PBR - $84.58 - Petro Brasileiro
PBR dropped back to our entry target of $87 on Tuesday and continued on to test support at $82 before rebounding. This was -$12 off its high for the month and should be a strong support point assuming we don't get an implosion in oil prices. Once we get a bounce to reflate call premiums we will sell a call to reduce our cost.
Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a mixed-capital enterprise of which a majority of voting capital must be owned by the Brazilian Government. The Company is engaged in a range of oil and gas activities, which include segments such as exploration and production, refining, transportation and marketing, distribution, natural gas and power, international, and corporate. Besides the dominant market position in Brazil, Petrobras has oil and gas activities in international locations, with significant international operations in Latin America, the Gulf of Mexico and West of Africa. During the year ended December 31, 2004, the Company had estimated proved developed and undeveloped crude oil and natural gas reserves of approximately 11.82 billion barrels of oil equivalent in Brazil and other countries.
Breakdown target $87.00 hit on 3/07
Entry $87.00 (3/07)
SLB - $116.86 - Schlumberger Ltd.
We got the pullback from $123 and the RIG induced spike back on March 3rd. We were triggered on the drop at $114 and right at current support. SLB has been rather tame since the drop and rose +2.12 on Friday. I am happy with our position despite it being expensive. The split on April 7th will give us (2) $60 LEAPS at $7 each before we start working on reducing the cost. SLB and RIG should be less dependent on the price of oil than a major oil like Conoco or Exxon.
2:1 Split April 7th
Schlumberger Limited (Schlumberger) is an oilfield services company that supplies technology, project management and information solutions for the oil and gas industry. Schlumberger consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company that supplies a range of technology services and solutions to the international petroleum industry. WesternGeco, jointly owned with Baker Hughes, is a surface seismic company. On January 29, 2004, Schlumberger completed the sale of its SchlumbergerSema business to Atos Origin. During the year ended December 31, 2004, Schlumberger completed the initial public offering of Axalto and no longer retains any ownership interest in this business.
Breakdown target $114.00 hit on 3/08
Entry $114 (3/08)
BTU - $46.20 - Peabody Energy
Peabody was knocked back to earth this week after coming very close to a new high the first week of March. $52 appears to be resistance and the 100 dma at $43 is support. Peabody split 2:1 baco on Feb 23rd and should find new buyers once the sector recovers. Peabody profits are not related to the price of oil and coal prices are continuing to rise. Summer cooling season is just ahead and BTU is going to be a long term hold. We bought the 2008 LEAP in anticipation of a long term position.
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.
Breakdown target $48.00 hit 3/07
Entry $48.00 (3/07)
PCU - $79.84 - Southern Copper Corp
PCU is not technically an energy play but a commodity play focusing on the global growth fed by oil. Copper and oil are linked in the growth scenario and PCU is my favorite copper stock. Strong support exists at $76.
Southern Copper Corporation, formerly Southern Peru Copper Corporation (SPCC), is an integrated producer of copper that operates mining, smelting and refining facilities in the southern part of Peru. The copper operations of the Company involve mining, milling and flotation of copper ore to produce copper concentrates, the smelting of copper concentrates to produce blister copper and the refining of blister copper to produce copper cathodes. SPCC also produces refined copper using the solvent extraction/electrowinning (SX/EW) technology. Silver, molybdenum and small amounts of other metals are contained in copper ore as by-products. Silver sold is recovered in the refining process or as an element of blister copper. Molybdenum is recovered from copper concentrate in a molybdenum by-product plant.
Breakdown target $78.00 hit on 3/07
Entry $78.00 (3/07)
XLE - $51.38 - Energy Select SPDR
The XLE declined to our entry target at $52 on Tuesday and held just above support at $51. This is exactly where we want to be and options are cheap. A break of $51 finds support again at $50 and I would be very surprised to see any further declines. With a mix of integrated oils, drillers and service companies the XLE should not be as volatile as oil prices. This is the vehicle for those with a very low risk tolerance.
The Energy Select Sector SPDR Fund (the Fund) is an index fund that seeks to replicate the total return of the Energy Select Sector Index of the Standard & Poor's 500 Composite Stock Index (S&P 500 Index). During the fiscal year ended September 30, 2004 (fiscal 2004), the Fund had a return of 48.27%, as compared to the Energy Select Sector Index return of 48.91% and the S&P 500 Index return of 13.87%. The Fund invests in industries, such as energy equipment and services, and oil and gas services, among others. In fiscal 2004, its top five holdings were Exxon Mobil Corp., ChevronTexaco Corp., ConocoPhillips Inc., Schlumberger Ltd. and Occidental Petroleum Corp.
Breakdown of components of the XLE:
$52.00 hit 3/07
Entry $52.00 (3/07)
RAIL - $63.63 FreightCar America
You may think RAIL is not an energy play but you would be wrong. 78% of its rail cars are for coal. You may remember in mid 2005 the coal companies saw a period of soft earnings because there was not enough rail capacity to get their coal to market. RAIL saw a +120% increase in orders in Q4 and saw a backlog of nearly 21,000 cars at year end. As more energy products are shipped from Canada and into Mexico the demand will continue to grow.
After a meteoric spike from $20 in July to $70 in February it was due for a substantial pullback. That arrived last week and afforded us our entry opportunity.
FreightCar America, Inc. is a manufacturer of aluminum-bodied railroad freight cars (railcars) in North America. The Company specializes in the production of coal-carrying railcars, which represented 78% of its deliveries of railcars, during the year ended December 31, 2004, while the balance of its production consisted of a broad spectrum of railcar types, including aluminum-bodied and steel-bodied railcars. It also refurbishes and rebuilds railcars and sells forged, cast and fabricated parts for all of the railcars that the Company produces, as well as those manufactured by others. Prior to April 1, 2005, the Company was named FCA Acquisition Corp. On April 1, 2005, a former parent company, also named FreightCar America, Inc., merged with and into FCA Acquisition Corp., with FCA Acquisition Corp. being the surviving corporation. In connection with the merger, FCA Acquisition Corp. changed its name to FreightCar America, Inc.
Currently the longest option you can buy is the September series.
Breakdown target: $67 hit 3/07
Entry $67.00 (3/07)