Wrap – Week Ended 2/24/12

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Closed Trades Week (lightening up as oil prices march higher)

  • ZLT
    • MHR – Sold the trading positions taken in November and January for $7.54, up 39%. I continue to own the core position.  
    • KOG – Sold the rest of the trading shares picked up last June, July, August, for $10.77, up 77%. I continue to own it as a Core position in the ZLT but am trimming back positions after a good run and also to balance out positions.
    • REXX – sold the trading position taken earlier this week @ $10.26 for $11.73, ran further, faster than expected. I continue to own the prior trading positions and the core. 

Positions in the ZMT, ZLT, ZLT-C will be updated on the ZEB Positions tab later today. 

People Say The Nicest Things Watch:

I've made well over a million dollars in my personal account in less than five years on names I'd likely never have traded were it not for my subscription to zmansenergybrain.com.  ~ Jim Ivey

Outstanding recap of REXX zman...  can't tell you how many times i have used your expertise and "balanced" DueDilly to get positioned in a name that you liked.  Of course you will not be right 100% of the time... but your batting avg and the amount of precious TIME you save me each day (so that i can perform DD on other stuff) is invaluable ~ irongate

The Week Ahead:  Next week look for:


  • the end (or at least the bulk of 4Q earnings season). We should have reports from the rest of the ZLT holdings next week except for EPL (comes the following week) and BCEI (which will be in late March) and TPLM which has na oddball fiscal year that delays them a month or so. 
  • We will get 4Q reports from SWN and NOG on the 28th and 29th respective. 

  • Look for an updated Bakken players piece on Thursday. 

  • Look for an updated series of play specific cheat sheets to roll out beginning next week

  • An update of the Global Oil Supply Slide Show
  • As well as the Natural Gas Supply Side Show. 


60 Responses to “Wrap – Week Ended 2/24/12”

  1. 1
    zman Says:

    ZEB Positions updated


  2. 2
    Zorgnak Says:

    S&P Weekly ……Breadth, momentum, volume , volatilty and liquidity studies still supportive of the intermediate term.
    Two Important levels for  early next week.
     Major Support  @ 1352.50 (CLVN). Tested three times over the past two weeks. Note this CLVN is wider than most, extending from
     1350.50 to 1354 with additional minor support at 1347.50. I expect bulls to defend this general area at
     least once more if/when we get there.

     Volume Range Pivot @ 1359.25 (MCHVN) ( Price level most easily facilitated between buyers and sellers within a given range.) Range 1352.50-1367.50.
     Bulls control the action above this level. Below this level I'd expect a retest of 1352.50 area. Very short term studies are slightly bearish
     going into next week. I would expect a test of the pivot and then 1352.50 if the pivot gives way. POMO liquidity ramps again starting Tuesday.

  3. 3
    nrgyman Says:

    Interesting article and comments on oil prices vs energy stocks:

  4. 4
    Zorgnak Says:

     Euro has reached a Major Acceptance area. Expecting currencies and related markets to loose momentum swings early this week.
     Crude is far above its major acceptance levels (+$9) with potential near support/resistance @ 106.60/110.60.
     Thinking that a flat to down Euro and talking down the Iran nuclear issue will pressure this??? Big guess.

  5. 5
    Zorgnak Says:

    For entertainment purposes only. Noise filter recommended.
    On Friday we had a very tight/dead market with an Initial Balance (1st 60 minutes) of less than 4 points. If I torture the stats on this one
     and look at the times the Initial Balance is less than 4pts over the last 12 months it suggests a short term top.
     Looking back over the longer term S&P Futures data it can be seen that this was the case on a number of occasions but nothing to bet the farm without more evidence.

  6. 6
    zman Says:

    Thanks Zorg

    $2 T deal coming 


  7. 7
    Zorgnak Says:

    Volume demand negative on the monthly,weekly and daily time frames and rolling over again on the daily after the
    bounce to where it snapped in early Feb. Expecting bounce retracement to slow beginning at 92 through 90.50. Vast majority of buyers after this bounce were
    above 90. If/when 90.50 goes I expect the retracement to pick up speed again with a double bottom/CLVN at 86.50 as the next major level down. Minor resistance at 93.36. Resistance 95.33.
    Long puts

  8. 8
    Zorgnak Says:

    Range bound in a wide low volume area from 34-36.
    Support in the low 34's looks solid. Needs to push north of 35.58 on volume for
    bulls to regain control. Thick volume congestion above from
    36-39. Major long term acceptance at 38.
    I'm long calls and common.

  9. 9
    Zorgnak Says:

    Point of control on REXX is around 11.70. Bulls need to keep it above this level to stay in control.
    There's a .35 low volume gap  to minor support at 11.16 that may see back filling on profit taking if momentum
    fades . Support at 10.75.

