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Weekly Newsletter, Saturday, 02/10/2007

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Table of Contents

  1. Commentary
  2. Changes in Portfolio
  3. Portfolio Listing
  4. New Plays
  5. Existing Plays
  6. Watch List

Leaps Trader Commentary

Winter Returns

With television news showing cities in the northeast shoveling out from under 100 inches of snow it would appear that winter has returned with a vengeance. Here in Colorado we had six straight weeks of snowstorms that left three feet of snow in the Denver area by mid January. It may seem like winter but it is just a cold spell not the end of global warming. After two weeks of 60-degree days the snow is disappearing at my house and the trees are starting to bud. Those people digging out their cars in New York will be seeing the same warming trend very soon. The thermostats will return to normal and home heating oil use will plummet. There may be some cold left in this winter but its days are numbered.

Fortunately for energy investors this cold spell helped produce a heat wave in energy prices. We saw a huge 3.6 million barrel drop in inventory levels for distillates, which includes home heating oil. Gasoline levels dropped -1.2 mb and crude oil fell -0.4 mb when expectations had been for a build of +1.4 mb. Supplies are expected to decline even further with this week's inventory report. Forecasters said heating oil use should be 23% above normal next week as below normal temperatures continue through Feb-23rd. Oil prices climbed past $60 as if supplies were shrinking into shortages. This could not be further from the truth. Heating oil supplies are still 8% above the 5-year average for this time of year. There is no danger of shortages and no reason for this to have any impact on prices.

This highlights the fact that oil trades on perception not the facts. The facts are that we have a glut of crude products in the America. Until normal weather patterns return possibly until a new cycle of colder winters returns we will not be in danger of heating oil shortages. That has not prevented prices from rising as sound bites showing blizzard conditions hit the airwaves. Natural gas inventories have fallen sharply since late December but the 2.347 trillion cubic feet in storage is still 19% above the 5-year average for this time of year. Last week's -224 bcf draw from inventory was very strong but it would take 10 more weeks of blizzard conditions in the Midwest and Northeast to produce any fear of shortages. This is not likely to happen this close to spring. Gas prices have returned to $8 per mcf but that is very strong resistance and a level not likely to be broken this winter. The rise in gas prices helped to power oil higher since they trade roughly in tandem on a btu basis.

Geopolitical events also combined to push prices higher. Nigeria declared Force Majeure on deliveries of light sweet crude for the rest of February and March. Production will drop -370,000 bpd for the rest of February and -260,000 bpd in March. OPEC appears to be following through on its announced production cuts for February although the EIA said only about 300,000 of the announced 500,000 bpd cuts will actually occur due to cheating by several nations. Fears of a future conflict with Iran heated up when the Iranian President announced plans to make a major nuclear announcement on Sunday to coincide with the 20th anniversary celebration of the Islamic Revolution.

Occidental said they lost fours days of 120,000 bpd production at the Elk Hills field in California after a fire damaged facilities. Production at Exxon's Hibernia field in Newfoundland will be offline for four weeks as the biggest maintenance program in five years gets underway. Production had dropped from 180,000 bpd to 120,000 after a valve failed on Jan-2nd. The remaining production will now be offline for four weeks as that problem is repaired.

On Thursday Mexico's state owned oil company PeMex said production from Cantarell, the world's 3rd largest oil field, would drop -15% in 2007 as depletion rates accelerate. Cantarell produced 1.79 mbpd in 2006 and is expected to produce only 1.53 mbpd in 2007. The rate of decline is expected to continue despite a crash drilling program to offset falling production.

