STR - $83.00 Questar ** Stop loss $77.50 **
Questar was a watch list candidate last week with a breakdown target of $86. It broke down substantially below that level and would need another +$3 gain just to get us even. Questar is in the right business for the coming months and the velocity of the rebound on Friday, +4.16, should give us a clue as to its strength.
Earnings: Oct 26th (estimate)
Questar Corporation (Questar) is a natural gas focused energy company with three principal lines of business gas and oil exploration and production, interstate gas transmission, and retail gas distribution. Questar conducts most of its operations through its subsidiaries Questar Market Resources (Market Resources), Questar Pipeline Company and Questar Gas Company (Questar Gas). Market Resources is a sub-holding company that owns Questar Exploration and Production Company (Questar E&P), Wexpro Company (Wexpro), Questar Gas Management Company (Gas Management) and Questar Energy Trading Company (Energy Trading). Questar Pipeline provides interstate natural gas transmission, storage and gas processing and treating services. Questar Gas conducts retail natural gas distribution.
APR 2006 $90 CALL STR-DR @ $6.10
Entry $86 (10/04)
BTU - $74.65 Peabody Energy ** Stop Loss $70.00 **
Peabody announced this week that it was acquiring 30% of Econo-Power, a coal gasification company. With the Econo-Power process 50,000 tons of coal can be converted into one billion cubic feet of natural gas at a cost less than current gas prices. This should be a windfall for Peabody as they can now sell the gasifier and the coal to run it. This opens up a completely new market for Peabody to users that don't burn coal for energy.
Peabody Energy Corporation (Peabody) is a private-sector coal company in the world. During the year ended December 31, 2004, the Company sold 227.2 million tons of coal. It sells coal to over 300 electricity generating and industrial plants in 16 countries. The Company owns, through its subsidiaries, majority interests in 32 coal operations located throughout all the United States coal producing regions and in Australia. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois, Indiana, Kentucky and West Virginia. The Company owns four mines in Queensland, Australia. Most of the Australian production is low-sulfur, metallurgical coal. In addition to the mining operations, the Company markets, brokers and trades coal.
MAR 2006 $80 CALL BTU-CP @ $6.30
UPL $52.39 Ultra Petroleum ** Stop loss $48.00 **
Ultra fell as much as the rest of the crowd although not as sharply. It appeared to battle for every point as the selling progressed. UPL gained +2.84 on Friday and was stronger than all but the refiners. UPL is a very strong gas driller and has a cost of acquisition under $2 mcf. They have over 10,000 drilling sites plotted and operate a very active drilling program. UPL is working with Questar to drill the very productive Pinedale Anticline in Wyoming.
Earnings Schedule: Oct-25th
Ultra Petroleum Corp. is an oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and gas properties. The Company's operations are focused in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. During the year ended December 31, 2004, it owns interests in approximately 166,974 gross (92,997 net) acres in Wyoming covering approximately 260 square miles. The Company owns working interests in approximately 241 gross productive wells in this area and is operator of 41.5% of the 241 gross wells. Through Pendaries Petroleum Ltd., it is active in oil and gas exploration and development in Bohai Bay, China. The Company also owns interests in 15,518 gross (14,652 net) acres in Pennsylvania, as well as interest in approximately 720 gross (320 net) acres and interests in three productive wells in Texas.
March $60 Call UPL-CL @ $5.70
CHK - $33.99 Chesapeake Energy ** Stop loss $31.00 **
CHK recently announced the acquisition of Columbia Natural Resources and over 4.2 million acres of gas leases. This puts Chesapeake as a strong number three contender in the U.S. market behind XOM and COP in that order. The additional leases and 125 mcfe of daily production will keep CHK busy drilling for the next 15 years according to their press release.
Earnings Schedule: Nov-4th (approx)
Chesapeake Energy Corporation is an oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs and the marketing of natural gas and oil for other working interest owners in properties that it operates. The Company's properties are located in Oklahoma, Texas, Arkansas, Louisiana, Kansas, Montana, Colorado, North Dakota and New Mexico. The proved oil and natural gas reserves as of December 31, 2004 were approximately 4.9 trillion cubic feet of gas equivalent (tcfe). At December 31, 2004, approximately 89% of the Company's proved reserves (by volume) were natural gas, and approximately 70% of its proved oil and natural gas reserves were located in the primary operating area, the Mid-Continent region of the United States, which includes Oklahoma, western Arkansas, southwestern Kansas and the Texas Panhandle.