  10. 10
    zman Says:

    Thanks Zorg – CRR – thinking $85 is my out on puts, OAS reiterated more white sand usage last week, and in new fringe areas, and made the comment that they saw no difference in IP and early results white sand vs ceramic which is sort of contrary to the CRR marketing materials ;-). KOG this week will say they are sticking with 100% ceramic as it has served them well so far although I have to wonder about them using that to the north in the new areas where their laterals will be shallower as they look at costs. Anyway, was thinking I'd be going long there after this pullback finishes as the name is no longer as expensive as when I wrote them up in early December. 

  11. 11
    zman Says:

    Last real week of 4Q earnings aside from a couple of late reporters to be a busy one. Week 6 includes:

    KWK, PQ, SWN, CRZO, ROSE, NOG, KOG, EVEP, GMXR, PETD.  CC calendar and expectations quick bullets in the morning post. 

  12. 12
    nrgyman Says:

    RE 8:  Thanks Zorg.  I'm long SWN also, but I can see more downside risk.  If natgas sells off hard this spring (probable) and the results from the Brown Dense wells are not so attractive, then SWN could easily move to the 50 dma at 32.50.  If the markets get really unnerved, there is that pesky gap below 30 that beckons to be filled.  I'm hopeful about the Brown Dense potential, but not so with short/intermediate term natgas prices.  I am holding some powder dry to add to SWN if/when these downside targets are reached.  If it breaks out above 36 I will probably let some shares go around the 200 dma price at 38.  

  13. 13
    Zorgnak Says:

    Growing base of volume support above breakout point/support at 114. Bulls in control above 115.70.
    Volume demand positive in all time frames. Stalled below congestion at 119.
    Long common.Short puts.

  14. 14
    Zorgnak Says:

    #10 thanks for your thoughts, as always

  15. 15
    nrgyman Says:

    RE 11:  Thanks Z.  I have positions in SWN, NOG, KOG and EVEP so I'll be particularly interested in them.  I've traded CRZO and still have some interest but no position.  Should be an interesting week.  

  16. 16
    Zorgnak Says:

    #38 re SWN….Thanks for your thoughts. I plan to not be shy about lightening up on any pop into the overhead….lot's of folks still underwater and you guys that know the natgas game have put me on alert to the likely slump coming in nat gas in general.

  17. 17
    Zorgnak Says:

    Solid volume base below 10. Note the volume point of control shift to 10.81 since the latest run began.(Red horizontal line)
    Big wad of selling volume hit in this area. (must have been Z). Expecting backing and filling from 10.36 to 10.80 with
    support at 10.

  18. 18
    Zorgnak Says:

    Forgot to mention I'm long the KOG common and short the puts. Long REXX common

  19. 19
    Zorgnak Says:

    Resistance in the 11.63 area with support at 10.80. Bulls in control above 11.10.

  20. 20
    zman Says:

    NRGY – mirrors my thinking on natural gas. SWN I view a little more favorably in light of Brown Dense and their past comments. Having that work is worth more than a few points to them, though I had noticed that gap up as well. 

  21. 21
    nrgyman Says:

    To follow up on GPOR, I found this presentation (which you have probably seen) to be very informative:
    The whole presentation is useful, but in particular check out:
    slide 6:  amazing cash margins
    slide 7:  solid, well-defined growth potential
    slide 8:  great Utica activity map
    slides 19-37:  excellent oil sands presentation
    This is still a relatively small company (2011 net production avg.=6392 boepd, TEV=1.94B) and most of their current production is concentrated in two gulf coast assets (both very productive, with fantastic cash margins).   They are using much of that cash to invest in high return potential NAM oil assets.  One concern is how does a small firm effectively manage investments that are widely dispersed in areas where they don't have expertise.  GPOR knows the gulf coast assets well, but they are new to most everything else.  This is how they're doing it:  their Permian assets are non-operated.  Their oil sands and Thai natgas investments are done through minority ownership of local private companies–so they don't operate there either.  The Niobrara and Utica shale investments are operated, but the Niobrara is relatively small.  The Utica is the largest investment outside of the gulf coast that they will operate.  They are excited about that asset and plan to put much operating attention there.  GPOR manages finances conservatively (negative net debt) and it appears to me that they have done a good job of focusing management resources while still diversifying their investments in high growth opportunities.  

  22. 22
    nrgyman Says:

    RE 20:  Agreed about Brown Dense, which is why I hold a good-sized SWN position.  But I am aware (and a little concerned) about the short/intermediate-term downside risks.  Long-term, I think SWN will do very well.

  23. 23
    zman Says:

    re 22 – I think gas has not yet bottomed but has less downside than upside over the course of the rest of 2012.  Though really not a lot of upside either. The shoulder season will start early and gas is likely to get very squishy mid March to April, potentially with a $2 test in there.  