Oil prices rose on the combination of all the events listed above. Unfortunately without any new events this three-week rally is going to find it tougher to move much higher. $60 is psychological resistance and $65 is major technical resistance. Without any new geopolitical event we may need to wait for the impact of the continued OPEC cuts for any further gains. We are in the sweet spot for oil prices. As long as we remain around $60 through the coming demand decline we should be primed and ready for a new move higher when summer consumption begins. Demand normally declines substantially from late February through March as heating demands diminish and summer gasoline demand has yet to increase. If we can maintain the $58 - $60 level through this period we should be set for summer. As summer demand arrives so does the threat of late summer hurricanes. I have not heard any forecasts for 2007 but they missed it so badly in 2006 that they are probably going to be conservative for 2007. Either way it all depends on how many storms appear and their impact on pricing. If the forecasters predict a bunch and they start to appear the refiners will load up on oil in advance just to be safe.

I am expecting flat and choppy prices for the next 6-9 weeks depending of course on geopolitical events. I then expect prices to rise into the summer as we head into driving season followed by hurricane season. The highs should come around September and that would be our exit point for the majority of our positions. We will buy any fall dip and repeat the process once again. Of course that assumes the perfect scenario and reality is never perfect and almost always messy. At least you know in advance what I am expecting.

Chevron was in the news on Friday over talks with Russia to buy the remaining Yukos assets worth something around $22 billion. ENI was also mentioned as a bidder. I hate to hear Chevron is venturing into the bears den in search for oil. It seems that a few CEOs are deaf to the rising problems in Russia and their total disregard for the rule of law. They have taken over every major project save one and BP will probably lose it before the year is over. You can't trust Putin and his gang and they will take your money and then a couple years from now charge you with some kind of tax evasion or environmental crime and repossess your asset. You can count on it! I am avoiding Conoco because of their $12 billion at risk investment in Lukeoil and I will avoid Chevron if they do something stupid as well. Several analysts said the same thing on Friday and warned about investing in Chevron if they do a deal. With all the nationalizing of energy assets around the world you would think the energy companies would learn. Evidently the lack of reserves available elsewhere and the lure of proven reserves in Russia is too powerful a drug to resist. Like with any other drug it may eventually prove their downfall.

Anybody that thinks the energy sector is fading needs to review the SLB and DO earnings reports. DO announced profits that doubled as demand for deepwater drilling increased. Earnings of $1.60 per share beat street expectations of $1.38. The day rate for semisubmersibles jumped from $181,000 to $253,000 and the utilization rate rose to 93% from 85%. Jackup rates spiked to $113,000 per day compared to $69,000 a year ago. No slump here!

Earnings are nearly over and the energy sector has been hit and miss. Some reported great earnings and others were hampered by price declines and dwindling reserves. Now that earnings have passed stock price movement will be more closely related to the rise and fall in oil prices. That could be rather choppy for the next nine weeks for the reasons stated above. Be prepared to be bored and hope for some event to provide a spark.

I am dropping several plays because there is no spark providing lift in their particular scenarios. I expect oil prices to slump over the next few weeks and if there stocks can't cut it after a three week rally then they will probably fail us over a 6-9 week slump.

Jim Brown


March Crude Chart - 90 min

March Crude Chart - Daily

March Gas Futures Chart - Daily

 


Changes in Portfolio

New Energy Plays

None


New Non-Energy Plays

None


Dropped Plays
APC $41.55 -2.28 Anadarko Petroleum
SU $72.45 -1.53 Suncor Energy

New Watch List Plays Triggered

None


Portfolio Listing & Top Picks


New Plays

Most Recent Plays

None this week.
 


Play Updates

Existing Plays

The current format of the Play Updates has changed. Only the pertinent data that has changed from the prior week will be shown in an effort to concentrate more on new commentary on new plays rather than restating existing positions. Each play has a link back to either its last full commentary or its initial description.

*****************************

OSX - $199.23 +1.18 Oil Service Index - Stop loss OSX $179

No change. New support now at $187.

Index Description:

The Philadelphia Oil Service Index is an index of 15 companies that provide drilling and production services, oil field equipment, support services and geophysical/reservoir services. This index contains companies like Halliburton, Nabors, Schlumberger, etc.

