01
Jul

Monday Morning – Welcome To July Plus The Natural Gas Supply & Demand Slide Shows

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Market Sentiment Watch: Busy but short week from an economic standpoin with all eyes on vacation time, the EU Summit outcome, and Payrolls in the States on Friday. Chinese HSBC PMI came in a touch lower again hitting an 8 month low with orders from the US and Europe particular weak. Not shocking and will just put the ball further in the stimulus court there. So far we have not seen a slowing in Chinese demand for crude (May was a record) but look for it to flatten June through August on refinery turns and I would repeat that the 2 mm bopd expected increase in global seasonal oil demand (to a new record high level) in not a function of increased demand from China in the back half of 2012.  In today's post please find a little commentary on the natural gas macro. 

Ecodata Watch:

  • We get ISM at 10 am EST (F = 51.5%, last read was 53.5%)
  • We get construction spending at 10 am EST (F = +0.1%, last read was 0.3%)

The Week Ahead:

  • Tuesday 7/3: Factory orders, Car sales
  • Wednesday 7/4: Happy 4th of July, market closed  
  • Thursday 7/5: ADP employment, jobless claims (F = 387,000, last week 386,000), ISM nonmanufacturing (F = 52.8%, last read was 53.7%), EIA Oil Inventory Report 11 am EST,   
  • Friday 7/6: Nonfarm payrols (F = 100,000, last month 69,000), unemployment (F = 8.2%, last month 8.2%),   EIA Natural Gas Inventory Report (10:30 am), 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. The Week That Was
  4. The Natural Gas Supply Slide Show
  5. The Natural Gas Demand Slide Show 
  6. Stuff We Care About Today - NOG
  7. Odds & Ends

Holdings Watch:

ZMT (Zman Medium Term portfolio)

See ZEB positions tab for updated positions

ZLT (Zman Long Term portfolio)

The blotter is updated

ZLT - C (ZMAN Education Savings Accounts) - the least traded accounts we run, all equity (no options), and up 34% year to date.  We've sold 3 full or partial positions this year (2 or which were entered early this year and one early in 2011) and we entered 3 new positions in 2012 so far. Slow and steady and no swings for the fences.   

See ZEB positions tab for updated positions

Commodity Watch

Crude oil rallied 7% last week to close at $84.96, rising a whopping $7.27 (9%) in the Friday session (the front month now looks like this due to:

  1. EU Summit eupophia in world markets,
  2. Crude short covering,
  3. The strike in Norway going into its second week
  4. The then looming July 1 startup of the EU embargo on Iranian crude (no delay in the start apparent from the EU)
  5. And despite the US giving China a waiver to consumer Iranian crude since China has been a good boy and reduced consumption of Iranian oil by about 20% in recent weeks.  

My sense continues to be that crude should not have been down this far in the first place. Yes we have strong growth in the States but that growth will not continue in a sub $75 environment unless we see a further substantial roll back in Service costs.  I have talked to a number of Bakken operators over the last couple of weeks and listened to more presentations from other Bakken players and the consensus seems to be that the Bakken, which is a big piece of the production growth in the States we show in the graphs each Thursday, has not yet seen much more than an alleviation of cost inflation and while all of them expect some CWC price relief in 2H12 none are yet really baking that impact into their 2Q plans. As far as WTI pricing we look for it to stabilize in the not too distant future over $80 as Cushing stocks retreat seasonally and gasoline demand re accelerates.  Distillate stocks remain severely understored due to strong export demand which is also WTI supportive as thoughts in a few months will shift to the heating season.    

Brent rebounded in similar fashion to WTI on Friday (rising 7% on the week) and while this first move may not be entirely sustainable this is apparently a good first note in the sideways trading game. I don't want to see an unsustainable V-back up here any more than I want to see it in the group.  This morning crude is trading off a little over a dollar, with a little profit taking after Firday's fourth strongest $ point move in history. 

  • Iran Watch:  U.S. welcomes beginning of EU embargo this past weekend and looks forward to progress at "expert level" meeting with Iran in Turkey this week. Not. Holding. Breath. 
  • Strike Watch: Norway offshore oil workers strike enters second week, cutting production by ~ 250,000 bopd or about 13% of total country production. Not a big deal, will likely get resolved soon but puts a little floor under Brent. 

Natural gas closed at $2.82 on Friday, up 6% on the week on a sweltering forecast and after EIA reported a slightly bigger than expected injection (57 Bcf vs 53 Bcf which is nearly rounding error and is still a record low for this time of the year). This week look for a sequentially smaller injection which should compare favorably to some mild weather a year ago (+95 Bcf then) and a five year average injection of 87 Bcf. Two words still ring true as the season progresses: Flatter Slope. To the injection line that is. The storage overhang has fallen from 927 Bcf at the end of March to 613 Bcf as of last week (that's an extra 3.8 B's of net demand to the five year average over this period). Look for it to dip well into the 500s this week. The overhang is still a threat and while we will may exceed record storage at the end of the season in October again this year I expect the overhang to be substantially gone by the end of the year to due a combination of falling supply and stronger gas fired generation (see Natural Gas Supply and Demand slide shows below).  This morning gas is trading off three pennies.

