Posted by: zmanbackup | April 21, 2010

Wednesday Backup Post – Just In Case

Market Sentiment Watch: AAPL proved last night that the consumer is alive and kicking as well as listening to music and talking on over priced albeit sleek phones. All unit sales expectations were blown away. The market this morning is so far not taking its cue from that but is instead adopting a more cautious tone.  Today in energy land we have earnings from NBR and ECA. With the closing of the two HAL trades (and yes, I left some cash on the table there) the ZIM officially doubled yesterday and is back to 100% cash.
In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today – Earnings Watch: NBR, ECA, WIOWIO – “Why I Own, What I Own”
  5. Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $11,500
  • 49% Cash
  • Positions for the quick view are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • Sold the May $15 BEXP Calls for $3.20, down 7% and uprisked into the …
    • … May $20 BEXP Calls for $0.45, added (30) bringing my total to (40). Expecting more well news here this week or next.

ZIM (Zman Inefficient Markets portfolio)

  • $20,500
  • 100% Cash
  • Positions are updated on the ZCAT, ZIM, ZLT page.
  • Yesterday’s Trades:
    • HAL – Sold the 20 $32 May Calls for $1.34 up 33%
    • HAL – Sold the 40 $33 May Calls for $0.85, up 26%.

Commodity Watch:

Crude oil rallied $0.72 to close at $83.85 yesterday on a strong market, end of contract volatility and a not so strong dollar. After the close, the API released a bullish looking report (see below). This morning crude is trading flat.

Natural gas inched up $0.03 to close the day at $3.975 yesterday. This morning gas is trading flat as well.

  • Tropics Watch: Weather forecaster WSI ups hurricane season activity level. Now sees 16 names storms.  WSI said the water in the Atlantic is at record warm levels for April, “even warmer than the freakishly active season of 2005”.

Early Read On Natural Gas Storage: Street is at 78 BCF for tomorrow’s report.

  • Last Week: 87 Bcf Injection
  • Last Year: 42 Bcf Injection
  • 5 Year Average: 41 Bcf Injection
  • 10 year Hi: 80 Bcf Injection
  • 10 year Low: 5 Bcf Withdrawal

Oil Inventory Preview

API Watch:

  • Crude: DOWN 741,000 barrels
  • Gasoline: DOWN 1.743 mm barrels
  • Distillates: DOWN 3.103 mm barrels

Stuff We Care About Today

Why I Own, What I Own -Option Edition – the very brief bullets for the current ZCAT holdings.  If you’ve got more questions feel free to ask.

EOG – I own some May $115 calls for …

  • Of the 6 remaining large cap domestic E&Ps, EOG went oily first and in the biggest way, so it is out in front of a trend that investors are now trying to get leverage to.
  • East Montana Bakken test – the Carat 2-33H well, could have results on the 1Q call (May 4). If the test is successful, EOG has a significant acreage position in the area that will further increase the potential oil reserves here.
  • Niobrara – 4 more horizontal wells they may be able to talk about on the 1Q call.
  • Valuation: Actually the name is cheap

BEXP – I own the shares and some May $20 calls for …

  • Another well update as per the catalyst list
  • The possibility that EOG has a good well at Carat as BEXP is drilling a well near by and this could give the company a new core area in the Bakken, their Ghost Rider acreage in E. Montana, to go along with their Ross and Rough Rider areas, results from which have been driving the name.
  • Valuation is high but it’s been that way for a long time.

HK – I own the shares and some May $24 calls for …

  • Asset sales outstripped plan $1.4 B vs $1.0 B, well ahead of the mid year target
  • Shift to liquids rich drilling underway
    Growth in excess of 30%, likelihood of production beats vs guidance should be high
  • Capital discipline seems to be taking hold with management; capital budget for 2010 recently reduced
  • Management commented it has no need to go to the equity markets in 2010 and 2011.
  • Potential for another asset sale – rumored to be their Fayetteville assets.

WLL – I own the common and a May $75 call for …

  • … it’s continuing status as the cheapest name amongst the Bakken players.
  • the position plays into the “oil over gas” preference play that continues in the E&P crowd.
  • New details on their new 200,000 acre Lewis & Clarke position (may or may not have one new well ready by the date of their 1Q call on April 29th)
  • Valuation: P/CF for 2010 of 4.9x and for 2011 of 4.0x is at the low end of the E&Ps and even low for this name despite the recent run.

NBR Reports Slightly Better Than Expected Numbers.

The 1Q Numbers:

  • Revenue of $902 mm vs $878 mm expected
  • EPS of $0.21 (ex items) vs $0.20 expected

Highlights:

  • North America – rigs up big in the U.S. as you’d have guessed, and up again since the end of the quarter.
  • “we do not believe the current [gas] price is sustainable over the longer term or even over the intermediate term”
  • seeing a flattening in shale gas drilling … backs up comments made by HAL and WFT earlier in the week.
  • Mexico was soft due to funding constraints at PEMEX … well known at this point in the quarter that Mexico was off, company further commenting that this deferral of activity continues.
  • International – they think was the trough quarter … this also sounds similar to the other Service name calls this week.