Complete list of OSX components

To see the initial commentary on this position click here

Breakdown trigger $185 hit Jan-04

Position:
SHORT Sept $250 PUT - OFJ-UJ @ 58.50, Stop loss OSX $160


*********************

ECA - $48.67 +0.48 - Encana

Still holding at recent highs. No news, no change. Earnings on Thursday.

To see the initial commentary on this position click here

Earnings schedule: Feb-15th

Current recommendation: Buy at $45

Breakdown target: $45 hit Jan-3rd

Position: 2009 $50 LEAP Call ZBM-AJ @ $6.60

Insurance put: None

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THE $33.77 -0.46 - TODCO

No earnings date yet. Strong support just below at $31. No change in play

To see the initial commentary on this position click here

Earnings schedule: N/A

Current recommendation: Buy at $32

Breakdown target $39 hit 12/7/06

Position: 2009 $45 LEAP ZYU-AI @ $8.40

Insurance Put: None

**********************

CHK $29.63 +0.17 - Chesapeake Energy ** Stop loss $28.50 **

Despite absolutely amazing news from CHK on reserve growth the stock remained flat for the week. CHK said it replaced its produced reserves by 348% in 2006. 237% came from drilling and 111% from acquisitions. Current reserves rose from 7.5 tcfe to 9 tcfe. Production for Q4 rose 17% to 152.1 bcf from 130.4 bcf. CHK also realized gains from hedging of about $1.3 billion in 2006 and has reestablished many of its hedges for future production. CHK now has 132 rigs operating compared to 76 at the beginning of 2006. What is not to like about this company? They are doing everything right and making a ton of money in the process. I am amazed by the lack of reaction to the stock price. Fear of falling gas prices in the spring is keeping a lid on the stock price but not on the outlook for CHK.

Earnings still two-weeks away. No change in play.

To see the initial commentary on this position click here

Earnings schedule: Feb-23rd

Current recommendation: Hold

Position: 2009 $35 LEAP VEC-AG @ $5.30

Insurance put: none

*********************

FXI $105.37 +1.42 - FTSE/Xinhua China 25 Index Fund

The Chinese indexes continue to wander ahead of the Chinese New Year. The various China markets will be closed for the holiday. Eventually momentum will return and support at $103 continues to hold.

The iShares FTSE/Xinhua China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 Index.

Component list

This iShare focuses on the largest companies in China (58% of it positions) and Hong Kong (42%). These are the most liquid companies in these markets. With Asia growing by leaps and bounds the FXI generated a +40% return in 2005 without using options. We hope to do better using LEAPs.

Current recommendation: Buy under $105

Breakout target: $94.50 hit 11/22/06 on gap open to $95.80

Position: 2009 $100 LEAP Call VHF-AT @ $13.50

No insurance

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MRO $91.13 +1.51 - Marathon Oil

Marathon reported two new discoveries in Angola with potential flow rates of 5000+ and 6300+ bpd respectively. MRO is a 30% owner in the fields and many additional exploration wells are planned before production is begun. This should be a large and profitable field. The discoveries will produce light sweet crude. No change in play.

To see the initial commentary on this position click here

Earnings: Feb-1st 3.06 vs 3.43 (Q4/05) $1.08 billion profit

Current recommendation: Buy at $85

Position 2009 $100 LEAP Call VXM-AT @ $12.60

Insurance put: None

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HES - $54.94 +.37 - Hess Corporation
(Formerly (AHC))

Hess is wedging up tightly to $55 and a breakout appears imminent. This is a very promising chart and would warrant new positions on the break. No news and no change in play.

