OPEC Bailout Watch: Production Cut 1.5 Million Bopd. Cut to
implemented by November 1 which is fast by Cartel standards. OPEC President
Chakib Kehlil said, "We’re prepared to meet more often to stabilise the market.
If a further decision has to be made, it will be made and we will not
necessarily wait for the Oran (December) meeting,"
Sentiment Watch: Absolutely horrible open on tap. Asia and
Europe got crushed overnight and a full scale U.S. equity market capitulation
appears set for the open (if not through the close). You know it’s bad when one
of the top stories on MarketWatch deals with circuit
breaker levels. For the completely risk immune, the open will likely
represent a fantastic buying opportunity in many energy names as even the
biggest of the big caps are set to open down 10% as determined by a few 10s of
thousands of pre market shares. Dramamine a must.
Big Thoughts From Yesterday Watch: Offshore drilling,
especially in the deepwater segment, has been largely unaffected by recent slide
in oil prices and by the freezing of the credit markets:
- New rig contracts continued to be signed
- Day rates remain elevated are are not showing signs of slippage
- Contracts between rig owners and operators are stronger than the buy and
sell-side think
- Little to no incidence so far of renegotiations of contracts
- NOCs (National oil companies), Majors, and U.S. Large Cap E&Ps are still
taking the long view with regard to oil prices
- M&A opportunities are approaching
- Nutshell: this comes from three conference calls (CLB, NE, and DO) and I
didn’t come away feeling like I’d been sold a package of goods.
In Today’s Post:
- Holdings Watch - added DO calls to the 10KP
- Commodity Watch
- Natural Gas Storage Review
- Odds & Ends
Holdings Watch: Holdings Wiki and 10KP Tabs are updated.
- Added (5) DO December $80 calls (DOLP) for $2.75 at the open with the stock
up $3 on earnings and a hike to their special dividend and on the heals of a big
drop in the last few days.
Commodity Watch:
Crude oil inched up $1.09 yesterday to close at $67.84 in advance of
OPEC’s decision. This morning crude is trading down $4+ in connection
with equity market futures and despite OPEC’s cut.
Natural gas fell like a stone yesterday
despite a smaller than expected storage injection. Gas ended down a whopping
$0.36 (5%) at $6.61. Selling started prior to the number’s release and
my best guess is that the forced liquidation boogeyman came to visit multiple
hedge funds as the November expiry on 10/29 approaches. The 12 month gas strip
was off nearly 4% to 6.92, its
first close below $7 since 2006. This should prompt more high profile
capital budget reductions as the general accepted level for healthy vs
non-healthy strip pricing had been thought to be about $8.
Natural Gas Storage Review
- EIA reported an injection to gas storage of 70 Bcf (I was looking for 70 and
the Street was at 75).
- Storage now stands at 3,347 Bcf.
- There are three weeks left in the injection season and given the weather
forecast we still look set to peak around 3.4 Tcf.
Odds & Ends
Analyst Watch: (RRC) upped to Buy at Stanford Re, (DO) upped
to Buy at Deutsche Sec., Argus keeps (VLO) at Buy, cuts target from $42 to $24.
(NOV) cut to Neutral at JPM,