Nutshell: I’ll wait for the conference call here, more positive than not but –

Conference Call: Today, 11 am EST

ECA Reports Strong Quarter; Outlines Longer Term Growth

The 1Q Numbers:  (not a name I track closely but worth a listen)

  • Production of 3.26 Bcfepd (94% gas), in line with guidance.
    • up from 3.2 Bcfgpd a year ago and 2.8 Bcfepd in Q4 (which had some volumes curtailed due to low prices)
    • gas production was strong due to Piceance, E. Tx and Haynesville results.
  • CFPS of $1.57 vs $1.33 expected

Highlights:

  • Reiterated that it will meet prior production guidance for 2010.
  • Establish long term goal of doubling production per share over the next five years.
  • Continues to repurchase shares; bought 9.9 mm in Q1 or 1.3% of outstanding.
  • “believe the current gas price environment is unsustainably low”.
  • Hedges:
    • 60% of expected 2010 production hedged at $6.01. Nice.
    • Just over 25% of 2011 and 2012 volumes hedged at $6.52 and $6.46 respectively
  • Debt to Cap of 30%; $5 Billion in untapped credit lines; $2 B in cash.

Nutshell: Good quarter and I think worthy of a listen following their recent split from their non-gas assets.

Conference Call: Today, 12 pm EST

Other Stuff:

  • We get earnings from NE, DO, ESV, and BTU tomorrow.
  • RIG rig explosion – Deepwater Horizon catches fire in Gulf of Mexico

Odds & Ends

Analyst Watch:

  • RIG cut to Neutral at Credit Suisse
  • CRU and TOO inititiated at Buy and Neutral at UBS
  • CRU initiated at Opco at Outperform, target $13

Responses

  1. Let me know here if you are unable to log in to the main site.

  2. Morning Z,

    odd, I cannot access the main site from work…tried flushing dns, renewing ip, cleaning cache/history…

    At home though I am able to access the main site.

    Will keep trying throughout the day.

  3. Thanks, will relay, they tell me everything is fine. I tell them they are wrong. They tell me they don’t know what to tell. I call them names.

  4. I am here. Can’t get on still.

  5. ditto, even unplugged modem like was suggested yesterday, does not work

  6. ZTRADE – ZIM – ECA

    ECA – Added (15) ECA May $33 Calls for $0.70 on the mid with the stock at $32.45, likely to add more after or during the call and after the oil inventory report.

    ECA – Also added (10) ECA May $32 Calls for $1.15.

  7. Problem I am told will resolve itself over the course of the day.

  8. No access for me as well.

  9. hmmm now back on here…going to zmans site through rss worked for a bit, but now it doesnt.
    odd.

  10. Good to see SSN not seeing another day of selling. I agree with Eli’s comment yesterday that it holding even close to this range is probably a positive sign. They will spud the next Bakken well mid to late May.

    WHX – through $21, still not looking back. This a quarterly paying royalty trust so probably no word on 1Q until mid May. I am seeing strong distributions from other monthly payers and positive reactions in their prices as well. My model puts the distribution based on the quarter’s prices, my wide looking differentials, average costs, and a conservative look at quarterly production decline puts the distribution at $0.61 this quarter. Based on their current price this puts them at about an 11% yield going forward (again, based on my model assumptions).

  11. I’ll keep reporting the issues to my host.

  12. EIA Oil Inventories:

    Crude at time of release: up 45 cents at $84.30.

    Inventories:
    Crude: up 1.9 mm barrels on a big rally in imports
    Gasoline: up 3.6 mm barrels
    Distillates: up 2.1 mm barrels

    Demand
    Gasoline: pretty good at 9.152 mm bpd
    Distillates: still soft at 3.466 mm bpd

  13. Nothing bullish in this report.

  14. opposite of api – what could be the disconnect?

  15. I think oil bulls can forgive the headline build on crude inventories due to the rise in imports which is likely to dip back away from this level next week.

    But on the production side, throughput looks too high for current demand by a ways and that will put a lid on gasoline prices and probably crude as a result.

  16. Ram – timing is often a week or so off between the two reports.

  17. Big build in stocks at Cushing should also serve to cool crude prices for a bit. API report agreed on a big rally there, almost identical build of 1.8 mm barrels to 34.1 mm barrels which would be about a 3 month high which was just short of a decade high at Cushing.

  18. Unable to access main site as well

  19. Crude down only 50 cents which is a bit surprising. Equity market action likely to dictate crude direction for rest of week. Feels higher despite the data. One thing favoring that would be a retreat of margins that should occur at these elevated production levels. Refiners should be thinking, whoa, maybe we are jumping back in a bit too fast for the demand side.

  20. NBR call in 15 minutes.

  21. Who is gkg.net?

  22. My host.

  23. NBR call starting now:

    http://web.servicebureau.net/conf/meta?i=1113167941&c=2343&m=was&u=/w_ccbn.xsl&date_ticker=NBR

  24. NBR notes:

    Gas drilling in the shale should level off, maybe decline a bit, we don’t know.

    The oil shale drilling continues to rise, and is more important to us, continuing to set drilling records.

