Friday, October 29, 2010
Technical Trading Alerts 10/28/2010
Thursday, October 28, 2010
Weekly DOE Natural Gas Storage Analysis
Storage levels inch closer to 2009 highs
Injection slightly above expectations – The EIA reported a natural gas injection of 71 bcf, slightly below expectations (as per Bloomberg) of 74 bcf. For the comparable week, injections last year were 25 bcf with the five-year average injections at 45 bcf. Total storage now sits at 3,754 bcf, only 0.1% below last year’s level of 3,756 bcf, and 9.1% above the five-year average of 3,442 bcf.
Storage levels inch closer to record levels set in 2009 – The 71 bcf injection this week puts us only 83 bcf below record storage levels set in late November 2009. Looking ahead, above average temperatures forecasted for key consuming regions means we could potentially reach new highs in the coming weeks.
Wednesday, October 27, 2010
Technical Trading Alerts 10/27/2010
Tuesday, October 26, 2010
Technical Trading Alerts 10/26/2010
Monday, October 25, 2010
Trade Entry -MEE Risk Reversal Option Play
Sunday, October 24, 2010
Technical Trading Alerts 10/25/2010
Friday, October 22, 2010
Trade Entry - CLB
Technical Trading Alerts 10/21/2010
Thursday, October 21, 2010
Weekly DOE Natural Gas Storage Analysis
Injection slightly above expectations – The EIA reported a natural gas injection of 93 bcf, slightly above expectations (as per Bloomberg) of 88 bcf. For the comparable week, injections last year were 23 bcf with the five-year average injections at 54 bcf. Total storage now sits at 3,683 bcf, or 1.3% below last year’s level of 3,731 bcf, but 8.4% above the five-year average of 3,397 bcf.
Futures curve continues to fall – Over the past six weeks, injections have averaged 30% higher than the five-year average, despite more normalized weather. With the potential prospect of gas-on-gas competition, not only near month NYMEX gas prices continue to fall, but also the full futures curve as well, down 7% from six weeks ago and 26% from last year.
Wednesday, October 20, 2010
Technical Trading Alerts 10/21/2010
Weekly DOE Crude & Product Inventory Analysis
Crude inventories increase slightly below expectations – Crude oil inventories increased 0.7 mmbbls last week, slightly below market expectations for a 1.5 mmbbls build (per Bloomberg). Crude oil inventories are now sitting at 361.2 mmbbls, which is 6.5% above last year and 11.8% above the five-year average.
Daily Energy & Resources Digest 10/20/2010
Kodiak (KOG) expands Bakken footprint with $110 million asset grab. The company purchased ~14,500 net acres and four producing wells (~500 net boe/d plus existing infrastructure) for $99 million in cash and $11 million of stock (2.75 million shares at $4 per share). Excluding the acquired production, this implies about $7,600/acre; if assuming $100,000 per flowing boe, the acquisition price comes out to ~$4,100/acre. Where's the cash coming from? With Kodiak's drilling success to date, it was able to expand its credit facility from $20 million to $50 million and it also received commitments for a second facility with $40 million of availability. With the extra capacity plus the $74 million of proceeds from the recent equity offering, our model has Kodiak exiting 4Q with $65 million of the $90 million drawn. Looking at the newly acquired acreage, 11,700 acres are located in McKenzie County (core) with the remaining 2,800 acres located in Williams County, just north of Brigham's (BEXP/$19.61/Strong Buy) Rough Rider position. The Three Forks has yet to be de-risked around this land, and therefore we estimate it only adds 34 Bakken locations to inventory (Kodiak estimates 60). Bottom line: While the new land gives Kodiak some additional running room in the Bakken, the transaction is neutral to NAV analysis and the stock is still one of the more expensive names in the group, particularly as smaller companies continue to get squeezed on margin by service costs.