To see the initial commentary on this position click here

Earnings: Jan 31st, $1.13, vs $1.44 in Q4/05, 230% replacement

Current recommendation: Buy at $47

Position:
11/05/06 2009 $50 LEAP Call VHS-AJ @ $6.80
Cost adjustment put exit +1.60, cost = $8.40

Insurance Put: Triggered Jan-3rd @ $49
01/03/07 May $45 put HES-QI @ $2.60, exit 1/26 $1.00

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BTU - $40.87 -1.15 - Peabody Energy

BTU can't seem to make the break over $42 despite the cold weather supporting natural gas. The spike on Monday was just enough to stop us out of our March put for nearly nothing.

To see the initial commentary on this position click here

Earnings: Jan-25th +42% including special items.

Current recommendation: Buy at $35

Position:
10/22/06 Jan-2009 $50 LEAP Call ZZT-AJ @ $8.70
02/05/07 March put stopped -$1.00, cost = $9.70

Insurance put: Triggered with drop through $39
01/03/07 March $35 Put BTU-OG at $1.15, stopped @ $42.50

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DVN - $68.31 -2.09 - Devon Energy

Earnings fell -40% on the drop in gas prices but matched analyst estimates of $1.36 per share. Devon said its realized price for gas fell to $5.74 per mcf compared to $9.42 in the year ago period. Sounds like they need some hedging lessons from Chesapeake. Q4 production rose to 613,000 boe per day from 574,000 boe in the same period in 2005. Proved reserves rose +13% to 2.4 billion boe. Devon added 427 mboe through drilling and discovery and 106 mboe through acquisitions. They drilled 2400 wells with a 98% success rate.

Devon said production in 2007 should be in the range of 219-221 mboe compared to 2006 production of 214 mboe. Expenses are expected to be $7.70 to $8.05 per bbl in 2007.

To see the last full commentary on this position click here

Earnings: Feb-7th, $1.36 vs est of $1.36

Current recommendation: Buy at $65

LEAP Position:
10/03/06 Position: 2009 $70 LEAP Call VVH-AN @ $9.00
Cost update: 1/22 Put exit +0.20 = $9.20

Insurance put: Triggered 12/18 at $69
Position: Apr-2007 $60 Put DVN-PL @ $1.30, exit $1.10 1/22

**********************

RIG - $77.40 +1.03 - Transocean Inc

RIG started to tick up slightly ahead of earnings next week and Friday broke $79 intraday. Baring an earnings miss we could see continued strength. The drillers have been reporting strong earnings and RIG should not be any different. No change in play.

Their rig report released Feb-2nd

To see the last full commentary on this position click here

Earnings schedule: Feb-14th

Current recommendation: Buy at $74

LEAP Position:
10/03/06 Position: 2009 $80 LEAP Call VOI-AP @ $12.90
01/31/06 Cost update Put stopped -1.15 cost = 14.05

Insurance put: Triggered at $79 on Jan-3rd
1/3/07 Feb $75 PUT RIG-NO @ $2.55, stopped $77.50, $1.40

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TSO - $84.36 +.38 - Tesoro Corporation ** Stop Loss $81.00 **

After 4 weeks of blazing performance TSO rested but continues to hold at the $85 high. No major gain but we also saw no profit taking. No complaints here but I did raise the stop.

I raised the stop loss to $81 to preserve profits. If we are stopped we will look for another entry on the next dip with a new strike.

To see the last full commentary on this position click here

Earnings: Jan-29th, $2.28 +129%

Current recommendation: Buy at $65.00 with stop at $60

LEAP Position:
10/04/06 Position: 2009 $70 LEAP Call ZGC-AN @ $7.70

Insurance put: None

*******************

APC - $41.55 -2.28 - Anadarko Petroleum ** Closed **

APC announced profits that more than doubled aided by a large gain from the sale of its Canadian subsidiary. Anadarko continues to sell excess assets acquired in its $22 billion in acquisitions in 2006 with $9 billion in sales to date. APC ended the year with 3 billion bbls of reserves after adding 1.04 billion mostly through those acquisitions. Most analysts remain negative on the stock until they see some execution on producing those acquired assets.