  • Natural Gas Supply Quick Note: Marketed supply for the Lower 48 rose sequentially by 0.5 Bcfgpd to reach 68.3 Bcfgpd (not a new record) in April with "Other States rebounding to a new high and small rise in Texas and Oklahoma offsetting losses in all other major areas. This grudging roll over in supply is as expected with some of the winter month apparent declines attributable to temporary price related curtailments. See next section for regional breakdown of production and rigs. 
  • Natural Gas Quick Demand notes. April gas fired demand hit an all time high for the month, rising 6.6 Bcfgpd vs last year. Note that this would have been a record had the calendar said May or June at the top as demand continues to steal increasing amounts of share from coal. Sellside and gassy E&P company wisdom suggest between $3 and $4 gas will result in more coal fired power entering the generation scape and after a couple of channel checks I would suggest the number really is closer to the high end of that range.  
  • Tropics Watch: All quiet on the tropical front. 
  • Weather Watch:
    • Last week saw cooling degree days of  75 vs a forecast of 74 and 71 CDDs in the prior week (which produced the 57 Bcf injection last Thursday). Note, the Mid Atlantic power outages will impact this week's and next week's gas consumption figures modestly. 
    • This week's forecast calls for CDDs to move up to 97 vs 68 normal for this time of year and 89 CDD's in the year ago week. 

The Natural Gas Supply Slide Show

.

The Natural Gas Demand Slide Show

The Week That Was

Stuff We Care About Today

NOG Receives Increased Borrowing Base

  • Borrowing based increased from $175 mm to $300 mm.
  • Nothing currently drawn after their recent $300 mm senior note offering. 
  • Interesting that the borrowing base is already back to pre senior deal levels before an expected mid year reserves report is released. 
  • Their next redetermination is set for October. 
  • Bottom line, this shouts a big  "we don't need an equity deal in 2012 or 2013 " to the shorts. 

 

Odds & Ends

Analyst Watch:

  • Baclays cuts targets on their E&P coverage universe, apparently as part of the commodity price mark to market action for the end of 2Q12. Ratings appear to have been kept intact. This is part of the action we have been looking for.  
  • PVA - Barclays cuts to Underweight. One of the cheapest names in the gassy getting oily space on $ /Mcfe of proved reserves that also happens to be rapidly transitioning 1P reserves to more oil via their Gonzales and now Lavaca County, TX Eagleford program. Proof that Barclays doesn't get the whole "buy the gassy getting oily names" where the fear of their balance sheet has overly depressed the equity.
  • Barclays also cut DVN, WPX and FST to Equal Weight. 

 

Housekeeping Watch:   I will be out of the office from Tuesday at 1 pm EST through Thursday for the 4th of July holiday and intern number 1's 9th name day. We will post tomorrow and again on Friday and I will check in from time to time on Thursday and comment on anything if necessary. 

Interesting Viewing Watch: GDP CEO talks about the Tuscaloosa

144 Responses to “Monday Morning – Welcome To July Plus The Natural Gas Supply & Demand Slide Shows”

  1. 1
    Zorgnak Says:

     
     
    S&P 500 Futures Short Term Levels 8:28 Am S&P 13156 Notes/Thoughts..
    Market gapped above 1341.75 CLVN, rallied and then closed at 1358.50 CHVN. 1363-1367 offers first potential resistance.
    1341.75 is important support. Between 1351-58 is a wide acceptance/congestion zone. Expectation is for the market to attempt to 
    consolidate above 1341.75 in that zone.
    A break of resistance(1363-67) on follow through volume would be major shift in market tone beyond Friday's relief rally. A break of support 
    (1341.75) has a major gap below and suggests a return to 1321 with Major acceptance at 1309 the major magnet below. 
    Demand volume is in place for more gains if market can, at a minimum, consolidate above 1341.75. 
     
     
     
     
     CLVN=Low Volume Rejection Zone – CHVN= High Volume Price Acceptance and Congestion Zone
     1363-67    Wide CLVN, Expect resistance here with congestion thickening from 1376-86.
     1351-58….Upper Volume Pivot.  Pivot for consolidation attempt above 1341.75
     1341.75….Support. Major gap below.
     1330.50….CHVN. 
     1321…… Potential support.  
     1298-1318..Long and short term volume pivot/acceptance. News/rumor chop area. 1309 CHVN    
     1286.75… A break here opens a test of gap, recent lows, support at 1252.50.
     1280…….Minor Support, Gap close.
     1252-58….Major Low volume area. Potential support and/or new leg down.
    S&P Futures
    http://www.charthub.com/images/2012/07/02/ES_Composite.png

  2. 2
    Zorgnak Says:

    Hmmmm…S&P was around 1356 at the 8:28

  3. 3
    zman Says:

    Today's post is a free one. If you know of anyone who might be interested i the site please pass it along. Thanks. 

  4. 4
    zman Says:

    A bit surprised by the early redetermination at NOG.  Strong work. Still expecting a 2Q12 upward move in reserves. Fun fact, last quarter they tied in more net wells than OAS or KOG. 

  5. 5
    tomdavis12 Says:

    The election in Mexico is good for free enterprise & smaller gov't. Hope that seeps further north. Likely to encourage more oil development. I expect the offshore boys in the area to benefit. NE, HERO, RDC.