Technical Trading Alerts 10/20/2010
Tuesday, October 19, 2010
Daily Energy & Resources Digest 10/19/2010
Technical Trading Alerts 10/19/2010
Monday, October 18, 2010
Daily Energy & Resources Digest 10/18/2010
McMoRan Exploration Co. (MMR) said Monday it cut its third-quarter loss by about half, but its revenue fell short of Wall Street estimates as production slipped. The New Orleans-based company, which explores offshore in the Gulf of Mexico and onshore in the Gulf Coast area, reported a net loss of $25.3 million, or 26 cents per share, compared with a loss of $51.9 million, or 60 cents per share, in last year's third quarter. Analysts surveyed by Thomson Reuters had expected a slightly narrower loss of 25 cents per share, on average, in the latest quarter. Revenue fell 13 percent to $94.8 million from $109.5 million. Analysts had expected revenue of $98.7 million, on average. Third-quarter production averaged 146 million cubic feet of gas equivalent per day, compared with 215 million cubic feet of gas equivalent per day in the third quarter of 2009. The company reiterated its expectations for full-year production of 160 million cubic feet of gas equivalent per day, including 140 million in this year's fourth quarter. Last month, McMoRan agreed to acquire the shallow water shelf assets of Plains Exploration & Production Co. for about $818 million in stock and cash. McMoRan said on Monday that it expects to close the acquisition by the end of this year.
Thursday, October 7, 2010
Technical Trading Alerts 10/7/2010
Weekly DOE Natural Gas Storage Analysis
Injection exceeds expectations – The EIA reported a natural gas injection of 85 bcf compared to market expectations (as per Bloomberg) of 79 bcf and the five-year average of 67 bcf. For the comparable week last year, the EIA reported an injection of 69 bcf. Total storage now sits at 3,499 bcf, or 4.1% below last year’s level of 3,649 bcf, but 6.7% above the five-year average of 3,279 bcf.
Tuesday, October 5, 2010
Daily Energy & Resources Digest 10/5/2010
The report found that E&P companies slashed capital spending by 40% last year, while the integrated oil companies reduced their investments by 9%. Exploration outlays fell 12% to $62.7 billion, but unproved acquisition costs dropped 71%. A 2% dip in proved acquisition outlays would have fallen 50% were it not for the $20 billion merger of Suncor Inc. and Petro-Canada. “With the recession and ongoing uncertainty in the market last year, companies put acreage acquisition on hold and seemed to focus on their in-house development opportunities,” said the report’s author and director of IHS Herold, Nicholas D. Cacchione. “This decision, I think, reflected their desires to monetize known holdings that can be brought into production much more rapidly than something with a less certain payout several years down the road,” Cacchione said.
The reduced capital spending and higher reserves totals resulted in a near 50% decrease in reserve replacement costs to $11.41/boe and lower finding and development costs to $12.23/boe, IHS Herold said. Strong natural gas reserves additions led reserves replacement rates to the highest level in 5 years, according to the report. IHS Herold expects a modest rebound in 2010 upstream spending. In North America E&P investment increased 30% in the first half of this year, which was more than expected and should result in a 20% increase in spending for the year, said Cacchione. Cacchione added that outside North America, where spending declines were less severe during 2009, he expects upstream investment to climb 10% this year.
Monday, October 4, 2010
Technical Trading Alerts 10/4/2010
Daily Energy & Resources Digest 10/3/2010
Apache (APA) Closing on Mariner (ME) Acquisition. Last Friday, Mariner announced that it would be holding a special shareholder meeting on November 10, 2010, to approve its merger agreement with Apache. Initially announced on April 15 and expected to close around mid-3Q10, Mariner production will now contribute only roughly half of a quarter of production for 4Q10. Stockholders of record as of October 12 will be entitled to the meeting and vote.
Patterson (PTEN) Reports September Activity and Closes Pressure Pumping Deal. Patterson reported 184 rigs running in September, including 175 rigs in the United States. This is a 2% month-over-month increase from August, when the rig count was 180 rigs and 171 rigs, respectively. Patterson also closed its acquisition of Key Energy's (KEG/$9.74/Market Perform) pressure pumping division. Bottom line: Patterson averaged 178 rigs in 3Q10, in the middle of the company's 175-180 rig guidance. Given recent wet weather, we'll be interested to see if management expects to still see a seasonal ramp in activity.
Berry (BRY) Signs Solid Cali Sales Agreement. On Friday, Berry announced that it had signed a crude oil purchase agreement with Exxon Mobil (XOM) for the sale of up to 12,000 bbls/d. The agreement covers all oil production from South Midway Sunset Field (currently ~7,500 Boe/d) and extends through November 30, 2011. While the sales agreement covers ~150% of current production from the field, the extra cushion would allow Berry to ramp production from South Midway Sunset field, which is currently projected to decline slightly to ~7,000 Boe/d by 2013. Bottom line: While the DOGGR decision to award permits for the next phase of diatomite production, the sales agreement provides Berry an additional source of capital expansion (in addition to the Wolfberry) should there be further delays in securing permits for the remainder of its diatomite development.