While I personally believe the eventual Anadarko will be a lean, mean producing machine the market evidently does not share my view. I am closing this play now rather than fight the current trend. We will pick it up again once the current disbursements are over and the trend improves.

To see the last full commentary on this position click here

Earnings schedule: Feb-6th

Current recommendation: HOld

LEAP Position:
9/20/06 Position: 2009 $50 LEAP Call OCP-AJ @ $6.90
Cost adjustment for expired Jan put +2.35 = $9.35
Exit 2/11 @ $4.50, -4.85

Insurance put: 9/25
Position: Jan $40 PUT APC-MH @ $2.35, expired

*******************

SU $72.45 -1.53 - Suncor Energy ** Closed **

Suncor reported an "operational incident" that caused a drop in production on January 23rd that caused production at its oil sands facility to decline to 249,000 bpd in January from its target of 260-270K per day. Repairs are nearly complete and production is expected to ramp up again over the next several days.

Suncor is not showing any positive trend and the oil sands story has lost its pizzazz with investors. I am going to drop this position ahead of the expected slump in oil prices going into spring.

To see the last full commentary on this position click here

Earnings: Jan 25th $0.78 per share

Current recommendation: Buy at $70

LEAP Position: 9/11/06
Position: 2009 $80 LEAP Call OYX-AP @ $14.30
Cost update Dec put expired: +2.10 to $16.40
Exit 2/11 @ 12.00, -4.60

Insurance put: 9/18
Position: Dec $60 Put SU-XL @ $2.10, expired

********************

SLB $64.46 -.66 Schlumberger

SLB continues to hold at its post earnings high. Look for movement on RIG earnings. No news and no change in play.

To see the last full commentary on this position click here

Earnings schedule: Jan 19th, +71% to $1.13 billionbr>
Current recommendation: Buy at $60, stop at $55

LEAP Position:
1/2 9/11/06 @ $8.60
1/2 9/12/06 @ $8.00
Position: 2009 $70 LEAP Call VWY-AN @ $8.30
Cost update for expired Jan put +2.00 = $10.30

Insurance Put: 9/18
Position: Jan $50 Put SLB-MJ @ $2.00, expired

********************

SUN $61.45 -2.41 - Sunoco

Sun paused to consolidate after strong earnings the prior week. No news and no change in play.

To see the last full commentary on this position click here

Earnings: Jan-31st, -57% $1.00 vs $.96 analyst est.br>
Current recommendation: Buy at $60, stop at $54

LEAP Position:
9/12/06 Position: 2009 $70 LEAP Call VUN-AN @ $13.50
Cost update expired Jan put +2.40 = $15.90

Insurance Put:
Position: Jan $55 Put SUN-MK @ $2.40, expired

********************

PXP $48.76 -.18 - Plains Exploration

PXP saw some profit taking on Tuesday that knocked nearly -$2 off the new high price but that dip was quickly bought. $49 remains resistance and earnings are 2 weeks away. No other news, no change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-22ndbr>
Current recommendation: Buy at $44, stop $40

LEAP Position:
9/12/06 Position: 2009 $50 LEAP Call ZXL-AJ @ 7.50
Cost update expired Jan put +1.90 = $9.40

Insurance Put:
9/25 Jan $40 Put PXP-MH @ $1.90, expired

********************

FST $33.16 +1.17 - Forest Oil

Forest said it received antitrust approval for their acquisition of Houston Exploration. The acquisition creates a combined company with 2 tcf of gas reserves. br>
Forest also announced 2006 reserve data. Total reserves increased +25%. They replaced 372% of reserves with finding and acquisition cost of $2.15 per mcfe. Organic reserve replacement was +258% with finding and development costs of $2.09 mcfe. Production volumes increased +14% in 2006 to 310 mcfe/d. They increased their hedges by 40 Bbtu/d for the last three quarters of 2007 to cover production from their acquisition of Houston Exploration.