  24. 24
    Zorgnak Says:

    "What a long strange trip it's been." Greatful Dead
    NOG after crossing 24.50 transitioned 85% of all the volume since the short attack began. That's a lot of potential longer term short squeeze fuel.
    In the near term the short term profile starting on 2/17 shows the recent short squeeze that has run up through the intermediate volume pivot at 25.31 before selling came in
    below resistance at 25.84 on Friday. The area between the short squeeze launch at 24.50 on 2/17 and Friday's close is a very low volume area…. very
    typical of a short squeeze volume profile (fat belly, long narrow stem). Wouldn't be surprised to see backing and filling in this area if insistent shorts reload.
    All of that heavy put buying recently was below 24.50 and in the red now.


  25. 25
    Zorgnak Says:

    Please forgive my horrendous spelling lately..I suppose I should proof read more carefully before posting….likely won't

  26. 26
    nrgyman Says:

    RE 24:  NOG has rocket potential this week with earnings due.  Not saying it will happen, but I am bullish on NOG and the potential is there.

  27. 27
    Zorgnak Says:

    Cleared it's year long volume base at 33 this week. Short term volume point of control shifted to 34.91 with size selling in that area.
    33 support.


  28. 28
    nrgyman Says:

    SWN and EVEP each have earnings this week.  Since each has large natgas exposure, I'm not bullish on their earnings reports.  However, each has a big catalyst in the near term related to oil investments.  SWN Brown Dense information could be enough to really juice the stock (or not), and the potential is there.  Much depends on when (and how much of) such information is released.  EVEP plans to monetize it's 159,000 net acres in the oil/wet gas window of the Utica shale, preferably by late spring, so any news on that front could provide a catalyst.  EVEP has a current yield of 4.3% and the stock has been basing in the high 60s.  The chart looks good.  If they get over $15,000 per acre, which is their minimum target because the assets are believed to be even better than the CHK assets–which sold for $15,000/acre, the stock could easily move into the 90s.  Some have a $120 target.  They are paying us nicely to wait and the downside risk is low.  Disclosure: I own shares in SWN and EVEP.

  29. 29
    Zorgnak Says:

    Broke above 12 month long volume base at 50. ……..YTD high, swing high and Strike price at 55

  30. 30
    Zorgnak Says:

    #28's…re EVEP..thanks

  31. 31
    Zorgnak Says:

    Long NOG, OAS and ROSE as well

  32. 32
    nrgyman Says:

    RE 21:  Forgot to mention:  I am long GPOR and plan to add on weakness.

  33. 33
    Zorgnak Says:

    Volume pivot at 69, support @  68
    No position, but on the radar.

  34. 34
    nrgyman Says:

    RE 23:  I expect natgas to test the lows this spring, but I do not expect the quality natgas stocks to set new lows in any selloff.  If this happens it would represent a positive divergence for the natgas stocks.  I would view such a selloff in SWN, RRC, REXX, CHK and others as a good, long-term buying opportunity.  If that scenario materializes, which I expect to happen, I will be adding exposure to those stocks.  That may be the last good buying opportunity for the quality natgas stocks for a long time to come.  It may take awhile for gains to develop, given the abundance of natgas, but the long-term fundamentals appear to favor it.

  35. 35
    brodway Says:

    re: 24
    Zorg. Strange is and understatement. 
    i couldn't believe someone had the courage to buy the 18 strike puts last week. i was happy to sell it to them. 

  36. 36
    Zorgnak Says:

    12 month volume base below at 34.85. Big volume support @ 35
    No position. On radar now.

  37. 37
    brodway Says:

    re: 34
    i have to agree, especially in a name like CHK which has really bounced nicely after a multitude of downgrades and visiting the 20 handle for a minute or two, that some profit taking is going to happen soon.  not sure if i want to sell the common or in the money calls to protect some of the profit just yet but your post makes a lot of sense to me.

  38. 38
    nrgyman Says:

    RE 36:  Since GPOR has had a good run into resistance and the market is extended, a pullback won't be surprising.  But looking at the weekly and P&F charts for GPOR, one can surmise that given it's growth profile (PEG=0.30), oil exposure and catalysts, it is only a matter of time before GPOR stages a major breakout to the upside.  I view any selloff in GPOR as a buying opportunity and intend to add more exposure if that happens.

  39. 39
    skimo Says:

    Interesting rebuttal that coincides with a lot of what Z's board has said over past couple of years.

  40. 40
    tomdavis12 Says:

    11: Z – You can add SDRL to your list (just for yield folk). NOG put premiums fell on very little volume Friday. NOG March 20 puts .35  – .45. That is 28% higher than the striking price with 15 trading days left. Seems like one of BOP's phrases. "like finding a few $20 bills outside the soda shop." I continue to be long common & short puts ( delusional or otherwise ).