Global (GLBL) Announces Contract Award in Dubai. This morning, Global announced it has been awarded a contract from Dubai Petroleum Establishment to design, construct, and install a platform and pipelines to connect to an offshore processing facility. Global anticipates that it will use its newly built Global 1200 as the primary construction vessel for the job, which is expected to be completed in 1H11. Although this announcement comes as good news, the award will likely be at a slim margins given it will be the initial test of Global's new state-of-the-art vessel. Once fully tested, it is expect that the 1200 will be a flagship vessel for the company. Recall that the company has a second, sister ship under construction (the Global 1201), which is expected to be delivered mid-next year.
Eagle Rock (EROC) Opens Up Its Checkbook for Panhandle Gathering System and Working Interest in Big Escambia Creek Field. Eagle Rock announced that it has acquired over 200 miles of gas gathering systems, compression, and dehydration facilities located in Wheeler and Hemphill Counties from Centerpoint Energy Field Services for $27.5 million. These assets are expected to complement Eagle Rock's gas processing facilities in the area. The partnership stated that the purchase price multiple is 7.6x the projected 2011 EBITDA forecast. Eagle Rock also announced it acquired 410.5 MBoe of proved reserves (87% proved develop producing and 130 Boe/d of production) of additional working interests in its Big Escambia Creek field for $4.2 million. Both transactions are expected to be closed no later than the middle of this month.
Kinder Morgan Energy Partners (KMP) Sells 50% Interest in Cypress Pipeline. Kinder Morgan announced that it has entered into an agreement with Westlake Chemical Corporation (WLK) to sell a 50% equity interest in its Cypress Interstate Pipeline for an undisclosed price. Recall, the 104-mile pipeline supplies Westlake's Lake Charles, Louisiana, petrochemical complex with natural gas liquids used to produce ethylene and ethylene derivatives. After the sale, Kinder Morgan will continue to operate the pipeline under a long-term agreement with Westlake Chemical.
Iraq Boosts Oil Reserve Estimate 24%, Bypasses Iran to Become World #4. The Iraqi government increased its petroleum reserve estimate to 143 billion Bbls today, a 24% jump from its most recent estimate in 2001, putting it behind only Saudi Arabia, Canada, and Venezuela. While Iraq hasn't had an OPEC output quota since the 1991 Gulf War, speculation is that future quota concerns may have been the impetus for the revision. Additionally, the augmented reserves could theoretically make the country more attractive to foreign operators. The government is counting on foreign investment to raise its production from ~2.4 MMbpd currently to a targeted ~12 MMbpd in the next six years. As a practical matter, however, the announcement may well be a fantasy; OPEC members have historically been notorious for playing politics with reserve estimates in order to "game" the quota system.
RIG COUNT The Baker Hughes (BHI) Domestic Rig Count Is Up 9 Rigs From Last Week to 1,659. The rig count is now up 62% y/y. Overall, we are 89% (783 rigs) above the rig count bottom experienced on June 12, 2009, but still 22% (372 rigs) below the peak experienced on September 12, 2008. The natural gas rig count was down 5 to 962, the oil rig count was up 14 to 687, and the miscellaneous rig count flat at 10. The horizontal rig count is at 55% of the total rig count. Bottom line: We anticipate that the gas rig count will continue to fall as producers slow drilling activity due to low gas prices. Additionally, it is believed that the ~960 gas rigs currently drilling are more than sufficient to increase domestic natural gas supply.
Saturday, October 2, 2010
Technical Trading Alerts 10/1/2010
Friday, October 1, 2010
Daily Energy Digest - 10/1/2010
Hess Corporation (HES) beefed up its interest in the Tubular Bells oil and gas field in the Gulf of Mexico (GoM). The company purchased an additional 20% interest from BP plc (BP) for $40 million. Following this deal, Hess will become the operator of this field with a total interest of 40%. Other partners in the Tubular Bells field are Chevron (CVX) and BP with each holding 30% interest. Discovered in 2003, the Tubular field is located 135 miles offshore New Orleans.