Earnings were announced for Feb-27th.

NNo change in play.

Enercom conference presentation

To see the last full commentary on this position click here

Earnings schedule: Feb-27thbr>
Current recommendation: Buy at $30, stop at $27

LEAP Position: 9/12/06
Position: 2009 $40 LEAP Call OJG-AH @ 4.50

No insurance due to cheap LEAP

********************

VLO $55.62 -.61 - Valero Energy

Valero held at its highs and continues to press resistance at $56. They presented at the Credit Suisse Energy Conference on the 8th. You can listen to that presentation here

No other news and no change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-1stbr>
Current recommendation: Buy at $50, stop at $45

LEAP Position:
9/24/06 Position: 2009 $60 LEAP Call VHB-AL @ $7.70
Cost update expired Jan put +2.25 = $9.95

Insurance Put:
Position: 9/25 Jan $45 Put VLO-MI @ $2.25, expired

********************

PBR - $95.35 -4.11 - Petroleo Brasileiro

Despite a week that saw some decent news PBR retreated to support at $95. They announced the start of production in the Gulf that will lead to about 25,000 bpd by the end of 2007. Their Argentine unit reported profits that grew +300%. PBR itself announced a deal with Pakistan to search for oil in the Indian Ocean. There was nothing negative making headlines but somebody sold the stock anyway. No change in the play.

To see the last full commentary on this position click here

Earnings schedule: N/Abr>
Current recommendation: Buy at $92, stop at $85

LEAP Position:
9/08/06 Position: 2009 $100 LEAP Call VDW-AT @ $14.90
Cost update Jan expired put +1.80 = $16.70

Insurance put:
9/11 January $70 PBR-MN @ $1.80, expired

********************

DO - $85.28 +.70 - Diamond Offshore

DO announced profits that doubled as demand for deepwater drilling increased. Earnings of $1.60 per share beat street expectations of $1.38. The day rate for semisubmersibles jumped from $181,000 to $253,000 and the utilization rate rose to 93% from 85%. Jackup rates spiked to $113,000 per day compared to $69,000 a year ago. Definitely no complaints here and DO spiked to a new 6-months high before profit taking settled in on Friday. No change in play.

To see the last full commentary on this position click here

Earnings schedule: Feb-8thbr>
Current recommendation: Buy at $75, stop at $69

LEAP Position:
8/29/06 Position: 2009 $80 LEAP Call VCT-AP @ 14.20
Cost reduction: Oct $70 Put profit -3.15, cost now $11.05
Cost increase: Dec $60 put expired -2.40, cost now $13.45

Insurance Put:
10/08 Dec $60 Put DO-XL @ $2.40, expired

Position closed:
10/03 October $70 put DO-VN @ $1.65, exit @ $4.80, +3.15

*************************

ATPG - $39.77 -1.39 - ATP Oil and Gas Corp

ATPG continued its low volume slide and is approaching support at $39.50. I would continue to be a buyer here based on the very strong outlook and activity in 2007 and beyond.

To see the last full commentary on this position click here

Earnings schedule: N/Abr>
Current recommendation: Buy at $38, stop at $34

LEAP Position:
8/20/06 Position: 2009 $40 LEAP Call VCL-AH @ $11.70
12/17/06 Cost update expired Dec 35 put -1.50 = $13.20

Insurance put:
9/06 Position Dec $35 PUT HKU-XG @ $1.50, expired

************************

PTR - $122.60 -1.55 - Petrochina

PTR continued to languish above support at $120 while waiting for the profit taking in the Chinese indexes to be over. I believe PTR will recover strongly once money starts flowing back into the markets after the Chinese New Year. br>
II still believe this stock could be well over $150 before our 2008 LEAP comes due.