  6. 6
    tomdavis12 Says:

    Z: Barron's had an article about a mutual fund VILLX. NOG ninth largest position. Guess you are not the only one that has an interest. 

  7. 7
    zman Says:

    re 6 – they have a good institutional following

    http://finance.yahoo.com/q/mh?s=NOG+Major+Holders

  8. 8
    zman Says:

    NOG – by the way, will have something new out there soon. 

  9. 9
    tomdavis12 Says:

    8 Yes I spoke to Erik last week. He and you are in agreement  with the events around 7/10. 

  10. 10
    tomdavis12 Says:

    Z: Noticed two other sellsiders cut E&P eps by 20% and CFPS by 8%. More of the larger cap names, not your pond so much.

  11. 11
    zman Says:

    re 10 – Thanks Tom.  They all have to cut estimates, just part of the process and most likely a buy signal. For the most part I expect them to mark oil down and NG down slightly. Later this year I expect them to again raise oil price thoughts back up. In the meantime, expect the estimates and price targets to come in but ratings to largely remain intact. 

  12. 12
    elduque Says:

    TED at .37
     
    BDI +9 at 1013
     
    Brent/WTI at 12.5

  13. 13
    zman Says:

    Analyst Watch

    PVA – Barclays cut the target from $5 to $4. Just no pleasing some analysts. Will look at buying his dip later today or this week. 

  14. 14
    zman Says:

    SSN showing a little more spine early, following through on Friday's ops update related strength. 

  15. 15
    zman Says:

    BOP – Got a quote for me on the PVA bonds?

  16. 16
    BirdsofpreyRcool Says:

    Don't see a Monday quote for PVA bonds yet… will watch.

  17. 17
    tomdavis12 Says:

    Z: Are you in the camp of Europe is not fixed so let's raise a little cash and look to nibble into some more risk off downdrafts. PS you made some great snags last week. Keep up the good work. Helps me to fight my momo demons.

  18. 18
    zman Says:

    re 16 – thanks much. 

    re 17 – no, I'm in the camp of slowly buying when others are busy raising cash … not that I think Europe or the US are close to fixed. .  Thanks for the kudos but how can you tell re those snags last week?  I can't as my time frame isn't that short. I added OAS in the low $30s late last year and in the mid and high $20s on the way down.  As long as a management stays focused /disciplined I won't be selling those any time soon. 

  19. 19
    zman Says:

    SJT continuing to inch up even as NG gets rejected off recent level after the April number which is less positive on the supply side than Feb and March were. 

  20. 20
    RB Says:

    here is a link to an interview with F. Gheit of Oppenheimer….gives his thoughts on several oil topics, including his view on $4 gas and he echoes what Z says re: oil pricing and Bakken activity.  I'm a long suffering holder of APC…in here it is his # 1 pick, on the basis of the new discoveries and the belief that a resolution of the tronox issue is a couple of months away….
    http://seekingalpha.com/article/695601-oppenheimer-s-gheit-natgas-headed-above-4-anadarko-top-oil-gas-stock

  21. 21
    zman Says:

    re 20 – Thanks RB, Fadel is one seriously smart guy. 

  22. 22
    zman Says:

    Holding $83.50 

    http://www.cx-portal.com/wti/oil_en.html

    Saw a couple of articles over the weekend on why Friday's bounce was not a key reversal. I would not look for a sharp reversal but a more sideways trading, rounding pattern as Cushing comes off seasonally and driving season drives gasoline demand back up.  

  23. 23
    zman Says:

    Watching SWN  come in after selling the calls on Friday with the EIA Nat Gas Monthly release. Not going immediately back in given the run but not forgetting about the options there either at the moment. Still a core holding in the ZLT. 

  24. 24
    Justin Says:

    Heard Goldman call for 1250 on the S&P for YE.  However, in the same report they said crude will go higher too.  Will forward if I can put my hand on the report and if it contains supporting data or it's just a GS edict.

  25. 25
    BirdsofpreyRcool Says:

    Goldman bond desk commenting that QE3 is on it's way. 
     
    Maybe… but feels a bit like we are pushing on a string now.  The problem isn't money… it's policy.  That means the same guys and gals who broke it are now being eyed to fix it.  Good luck with that.

  26. 26
    zman Says:

    re 24 – I like that those guys back in I believe March were calling the market at a "generational buy point" saying it was so cheap the time was NOW, NOW, NOW.  

  27. 27
    tomdavis12 Says:

    Sellsider updates: Upgrades – Maquarie – HERO, Barclays – CXO, PXD, DBank -= MPC, PSX. Just wanted to show there is some sunshine as well. 

  28. 28
    zman Says:

    re 25 – I'd LOL if it were not so sad. Ben points to congress. Congress and the President point back and forth at each other. China wonders when WMT will start buying more stuff again. Europe thinking ideals without a plan is a bad idea, etc. 

  29. 29
    zman Says:

    re 27 – ha, their Directors of Research made them work this week. 

  30. 30
    BirdsofpreyRcool Says:

    JPMo bond desk commenting that bond rally is due to expectations of QE3… saying if that is the case, perhaps Friday's Jobs Number will REALLY get a rally moving.
     
    I think the guy is being sarcastic, tho, as he attached a picture of a deer caught in the headlights.