APRIL $35 CALL CHK-DG @ 5.30
BR - $72.71 Burlington Resources ** Stop loss $68.00 **
Burlington has over 12 trillion cf of gas reserves and onshore gas in the U.S. accounts for more than 85% of their production. BR is very well positioned to profit from a continuing rise in gas prices.
Burlington Resources Inc. is one of the world's largest independent oil and natural gas exploration and production companies, and holds one of the industry's leading positions in North American natural gas reserves and production. Our hallmarks include long-life reserves, strong cash flow generation and high expertise in producing from complex geologic reservoirs. Our reserves base of 12 trillion cubic feet equivalent of natural gas at year-end 2004 was concentrated in North America, which supplies nearly 85 percent of current production, with a key focus being the Rocky Mountain gas fairway of the U.S. and Canada.
Burlington's producing areas include the giant San Juan Basin Field of New Mexico and Colorado, where Burlington is the leading producer; Wyoming's highly productive Madden Field; the Williston Basin of North Dakota; the Anadarko Basin in Oklahoma; the Barnett Shale and Bossier trends in Texas, and South Louisiana. Major Canadian production comes from the Deep Basin, O'Chiese, Foothills, Northern Plains, Kaybob and Southern Plains areas. We also produce natural gas in the East Irish Sea, the Dutch North Sea, Argentina and China, and oil in Algeria, offshore China and Ecuador. With headquarters in Houston, we employ more than 2,200 people.
Buy FEBRUARY $80 Call BR-BP @ $3.90
Entry $72.71 (10/09)
SWN - $72.00 Southwestern Energy ** Stop loss $68.00 **
SWN just completed a secondary offering in order to finance an aggressive drilling program on the Fayetteville Shale play in Arkansas. SWN drilled 119 wells in the first half of 2005 and only had 3 dry holes. The stock split at $72 back in June and it closed at $72 again on Friday. After gaining +18 in only four days before the crash it gave -13 back before rebounding again. Let's hope we recover that $13 very quickly. I am playing a December call because the 2006 options are way too expensive.
Earnings: Oct 28th
Southwestern Energy Company is an integrated energy company headquartered in
Houston, Texas, primarily focused on the exploration for and production of
natural gas. Originally organized in 1929 as a local natural gas distribution
company in Arkansas, today the Company is involved in many different activities.
Buy DEC-$80 Call SWN-LP @ $5.10
Entry $72.00 (10/9)
KMG $87.59 Kerr McGee ** Stop loss $84.00 **
On Thursday Kerr McGee announced it was going to spin off its chemical business sometime in Q4. Kerr McGee's chemical business it the worlds third largest producer and marketer of titanium dioxide pigment with a 13% global market share. After the spin off KMG will be solely dedicated to exploration and production of oil and gas. KMG recently agreed to spend $4 billion to repurchase its shares in a successful defense to keep Carl Icahn from acquiring a seat on the board. Plenty of reasons for upside potential here without any boost from oil prices.
Kerr-McGee Corporation (Kerr-McGee) is an energy and inorganic chemical holding company whose consolidated subsidiaries, joint ventures and other affiliates (together, affiliates) have operations throughout the world. The Company's core businesses include exploration and production, and chemicals. Kerr-McGee's oil and gas exploration and production areas are onshore in the United States, in the Gulf of Mexico, the United Kingdom sector of the North Sea and China. In addition, the Company has exploration programs in Alaska, Brazil, Morocco, Bahamas and Benin. Kerr-McGee affiliates engaged in chemical businesses produce and market inorganic industrial chemicals, lithium-metal-polymer batteries and heavy minerals. On June 25, 2004, the Company completed a merger with Westport Resources Corporation. On Oct 7th, 2005, the Company announced its decision to proceed with the proposal to spin off its chemical business in Q4-2005.
Buy APRIL $90 Call KMG-DR currently $7.40
Entry $87.59 (10/9)