    Leading driller in the liquids rich shales in the U.S. now, including the Eagle Ford oil window.

  25. NG up five cents, oil off 80 cents.

  26. NBR Notes:

    Algeria didn’t hurt them as much as others

    Iraq – expect it to be big but its not in their expected recovery thinking very much for 2011.

    Canada – still not great, sees their position rising due to British Columbia shales.

  27. NBR Notes Q&A session:

    Have not yet seen drilling back off in pure dry gas focused targets.

    NBR hopes margins are headed back to the low double digits and then back to the peak but that will take some time. Signing long term contracts in the Bakken, just signed a 5 year deal, seeing demand rise for term contracts in the EFS as well. This is for the higher end, 1,500 HP rigs. But the lower end rigs are moving up in rates as well.

  28. NBR nutshell: pretty strong going forward, watching more closely. Still feels like best idea in the space is HAL/SLB.

  29. ZTRADE – ZIM – ECA

    ECA – Added (15) ECA May $33 Calls for $0.45 on the mid with the stock at $31.50.

    ECA – Also added (10) ECA May $32 Calls for $0.80.

    Conference call about to begin.

  30. ECA call about to start

  31. ECA Notes:

    Haynesville – 23 rigs running, only drilling 1 well per location at a time to max leasehold grab. Moving towards a target of 35 days per well. Currently producing 250 MM/d net to ECA, on track to produce 400 to 500 MM/d by year end.

    ECA has contracted all services for 2010, mitigating inflation pressures.

    When they go to pad drilling I wonder if it will look like their 16 super pads in other regions. Lots of benefits to that model in terms of efficiencies/costs.

  32. ECA call ongoing but they’ve moved on into reading the pr. ugh.

    Crude now green.

  33. ECA sees spending another $300 mm on share buybacks in rest of year and sees divesting about $500 mm in assets.

    On track in terms of growth targets, 1Q production of 3.3 Bcfgepd is essentially on target with their average production target for the year and they see the exit rate capacity at 3.4 to 3.5 Bcfepd.

  34. ECA – Horn River – right now at 20 mm/d, see 55 mm/d average this year, with a 2010 exit of 100 mm/d and 200 mm/d exit for 2011. Gas, gas, gas.

  35. ECA – these guys are sandbagging on the official volume guidance. Volumes in 2Q should be higher than 1Q which was above plan as they brought back on more volumes than analysts expected. The only reason it doesn’t beat numbers would be a resumption of voluntary shut ins if gas prices fall further.

  36. ECA – Maverick Basin (Eagle Ford Shale)

    were with TXCO, now partnered with NFX, just completed first well and are evaluating that. Best guess is we could have data there right before or on the NFX call.

  37. Group greening nicely now.

    ECA – Question the guidance, wondering how it jives with all the growth they are talking about.

    1Q – brought back on a lot of shut in gas, so you had flush production, so the next quarter could fall off a bit, but with activity that could be a bit muted.

    Canada early break up is going to mean a dip there.

    Sounds like if they shut in some gas like last year, they will make their 3.3 Bcfepd target number for 2010 but if they don’t do that and everything else works as they expect then they are at the 3.5 Bcfepd level. So 3.3 Bcfepd sounds kind of like worst case which is price induced.

  38. ECA Call over.

    Bottom line, not a lot of surprises, good comments about costs and cost inflation appears to be fairly tame for them. Good comments on production guidance, stock down 6 cents at end of call. Should see some numbers rise here but not by much, more likely a quarter by quarter progression on the part of the analysts as you don’t want to get ahead on volumes and then have the company cut volumes back due to low prices as they have said they might.

  39. Is there anyone who still can’t get on the main site? Thanks.

  40. Probably just me, always seem to be the last due to our internet provider according to my IT guy.

  41. What’s your opinion on the ECA calls? Gonna hold a while longer?

  42. Bond – definitely through today, not adding any more for the moment. Will like to see some post call reaction, so far nothing.

  43. Yep, still getting the GKG.net page

  44. Last I heard from them they told me it was working fine to which I referred them here. They then said they had “escalated the ticket” which to me sounds like they through it in the trash.

  45. Bond – have you tried all the usual stuff, DNS flush, clear cache, maybe a reboot?

  46. Still can”t get on. Have tried it all as well.

  47. Oh yeah, tried all that sheeite, IT guy said that our Internet provider is the problem. To be honest, I don’t remember how he put it.

  48. Ok thanks, will be posting here again tomorrow then it seems.

  49. I have been trying all day. I still can’t log on.

  50. Ram – I will post here tomorrow as well. Main site very quiet anyway in this paint drying market.

  51. Thank you for your patience. I hope you can hold your host accountable for something.

  52. Re accountable – doubtful. And don’t thank me for mine as I have none left. But I very much appreciate yours. And if you have none left all I can do is say that I understand that and that it’s out of my hands. I’d choke the guy through the phone if possible but there’s not an ap for that.

  53. AAPL would double if they could come up with an app for that. The bitch slap app I’d call it.

  54. I flushed everything first thing and still not getting in.

  55. I feel so alone, isolated, very coooold…..

  56. Thursday post is up.


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