  31. 31
    zman Says:

    NG supply figures = meh to  so, so.  Pretty much as expect as we knew that some gas was being curtailed during the ultra low price months of the non winter. 

    NG demand figures = best April ever. For NG gas fired demand best April ever and would have best May or June. NG price has not come enough to cause anything in the way of significant switching back to coal. 

  32. 32
    zman Says:

    re 30 – the deer is definitely the Fed, wonder who's driving the truck. 

  33. 33
    choices Says:

    PVA bonds on IB:  96/97.75, last 97.85, low volume
    FWIW:  Baylor, TD Amer does have some bond info, Moody's "analysis" which is the usual CYA blather and caveats-I would say take BOP's view on bonds, Z of course on the company because Moody's does not add anything to the equation-don't hold it against me for even mentioning rating agencies but thought I would mention it following Friday's discussion on TD and bonds.

  34. 34
    zman Says:

    ISM at 49.7%, no wonder the talk of QE3. 

    Choices -thanks very much. Those are the 2016's right, these:

    The 2016 Senior Notes were originally sold at 97% of par equating to an effective yield to maturity of approximately 11%. The 2016 Senior Notes bear interest at an annual rate of 10.375% payable on June 15 and December 15 of each year. Beginning in June 2013, we may redeem all or part of the 2016 Senior Notes at a redemption price beginning at 105.188% of the principal amount and reducing to 100% in June 2015 and thereafter. 

    What's that cusip again?

  35. 35
    tomdavis12 Says:

    VNR completed their previously announced deal. Many accretive deals out there.

  36. 36
    BirdsofpreyRcool Says:

    PVA 10 3/8 CUSIP 707882AB2

  37. 37
    zman Says:

    Thanks BOP. 

    Stocks look like a lot of folks are not at their desks, seeing several with anemic volumes for this time of day. 

  38. 38
    elduque Says:

    Construction spending continues to inch up. I would suggest that a lot of the reason for the negative PMI no. is Europe related. 

  39. 39
    BirdsofpreyRcool Says:

    OT:  CIGX…. apparently chart became interesting to some TA guy with a following…

  40. 40
    zman Says:

    re 38 – yeah, that's what China is saying about theirs as well. 

  41. 41
    DaveH Says:

    ATPG +18% today after finding gas in Israel.  http://www.reuters.com/article/2012/07/02/us-atpoilgas-drilling-idUSBRE8610OE20120702?feedType=RSS&feedName=globalMarketsNews&rpc=43

  42. 42
    Zorgnak Says:

    REXX pulled back to 11..bought some
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2.png

  43. 43
    zman Says:

    ZTRADE – ZMT – TPLM Calls

    TPLM – Added 10 more July $5 calls for $0.60, (now hold 20). Expecting news any day to any week now on the next 2 operated wells there. 

  44. 44
    zman Says:

    Average cost there now $0.51

  45. 45
    zman Says:

    Hear ya Zorg – REXX breakout continuing. 

  46. 46
    zman Says:

    SDCJF bouncing up on those director buys

  47. 47
    milepost_43 Says:

    43..news on their Frac Co too??

  48. 48
    milepost_43 Says:

    39 OT room to run to upper BB @ 5.10ish…..I hope…

  49. 49
    milepost_43 Says:

    3 free site….what link do I use? thanks

  50. 50
    zman Says:

    re 47 – yes, they should be staffing up to get to 24/7 operations later this year. They are already in the process of completing the next 3 operated wells with the one full crew on hand. 

  51. 51
    zman Says:

    re 49, thanks

    http://zmansenergybrain.com/2012/07/01/monday-morning-welcome-to-july-plus-the-natural-gas-supply-demand-slide-shows/

  52. 52
    elijahwc Says:

    MHR: Fun with Form 4's
     
    Check out the reason
     
    http://www.istockanalyst.com/article/viewsecfiling/articleid/5923051

  53. 53
    zman Says:

    MMR – the inch up continues into mid month results. 

  54. 54
    BirdsofpreyRcool Says:

    #52 — the court made him do it?  What is it… a divorce settlement or something??

  55. 55
    zman Says:

    re 52 – thanks Eli. Insignificant sale amount relative to his total remaining holdings at least.   At least he didn't sell the company his map collection to raise the cash. 

  56. 56
    zman Says:

    Packman, lemme know if you have any further questions re DJ 1 or the UD play. MMR acting like you took another big whack at it today. 😉

  57. 57
    zman Says:

    Liking the resilience of SJT here

  58. 58
    DaveH Says:

    Do you know what percentage oil for SJT?

  59. 59
    andy Says:

    z  cannot copy and paste 51     if i just send the website to them , will they be able to get it that way?

  60. 60
    zman Says:

    re 58 – less than 1% oil. Unknown quantity of NGL's. I asked. The Trust does not know as COP, the operator, has not told them. Obviously they have some rich gas/NGL's or their realizations would be lower.

    Andy – thanks and yes, today the main site will take them to it. If you click on the banner at the top of the site (the name plate of the site) it will take you to the most recent post   If you click on the name of today's post, it puts that in your address bar so you could then right click and copy and paste from there.  