  41. 41
    nrgyman Says:

    RE 34:  Another natgas stock on my radar for purchase on any significant pullback is DVN.  They have much more oil exposure than the market gives them credit for and liquids production is growing rapidly.  It is a large cap stock, so the potential gains may not compare favorably with some of the small-cap names often discussed here, but I see solid growth ahead for them and the stock is undervalued.  They have an excellent portfolio of oil assets to develop, including sizable positions in new growth plays like the Permian, Utica, Miss Lime, Niobrara, TMS and the Brown Dense.  They also have significant, low-risk growth ahead in the oil sands.  They had $7.1 billion in cash (not a typo) and low debt at year end 2011.  Management is conservative, and I thought late to redeploy the proceeds from disposing their offshore and int'l assets, but they are on the move now.  The stock has recently spiked on earnings (they are well-managed), but is at resistance and should pull back to at least fill the gap around 72.  The next target would be the 200 dma and support in the mid 68s.  Nasty market conditions could push the stock down to solid support at the 50 dma around 66, but I don't think that is a high probability.  Upside targets are the 2011 high around 93 and the 2008 highs around 115.  Natgas exposure and the market's view of DVN as a natgas stock will weigh on the shares, but  DVN may provide a great buying opportunity on the expected natgas selloff.  Disclosure:  I do not own shares, but I am likely to buy some on a significant pullback.  

  42. 42
    Zorgnak Says:

    Deepwater Horizon oil spill trial, which was due to get under way on Monday, delayed for another week, reports say


  43. 43
    nrgyman Says:

    Oil demand expected to increase later in 2012, pressuring prices higher:

  44. 44
    zman Says:

    re 42 – thanks

    re 43 – thanks, I hope the WSJ doesn't think that's "news"

    Why are there so many woman in my house screaming about the dresses people are wearing on the red carpet? Sennheiser headphone noise cancellation tech failing.  

  45. 45
    zman Says:

    Zorg – ah, delayed for settlement talks. Nice. The sooner we get a settlement and therefore either no trial or a short one and then a settlement, the soon HAL can lift. 

  46. 46
    Zorgnak Says:

    #45..ah…good news then..hopefully

  47. 47
    zman Says:

    re 46 – I think BP doesn't want to risk the fines going much bigger, like over $50B if the trial goes forward. 

  48. 48
    zman Says:

    Of course, BP may turn around and sue HAL again post settlement. 

  49. 49
    nrgyman Says:

    RE 48:  Hoping for a BP/HAL settlement soon.  They have been talking:

  50. 50
    Zorgnak Says:

    Z..Just read your SA post…Nice job.
    It had a pleasantly satisfying passive aggressive touch to it..  🙂


  51. 51
    Zorgnak Says:

    #50 re  NOG

  52. 52
    zman Says:

    re 50 – thanks I think  😉

    Here's the follow up piece:


    and then one on their mid year reserves which, in a word, were stellar. 


  53. 53
    brodway Says:

    re: 48
    Zman. Not sure how can an entity continue to litigate once a settlement is reached or a decision been rendered.
    From what little i know i don't think they can sue HAL based on 
    Res judicata or res iudicata (RJ), also known as claim preclusion, is the Latin term for "a matter [already] judged", and may refer to two concepts: in both civil law and common law legal systems, a case in which there has been a final judgment and is no longer subject toappeal;[1] and the legal doctrine meant to bar (or preclude) continued litigation of such cases between the same parties, which is different between the two legal systems. In this latter usage, the term is synonymous with "preclusion".
    In the case of res judicata, the matter cannot be raised again, either in the same court or in a different court. A court will use res judicata to deny reconsideration of a matter.[2]
    The legal concept of res judicata arose as a method of preventing injustice to the parties of a case supposedly finished, but perhaps mostly to avoid unnecessary waste of resources in the court system. Res judicata does not merely prevent future judgments from contradicting earlier ones, but also prevents litigants from multiplying judgments, so a prevailing plaintiff could not recover damages from the defendant twice for the same injury.

  54. 54
    zman Says:

    Brod – my point is they have reached a settlement with others but not yet will HAL, so thinking that once they see how much they owe the govt and related damaged parties they can then go after HAL harder or not in their ongoing battle. 

  55. 55
    brodway Says:

    i see your point.

  56. 56
    zman Says:

    re 55 – but I'm no lawyer and I don't play one on the internet so I appreciate the comment. 

  57. 57
    brodway Says:

    And for a minute there i had imagined you as Joe Pesci in the movie My Cousin Vinny doing preaching the law.

  58. 58
    Zorgnak Says:

    WPRT another truck engine deal

  59. 59
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