To see the last full commentary on this position click here

Earnings schedule: N/Abr>
Current recommendation: Buy at $125.50, stop at $119

LEAP Position:
5/14/06 Position: 2008 $120 LEAP Call LJC-AD @ $16.20
Cost adjustment: Close short Dec $115 call +1.30 = $17.50
Cost adjustment: Close long July $90 puts +3.00 = $20.50
Cost adjustment: Close long Sept $110 put -2.60 = $17.90
Cost adjustment: Expired Dec $100 put +2.20 = $20.00
Cost adjustment: Closed Jan $135 put -2.60 = $17.40

Insurance put: (12/31)
1/03/07 Jan $135 Put PTR-MG at $138.50, $1.90
1/04/07 Profit stop at $132.50, $4.50 for +2.60.

Insurance put: (9/11)
Position: December $100 Put PTR-XT @ $2.20, expired

Insurance put: (8/13)
Position closed:
Sept $110 Put PTR-UB @ $2.40, stop @ $106 @ $5.00, +2.60

Insurance combo: Closed
Short: Dec $115 Call PTR-LC @ $3.20, 6/13, exit $4.50, -1.30
Long: (2) July $90 Puts PTR-SR @ $3.70, 6/13, exit $0.70, -3.00

Insurance puts: (Closed 6/7)
CClosed: June $105 PUT PTR-RA, @ $4.20 (5/22), exit 6/7 @ $4.30


****************************
Non-Energy Positions
****************************

DHI - $28.05 -2.81 - DR Horton

Ouch! The Toll Brothers guidance last week and DHI guidance on soft orders for Q1 really took a bite out of the stock price. I believe this is temporary since bad weather for the last 4 weeks was a critical factor in home shopping. Strong support at $27.50. No change in play.

To see the last full commentary on this position click here

Earnings: Jan-23rd, +35 cents vs 98 cents in 2005.br>
Current recommendation: Hold

LEAP Position:
9/24/06 Position: 2009 $25 LEAP Call VEI-AE @ $5.10

Insurance put: None
 


Leaps Trader Watch List

Dropped Entries

None


New Watch List Entries
SNP
Sinopec
UPL Ultra Petroleum

Current Watch List

SNP - Sinopec

China Petroleum & Chemical Corporation (Sinopec Corp.) is an integrated energy and chemical company with upstream, midstream and downstream operations. The Company and its subsidiaries operate mainly in the People's Republic of China. The principal operations of Sinopec Corp. and its subsidiaries include exploring for and developing, producing and trading crude oil and natural gas; processing crude oil into refined oil products, producing refined oil products and trading, transporting, distributing and marketing refined oil products, and producing, distributing and trading petrochemical products. Sinopec Corp. has five operating segments: exploration and production, refining, marketing and distribution, chemicals, and corporate and others. On June 21, 2005, Sinopec Corp. entered into an agreement with Beijing Yanhua Hitech Co., Ltd., pursuant to which Sinopec Corp. acquired 95% equity of Beijing Yanhua Hi-tech Catalyst Co., Ltd., held by Yanhua Hi-tech Corp.

Breakdown target $80.50

Buy JULY $85 Call SNP-GQ currently $6.30

**************************

UPL - Ultra Petroleum

Ultra Petroleum Corp. (Ultra) 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 primarily in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. As of December 31, 2005, Ultra owned interests in approximately 148,007 gross acres in Wyoming covering approximately 230 square miles. The Company owns working interests in approximately 330 gross productive wells in this area and is operator of 53% of the 330 gross wells. Its domestic operations are focused on developing and expanding a tight gas sand project located in the Green River Basin in southwest Wyoming. During the year ended December 31, 2005, the Company's Wyoming production was approximately 87.4% of total oil and natural gas production on a thousand cubic feet of natural gas equivalent (MCFE) basis and 98.5% of the Company's estimated net proved reserves were in Wyoming on an MCFE basis.

Breakdown target $45

Buy JAN 2009 $50 LEAP Call AZH-AJ
 


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