  61. 61
    zman Says:

    Comments from a smart friend of mine:

    http://www.minyanville.com/business-news/the-economy/articles/US-Monetary-Policy-overall-macro-situation/7/2/2012/id/42117#ixzz1zTsE7tXJ

  62. 62
    andy Says:

    z  – thks  

  63. 63
    elduque Says:

    Z – over the last 4 weeks EOG has definitely trader cheaper than its peer group, albeit it has outperformed the same group over the last year. Random noise?? or do you think it has something to do with the poor performance of Bakken stocks. 

  64. 64
    zman Says:

    re 63 –   The stock normally trades at a premium to its peer group. I would suggest that the recent larger drop there is a function of falling NGL pricing in Texas. Recall they have a good size component of their liquids that are not black oil and the market has taken many of the more NGL liquids rich players more to the woodshed than the group.Also recall that on the last conference call they started talking up their Bakken activity more than they had in recent quarters. I don't think there is anything operationally wrong with them at all and do think that the market has simply over reacted to the down turn in propane pricing. 

  65. 65
    elduque Says:

    Thanks Z – where does one find a daily quote of NGL prices. 

  66. 66
    nrgyman Says:

    HK:  selling still not done, but the worst might be over.  Were these mostly shares coming off restriction and sold?  

  67. 67
    zman Says:

    re 65 – good luck with that, they are a bit harder to come by for free than one would guess. There's also no standard NGL barrel (different mixes of propane, butane, ethane). But you can get an idea of how they are moving by looking at propane 

    http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EER_EPLLPA_PF4_Y44MB_DPG&f=D

  68. 68
    zman Says:

    re 66 – dunno, never found a cause for it. I have trouble believing it was sudden arb spread closure related but could be part of it. 

  69. 69
    zman Says:

    ZTRADE – ZMT – Adding TPLM Shares 

    TPLM- Added 250 shares of TPLM at $5.48. Now holding 500 in this portfolio, after having sold 750 shares back in the Spring at an average price of $7.05 in 3 separate trades. 

  70. 70
    zman Says:

    ZTRADE – ZLT C – Swapping Some OEDV for More REXX

    OEDV – Sold 200 shares of OEDV for $1.17, up 32% since entry, leaving 250 shares.  Ran up faster than I thought and am taking the opportunity to re-balance.

    REXX – Added 20 more shares for $11.54 taking the account to 50 shares. 

  71. 71
    zman Says:

    REXX volume quite strong for time of day, have been awaiting a base breakout for some time, looks to be approaching.  News in July and again in August likely on 1) a beat and possible guidance increase and 2) Utica oil well results.  

  72. 72
    elijahwc Says:

    #52 54 & 55: re MHR :  I haven't a clue, just found the one liner amusing and honestly I'm too shy to call the company and ask.  That being said someone (guess) was pis..ed.
     
    On a more relevant note, MHR has an update out on shut ins in the Marcellus due to the storms, the most important piece being curtailments at the Dominion pipeline tailgate which may be offline for weeks.
     
    This has the potential to show up in the analyst 'refreshed models' and not just for MHR, one would assume.
     

  73. 73
    zman Says:

    Re 72 – Thanks Eli, had not seen. 

  74. 74
    zman Says:

    Generally my take on short term discombobulations due to power outages and other AOG is that they are buying opportunities if they last long enough to pull the trigger on at all.  

  75. 75
    zman Says:

    EXXI moving on volume at the moment. 

  76. 76
    zman Says:

    The GDP CEO presentation on the TMS is worth listening to for the basics. This  is from prior to them announcing a similar rate in the  Anderson 18 H but it gives good flavor on the play and what it means to GDP

    http://www.tuscaloosatrend.blogspot.com/2012/06/goodrichs-ceo-robert-turnham-discusses.html

  77. 77
    zman Says:

    Offtopicthirty, on a call for a bit. 

  78. 78
    nrgyman Says:

    RE 66 and 68:  HK selling:  Perhaps this might explain it.
     
    http://www.bloomberg.com/news/2012-07-02/georesources-seen-returning-56-with-july-halcon-deal-real-m-a.html?cmpid=yhoo

  79. 79
    zman Says:

    re 78 – perhaps some of it., one would think GEOI would be rising as iHK was being shorted however.  Hmm.

  80. 80
    zman Says:

    Group starting to edge a bit more green … feels like noise, volumes look light. 

  81. 81
    choices Says:

    #34-had to step out so did not confirm but you have the cusip.
    Z, attached here are EIA analyst comments on reduced demand for various petroleum products-I'm sure you have seen but do you read any significance on the reduced demand levels, diesel, gasoline, jet fuel, etc as they relate to demand levels for crude-i.e. demand levels for crude keep edging up but that does not jive w/reduced demand for products-seems like EIA is becoming a tad pessimistic if accurate.
    Thanks
    http://tinyurl.com/preview.php?num=87ogeru

  82. 82
    nrgyman Says:

    MMR running.  When are the DJ1 results expected?

  83. 83
    zman Says:

    re 81 – thanks will have a look. Spoke to the EIA a couple of weeks back on a few questions re products. Reduced demand a function of unemployment depressing domestic consumption of gasoline, distillates and kerosene offset by ongoing elevated exports. Demand is not that bad considering the L shaped economy but would look a lot worse were it not for record exports. So refining demand is up to chase the margins of the exported product markets. 

