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DVN - $62.44 - Devon Energy

Devon gapped down on Tuesday with the implosion in oil and hit our entry trigger at $60. There is no news but you may remember Devon is a partner on that new oil discovery in the Gulf reported to be between 3-15 billion bbls. Of course they have to figure out how to develop it first. Either way Devon is a strong producer and that new find will become an asset on their balance sheet. Look for them to rally early once October is over.

Insurance put:
Buy Jan-2007 $55 Put DVN-MK currently $1.75 only if DVN trades at $60 again. Hopefully an OPEC production cut will prevent us from making the entry.

Earnings schedule: Nov 1st

Company Info:

Devon Energy Corporation (Devon) is an independent energy company engaged primarily in oil and gas exploration, development and production, the acquisition of producing properties, the transportation of oil, gas and natural gas liquids (NGLs) and the processing of natural gas. Devon operates oil and gas properties in the United States, Canada and various regions located outside North America, including Azerbaijan, Brazil, China, Egypt, Russia and West Africa. In addition to Devon's oil and gas operations, it has marketing and midstream operations. These include the marketing of natural gas, crude oil and NGLs, and the construction and operation of pipelines, storage and treating facilities and gas processing plants. The Company sells its gas production to a range of customers, including pipelines, utilities, gas marketing firms, industrial users and local distribution companies.

Devon is a 25% partner in the new BP discovery in the Gulf. This is a huge windfall for Devon but it is also a long way off before any income is received.


Breakdown target: $60 Hit 10/03

Position: 2009 $70 LEAP Call VVH-AN @ $9.00 10/03

RIG - $69.32 - Transocean Inc

RIG dropped -8 this week to the Wednesday lows and our entry trigger at $68. We have strong support at $65 and a -30% decline off the highs. I expect RIG to recover and set new highs as more drilling gets underway in the Gulf. Check out their rig report just released this week: http://tinyurl.com/ho3mt

Insurance put:
Buy Jan $60 PUT RIG-ML currently $1.90 only if RIG trades at $65.

Earnings schedule: Nov 2nd

Company Info:

Transocean Inc. (Transocean) is an international provider of offshore contract drilling services for oil and gas wells. As of March 2, 2006, it owned/had partial ownership interests in, or operated 89 mobile offshore and barge drilling units. Its fleet included 32 High-Specification semisubmersibles and drillships (floaters), 23 Other Floaters, 25 Jackup Rigs and nine Other Rigs. The Company's primary business is to contract these drilling rigs, related equipment and work crews primarily on a day-rate basis to drill oil and gas wells. It specializes in sectors of the offshore drilling business with a focus on deepwater and harsh environment drilling services. The Company also provides additional services, including integrated services.

October rig report from Transocean: http://tinyurl.com/ho3mt

There are only two major companies that can drill in 7500 ft of water. DO and RIG. We already own DO and I would like to get a piece of RIG as well. RIG has already announced a long-term contract to construct and operate a new drillship for BP and odds are good there will be more to follow once the other players want to start exploring their blocks.

Breakdown target: $68 hit 10/03

Position: 2009 $80 LEAP Call VOI-AP @ $12.90 10/03

TSO - $58.39 - Tesoro Corporation

TSO declined to $55 on Wednesday triggering our entry with oil at $57.70. The rebound took it right back to current resistance at $59. Now that the big decline in oil is over we are not likely to get the crushing drops that could break support at $54. If we do it will also trigger a protective stop.

Insurance put:
Buy Feb $50 PUT TSO-NJ only if TSO trades at $54

Earnings schedule: N/A

Company Info:

Tesoro Corporation (Tesoro) is an independent refiner and marketer of petroleum products with two major operating segments: Refining and Retail. Through its refining segment, the Company manufactures products, primarily gasoline and gasoline blendstocks, jet fuel, diesel fuel and heavy fuel oils for sale to a variety of commercial customers principally in the mid-continental and western United States. It operates six refineries in the United States with a combined rated crude oil capacity of 558,000 barrels per day (bpd). During the year ended December 31, 2004, approximately 50% of the Company's total refining throughput was heavy crude oil. Its retail segment distributes motor fuels through a network of branded gas stations, primarily trading under the Tesoro and Mirastar brands. The Company markets its products to wholesale and retail customers, as well as commercial end users.

Breakdown target $55 hit 10/04

Position: 2009 $70 LEAP Call ZGC-AN @ $7.70 10/04


 

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