Separately, Hess also announced the completion of its interest acquisition in a couple of Norwegian North Sea offshore fields — Valhall and Hod. In June, the company assumed 7.85% and 12.5% interest in Valhall and Hod fields, respectively, for a total consideration of $496 million. The transaction brought Hess’ interests in Valhall and Hod to 64.05% and 62.5%, respectively. It appears that the needle had moved positively for Hess with its recent initiatives in exploration and production. Historically, the company had been lagging its peers in terms of upstream growth and balance sheet strength. Notably, the company keeps maintaining the balance between domestic as well as international upstream development efforts. However, Hess’ international operations in terms of reserves and production growth hold more promise. Also a positive is Hess’ oil-weighted production profile given the positive near- to medium-term oil outlook.
M&A expenditures total $21B for US Shale gas in first half of 2010 (Source: Wood Mackenzie) Wood Mackenzie’s latest corporate analysis highlights that upstream M&A expenditure in US shale gas totalled US$21 billion during the first half of 2010: equivalent to one third of global upstream M&A spend during the period. The independent energy research firm says key indicators suggest that this level of activity is set to continue over the next couple of years, with the large caps and majors continuing to dominate the market.
Luke Parker, Manager of Wood Mackenzie’s M&A research service underlines the magnitude of the market, “Through the first half of this year alone, in excess of 35 trillion cubic feet (tcf) of shale gas resource changed hands at an average cost of US$0.60 per million cubic feet of gas equivalent (mcfe). This expenditure is equal to the total US shale gas M&A expenditure for the 2008 and 2009 combined – which was US$19.7 billion and US$2 billion respectively.”
“M&A activity in US shale gas has evolved with its emergence, play-by-play, as a world scale source of secure, long-term gas supply. The key factor driving this has been the continued evolution and application of new technologies to unlock enormous volumes that were previously considered uncommercial.” The result is lowered development breakeven costs to a level at which the cost of shale gas is highly competitive with other domestic sources of supply - conventional and unconventional - and LNG imports. Operators have made, and continue to make, notable advances and unit costs have fallen in spite of increasingly complex and specialised well design. Parker goes on to highlight the impact of this structural change, “In a wider upstream oil and gas sector characterised by dwindling opportunities and increasing risks, the emergence of such an attractive resource – competitive with other global opportunities by every measure – has been a game changer.”
So has the flurry of activity peaked yet? Parker doesn’t think so, “The ingredients required for continued high levels of M&A activity in US shale gas remain in place. The drivers that make shale gas so attractive – world scale resource, robust economics, access opportunities and limited above-ground risk – are as strong as ever.” Expanding on how continued level of activity is set to unfold Parker explains, “There’s scope for intra-play and sector wide consolidation, facilitated by mounting pressures on existing players to evaluate and restructure their portfolios as strategic priorities evolve. Key among the various pressures that will influence the market, at least in the near-term, is the continued disconnect between oil and gas prices and a depressed Henry Hub futures market.”
Therefore Wood Mackenzie suggests that gas weighted independents with a weak balance sheet and/or hedging position are beginning to look increasingly vulnerable to larger players. In fact, the report suggests that shale gas offers a good fit for the large caps and majors, playing to their technical capability, financial strength and long-term view, all of which are pre-requisites for those looking to build a material position. Hence this peer group will continue to dominate the large scale deal activity. Robert Clarke, Unconventional Gas Research Manager for Wood Mackenzie adds, “The magnitude of the US Shale gas resource is extraordinary. We estimate the total resource potential of the 22 shale plays we currently analyse is approximately 650 trillion cubic feet of gas equivalent (tcfe): equivalent to a resource life of 32 years based on total US gas production in 2009. Shale gas production is set to increase from 17% in 2010 to 35% in 2020 of total US gas supply.”
Enbridge (ENB) to invest $260MM to expand Edmonton Terminal to support growing oil sands production. The company announced that its wholly owned subsidiary, Enbridge Pipelines Inc. (EPI), will expand the tankage of its mainline terminal at Edmonton, Alberta by one million barrels at an estimated cost of approximately $260 million, subject to regulatory approval. The expansion is targeted for completion by late 2012. The expansion is required to accommodate growing oil sands production receipts both from Enbridge's Waupisoo Pipeline and other non-Enbridge pipelines. The expansion will be undertaken under the terms of the 2010 Incentive Tolling Settlement between EPI and the Canadian Association of Petroleum Producers (CAPP). Enbridge has received a letter of support from CAPP to undertake the project.