  84. 84
    zman Says:

    re 82 – mid July, could be earlier. Well was perforated just before the GHS conference and the guns had been pulled from the hole as I understand it last week. Surface hookup underway, should be on by mid month without weather delays. 

  85. 85
    RB Says:

    yeah, my overall MMR position now has a whopping .44% gain….lots of joy and depression along the way riding this beast

  86. 86
    zman Says:

    r e82 – note EXXI moving as well. MMR has the bigger piece of the pie here and its more important to their story anyway so the outsized move in MMR is to be expected but both have plenty of room for upside upon strong results. Strong results are probably 20+ MMcfepd given the narrow casing in this well. Higher rates like to cause bigger moves in the stocks. Gas flowing from more of the A to F sands here would likely do the same. 

  87. 87
    zman Says:

    re 85 – They put the E back in E&P. Drilling in a completely new play, having to develop new technologies to deal with the heat and pressure along the way … not your run of the mill  unconventional production growth story. 

  88. 88
    zman Says:

    Odd that the TISDZ is not yet rallying with MMR/EXXI

  89. 89
    Baylor Says:

    Re 33, thanks for the info choices
     
    I appreciate everyone being willing to help with the occasional newbie auestion

  90. 90
    snoles Says:

    PVA is now on RBC's top list of "Most Technically Bullish Charts".  Zorg, do you agree?

  91. 91
    BirdsofpreyRcool Says:

    OT:  eli — your "Should Find a Cure for Something" portfolio is kicking market behind today.  On a red day.  In the summer heat.  Impressive!

  92. 92
    RB Says:

    r: 88…TISDZ is such an oddball thing and they aren't in Davy Jones….wondered if that lease MMR lost last week when their extension was denied had any effect on TISDZ….I like odd ball stocks, dark dirty bars  and trashy women

  93. 93
    zman Says:

    re 92 – I like odd ball stocks, dark dirty bars  and trashy women … sounds almost like a business plan. 

    On the line with a broker now on a PVA bond quote. 

  94. 94
    zman Says:

    BOP- Did the squirrel cam fall over  the side of the rig?

  95. 95
    BirdsofpreyRcool Says:

    DJ#1 Teddy Cam has been sworn to secrecy.  Roughnecks put him in a bucket.

  96. 96
    elijahwc Says:

    TY for #91 BOP:  Its quite the remedy for heartburn.
     
    Here is the list  should anyone care:  AMRN PCYC ELN CBST ABMD SPPI CIGX ONXX AMLN ALR BIIB PDLI ZIOP VVUS IDIX VRTX QCOR MDVN YMI WBMD OGXI HGSI

  97. 97
    zman Says:

    70 of those PVA 2016's being offered at 97.8ish  … ah, transparency. 

  98. 98
    elijahwc Says:

    #88 92:  Misses RMD's order flow today.  He owns the float but alas is on vacation at the coast.

  99. 99
    BirdsofpreyRcool Says:

    #97 — that's about where Trace recorded the last trade on those PVA 10 3/8s.  Haven't seen 'em quoted on any HY desk today, tho… but HY (and credit) market has been rallying hard over the last week.  So, plus-or-minus, that's about where those bonds are trading now. 

  100. 100
    BirdsofpreyRcool Says:

    As a matter of fact, stocks are down, but bonds are doing a Heckuva Rally Dance today.

  101. 101
    zman Says:

    GDP waking up.

    Thanks BOP. Given PVA's tight for cash I wonder if they don't yank those at first opportunity in a higher oil, higher gas price environment. Puts YTW same as YTM which is a bit over 11% and YTC at 18%+ which I would do all day for a year's wait.  

  102. 102
    Zorgnak Says:

    #90….It's been on my list as the best looking chart for a couple weeks or a month or so,,,,has lot's of room to run, imo

  103. 103
    zman Says:

    re 102 – right up there with REXX I take it 

  104. 104
    snoles Says:

    102 – Thanks

  105. 105
    Zorgnak Says:

    #90…REXX is looking pretty as well…
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_2.png

  106. 106
    Zorgnak Says:

    ha!..didn't see your post till after I posted…I'm in and out today….

  107. 107
    zman Says:

    re 105/106 – yeah, the chart is getting a little obvious now and attracting some volume … should be a good second quarter report for them.  Near term news flow (outside of what should be a good 2Q report and hints at what the first Warrior well will mean for them in the oily Utica) also to include possible monetization of Niobrara position very near term (or a JV). 

  108. 108
    zman Says:

    OK, enough fun, beerthirty, I'll be around all night, working on a few things, shout if you have questions. 

  109. 109
    BirdsofpreyRcool Says:

    MMR almost doubled off it's recent low in the beginning of June.  Wow.  Amazing how one is willing to forgive a stock, when it assumes the Hockey Stick Formation. 
     
    Hope to see this underpinned by good news soon.

  110. 110
    zman Says:

    re 109 – agreed. Someone mentioned thoughts on a rally here over the weekend and I attributed it mostly to trading up into pending news and the fact that everything seems to be going well pre kickoff at DJ1. But condensates mentioned in the Blackbeard West 2 well noted about two weeks back also corresponds to a bit of the rally rally in both MMR and EXXI. 

  111. 111
    RB Says:

    amen to that on 109….keep believing that works…cannot imagine taking all that pipe outta the hole at the expense it took had they not believed that 1) it would improve productivity and 2) they'd learn some invaluable stuff….it wasn't cheap to do

  112. 112
    BirdsofpreyRcool Says:

    "Proof-of-Concept" at Davy Jones #1 opens up a brave new world of exploration on the shallow (infrastructure-rich) GOM Shelf.  Will be fun to watch.

  113. 113
    tomdavis12 Says:

    EXXI was successful with one bid in the GOM auction. They have not released amount yet.

  114. 114
    Zorgnak Says:

    S&P behaved as expected consolidating in the 1251-1258 zone. Can't ask for more than that. Closed nicely with the majority of volume under the closing price. Nice….another day of this and then we get the jobs number on Thursday….that should shake things up a little?
    http://www.charthub.com/images/2012/07/02/FT71_ES_Intraday_52512.png
    Crude Futures held minor support at 82.50 and settled at acceptance in the mid 83's. 85 is resistance. 81.50 is far support. 
    http://www.charthub.com/images/2012/07/02/Crude_Composite_2.png

  115. 115
    RB Says:

    Goldman out saying brent will trade to $120 in the coming three months and that the Iran oil sanctions will have more impact than has been expected….gotta love those crooked yahoo's….

  116. 116
    elduque Says:

    Z- bordering on the line of a question, I should have already know the answer to. However, on your write up last week of Gas stocks. You had GDP Market Cap at .5 and its debt at .6, yet you had net debt to cap at 83%. 
    By those numbers debt is more than market cap. I did see where The Street had debt/asset value at 83%
    I assume that the cos. quoted asset value is the cost of land owned not what it may be worth, if sold. Is that correct? 
     

  117. 117
    elijahwc Says:

    Heres what I'm hearing
     
    "Proof-of-Concept" at Davy Jones #1 opens early July.
     
    Guest appearance by cast member ' Drill Bit' expected at a preview in China. 
     
    Jim Bob to cite Jules Verne as a childhood inspiration at a sneak peek for buds at the Petroleum Club 

  118. 118
    zman Says:

    re 116 – apologies for the delay in responding, had to round up some small ordinance for the 4th. 

    I get your question, perhaps I should make the table label a bit more clear but in general when I talk about debt to cap or net debt to cap I'm using book equity on the balance sheet in the denominator.  So the equation is D/(D+E) or as of their last Q, $599 mm / ($599 + $126) = 83% … net debt to cap would be (Debt – Cash ) / (Debt – Cash + Equity) … I'd subtract their cash but they don't have any. Anyway, most E&Ps I own try to keep this lower, say in the 30 to 50% range. As long as they can roll the debt over time and pay the interest when its due its not that big a deal to be this high. It will mean higher costs as changes are the higher your debt to cap the more out of whack your debt to last twelve months EBITDA metrics are going to be as well but not necessarily so.  

  119. 119
    elduque Says:

    Thanks Z- carrying on with the discussion. Using the TMS as an example, if you buy land for $250/acre that is what is going to be on your books, yes/no. When do you get a chance to raise your book value? 

  120. 120
    zman Says:

    Easier to drop that in from their Q

    Property and Equipment—We follow the successful efforts method of accounting for exploration and development expenditures. Under this method, costs of acquiring unproved and proved oil and natural gas leasehold acreage are capitalized. When proved reserves are found on an unproved property, the associated leasehold cost is transferred to proved properties. Significant unproved leases are reviewed periodically, and a valuation allowance is provided for any estimated decline in value. Costs of all other unproved leases are amortized over the estimated average holding period of the leases. Development costs are capitalized, including the costs of unsuccessful development wells.

  121. 121
    elduque Says:

    So the way I read it. You get no upside if the property is worth more, but have to write it down for a decline in value. What am i missing?

  122. 122
    zman Says:

    re 121 – No upside from a balance sheet standpoint on the cost of the acreage, that's true. Unless you sell it or convert it from undeveloped acreage to some form of proved reserve, either producing or otherwise. To me it doesn't matter as I don't use the balance sheet for asset values but rather use an estimate of market acreage (as opposed to book value) and my estimate of what the reserves are over time. The balance sheet I only use for debt and working capital so I can gauge what the market place thinks the total enterprise (TEV) is worth.   So I don't care what they have them on the books at , I just care what the market thinks the acreage is worth. This is a pretty loose range generally and often if we are talking about contiguous acreage of size it can be a lot higher than what you could go out and lease a few scattered acres for so it needs to be looked at in context. Note that all of the Bakken players trade at acreage multiples in excess of what they can go out and buy acreage for. However, they couldn't go out and rebuy all of their position as they have it now without considerable difficulty and likely much higher than market costs, hence the some of the extra stock market value over lease market prices. 

  123. 123
    Zorgnak Says:

    TPLM   
    A volume breakout here works to 6.42 with far resistance at 6.78….
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_4.png

  124. 124
    elduque Says:

    Thanks Z- so given the potential market value of GDP's property the fact that debt is 83% of book is somewhat misleading as to the amount of risk in the company from a debt standpoint. 

  125. 125
    zman Says:

    re 124 –  I hear what you are saying but I wouldn't quite say it that way. I would say they are two different things. Debt to cap is a standard measure. Market value of the company is a standard measure.  Market value of the acreage is open to interpretation. I think their cost in the play is about $250./ acre. At some point f the play really starts humming it will no doubt be worth more but given that they just acquired it and that the play is not yet well delineated its not yet time, at least for me to start marking up a back of the envelope NAV with some high numbers.

    The debt however is a very real $600 mm vs EBITDA last quarter of $40mm, and  Last Twelve Months EBITDA of $181 mm, so debt to LTM EBITDA is  3.3x which isn't outrageous but its high and will lead to higher borrowing costs than other with less debt and this point their EBITDA to Interest is somewhat low at  3.1x on a current basis … Interest is $12 mm a quarter which is noticeable given their size and that limits how much they can spend on drilling to a great extent than it does many of my names in the ZLT.   

    Look at a name like EXXI by comparison who is underspending cash flow but has 2x the debt load and the metrics look very different. Debt to NTM EBITDA of just 1.3x (way into the safe zone even with net debt to cap of 45%) and EBITDA to Interest of 8x (very high coverage).  

    Maybe I should put a table of ZLT debt metrics together. Hmmm.    

  126. 126
    zman Says:

    re 123 – Thanks.   Looks like a base break out, not gaps left unfilled in the chart OK volume for a sleep of a day in the group and seeing some little volume spikes on the minute chart that are probably institutions nibbling while trying not to push it. 

  127. 127
    zman Says:

    SSN- tiny nibble by the VP of exploration

  128. 128
    zman Says:

    Doubtful but hey, it would be good for me., 

    http://finance.yahoo.com/news/why-analysts-may-stop-covering-211653521.html

  129. 129
    life’s-a-gas Says:

    Bakken crude headed to Philadelphia.
    http://online.wsj.com/article/SB10001424052702304299704577502390528647370.html?mod=WSJ_hp_LEFTWhatsNewsCollection

  130. 130
    elduque Says:

    Thanks for the lesson.

  131. 131
    zman Says:

    re 129 – thanks

    re 130 – Sure, you know me, always bringing five metrics when you are looking for one, lol 

  132. 132
    RMD Says:

    MMR-TISDZ: I looked at the relationship between the two recently, thinking TISDZ is 'due' to catch up. Back in late '11 MMR outperformed for a while, then TISDZ caught up.  As I look at an overlay of the charts, they are still closely related: if not brothers, at least first cousins.
    FWIW, I suspect in the short term Lafitte is the most direct influence on TISDZ, and its results are a ways off.

  133. 133
    zman Says:

    re 132 – thanks RMD. I should keep a list of the Treasure Island lease blocks around, got one?

  134. 134
    Zorgnak Says:

    HAL DeMark exhaustion buy setup last week. Has to stop going down someday… demand volume still negative though..resistance 29.70s
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_6.png

  135. 135
    choices Says:

    TISDZ-tough getting info, no web site that I could find-here is 6 mo old SA article which has list, not all sure of accuracy-do not have any info  on disputed leasehold;
    http://seekingalpha.com/article/316239-treasure-island-royalty-trust-a-net-asset-valuation-of-the-trust-s-core-property-interests?source=yahoo

  136. 136
    zman Says:

    re 134 – probably an inflection point with 2Q report later this month (7/23). Should provide better insight into back half threat to NAM margins. Note the name is back up their warning from early June that 2Q NAM margins would be 300 additional basis points below prior expectations.  At the time that amount seemed priced in. I'll probably add small additional stock position pre numbers and then look to add calls on any dip that comes from them kitchen sinking the back half of the year. Name remains cheap despite the drop in estimates.  

  137. 137
    zman Says:

    Thanks Choices, just a curious as I'm with RMD on this one, though not long. 

  138. 138
    zman Says:

    Brent and WTI up a touch on Iran Hormuz comments. Rattle, rattle, rattle. 

  139. 139
    Zorgnak Says:

    MPO 
    Selling looks done here…break of 10 works to 10.80 and above..
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_7.png

  140. 140
    Zorgnak Says:

    CLR…still basing looks like it's got some more work to do..demand volume flattening now long term..reminds me of NOG….KOG still looks the best of the Bakken charts to me
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_8.png
    NOG
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_9.png
     
    KOG   Still looks the best of the Bakken charts to me
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_10.png
     
    OAS   Clearing congestion..room to run with a volume break of 24.64. 
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_11.png

  141. 141
    Zorgnak Says:

    CLR…still basing looks like it's got some more work to do..demand volume flattening now long term..reminds me of NOG….KOG still looks the best of the Bakken charts to me
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_8.png
    NOG
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_9.png
     
    KOG   Still looks the best of the Bakken charts to me
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_10.png

  142. 142
    Zorgnak Says:

    OAS   Clearing congestion..room to run with a volume break of 24.64. 
    http://www.charthub.com/images/2012/07/02/Stock_Weekly_2_11.png

  143. 143
    More Gas than Oil – Independent Stock Analysis Says:

    […] Scroll down for the huge natural gas supply and demand slide show:  Zman’s Energy Brain […]

  144. 144
    zman Says:

    $86

    http://www.cx-portal.com/wti/oil_en.html

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