Table of Contents
Leaps Trader Commentary
Who would have thought that oil prices would rebound +2.50 from the lows on an increase in supply and no hurricane damage. It is truly the power of imagination that drives markets. Some traders see two refinery outages for loss of approximately 250,000 bpd of refining capacity as bullish for oil. It should be exactly the opposite since a drop in refining means more oil backing up in the pipeline. Prices were also helped by stronger than expected economic reports suggesting demand would continue at a record pace. We also had some short covering after prices failed to implode in the aftermath of Dean.
I believe this is just a blip on the chart as we await the peak of hurricane season on September 10th. Hurricanes can still form after the 10th but once we are on the backside of the curve they are quickly forgotten.
I received an email on Friday telling me to forget the current entry points because all our candidates were running away from us. I agree they are moving in the opposite direction but once oil prices reverse to the downside so will the stocks. We may not get all our entries but the ones we do should be profitable. Be patient.
I attended the 12th annual Enercom Energy Conference in Denver last week and listened to 75 companies try to convince fund managers to invest in their stock. There were CEO's that could have been used car salesmen with their polished pitch attempting to sell the dream. There were 75 companies what presented and I told you on Tuesday night I would post the best ten in this newsletter. Unfortunately I only found 9 to recommend. This was a tough year. Increasing production is becoming increasingly hard and many of the small players are struggling to really add significant numbers. Costs are rising and competition for rigs and leases remains tight.
Chesapeake and Core Labs both made a point of saying the land grab was over. The majority of leases covering the remaining production in non-hostile areas have already been snapped up. For instance Chesapeake has over 12.2 million acres under lease in the United States. Apache has more than 46 million acres. To accumulate that many acres they had to expand their search to Australia, Canada and Egypt. Basically if you don't own it today you are going to have to pony up the big bucks to pry it out of your competitors portfolio. Sector consolidation is about to ramp up furiously. Rather than just dry up and blow away it is better to be acquired. Those companies with money are in the faced with many opportunities to pick up the stragglers with diverse portfolios and insufficient assets to develop them.
There is a new trend developing in the natural gas sector that suggests prices are going a lot higher over the next couple of years. The weather has been unseasonably warm over the winter and that has led to massive amounts of gas in storage and a backup into the pipelines leading to lower gas prices. December-06 and January-07 were the two warmest months in the U.S. since meteorological records have been kept starting 112 years ago. This slowed demand and allowed storage levels to remain high. Eventually normal winters will return and there is not enough gas storage in the U.S. to accommodate a normal winter. In a normal winter gas storage must be filled to capacity during the summer and fall and full production must be continued throughout the winter to avoid shortages. The problem with this scenario is the falling gas production in North America. You could not see the problem by just looking at current gas prices. Current prices have been skewed by the warmer weather.
Calyon Securities gave an update on gas price projections at the conference and the new trend is higher finding and development costs. Because gas wells are going progressively deeper to produce shrinking volumes of gas this raises the cost of the well and therefore the cost of the gas for the producer. The average cost per MCF today has risen to about $4.67 per MCF. Gas prices closed on Friday at $5.51 per MCF. Prices are not going much lower because producers will shut in production rather than produce it for a loss. This is going to impact profits at those companies that have a high cost of acquisition while benefiting those that have a low cost like Ultra (UPL) where costs are more in the $1.50 range. Over the coming years the price of gas must rise to allow the funding of future drilling. We have already seen drilling in North America slow as gas prices fell over the last 2-years. This supply/demand cycle will only move prices higher once demand returns with fewer new wells supplying gas.
The normal life cycle of a gas well is very high production in the first 12-18 months where 35% to 65% of the gas in place is produced. This is followed by a sharp decline in production rates until the well goes dry. That decline period can be from 5-20 years with the rate of flow only a fraction of the initial production. This means new wells must be constantly drilled in order to get that burst of initial production just to keep overall production flat. New production comes on very fast but drops sharply as shown in the Ultra chart below.
Ultra Petroleum Individual Well Decline Chart
Rig Count VS Gas Production
More rigs are producing less gas. In May of 2000 the Baker Hughes rig count showed just over 600 rigs drilling for gas in the United States. Production was just over 53,000 MMCF per day. Today there are over 1400 gas rigs and over 150,000 more wells and production has fallen to just over 51,000 MMCF per day. The gas production effort has more than doubled and production is still falling. This trend is going to end badly. We can't put enough wells in the ground to offset the sharp decline curve now that the easy gas has been produced. The massive conventional plays have been exhausted and the current shale plays are labor intensive with shorter life spans. Gas prices are going up, just not next week.
The same is true in the oil fields. Discoveries peaked back in the 1960s and have declined sharply for decades. All the big fields have been found and production is well along the decline curve. It is thought that between 1.9 and 2.4 trillion barrels can ultimately be produced. We are approaching that midpoint where the remaining oil in the fields must be coaxed out of the ground by enhanced recovery techniques. These are costly, time consuming and produce at a much slower rate. The chart below shows the discovery decline curve and the production curves. If you can't find new oil you can't produce it. Therefore the production curve for known discoveries can be plotted fairly accurately. In the chart below the production curve is shown to be peaking now if you use the 1.9 TB ultimate production number. Using the 2.4 TB ultimate production forecast the peak would occur around 2010. Existing fields are declining at a rate between 2.5% and 7.5% per year depending on the life cycle the field. If a field has been producing for 10 years it will have a slower decline rate than one that has been producing for 40 years. Most of the 4000 fields around the globe have been producing for more than 20 years, some 50 years, and are approaching their end of life. An oil well has the same general peak and decline characteristics as the gas well illustrated above only the initial decline rate is slower.
Discovery Decline Chart - Sources- EIA, BP, Colin Campbell
This energy scenario has not changed since I began reporting on the coming energy crisis several years ago. We are just a little farther down the road and closer to the peak. Wells are becoming harder to drill, in harsher locations and requiring more technical expertise. This diagram from the Talisman presentation shows how drillers have to resort to more and more horizontal wells to obtain smaller amounts of oil. By going horizontal the well bore remains in the producing zone for thousands of feet rather than a couple of hundred feet with only a vertical well. This allows for a greater volume of oil to be recovered but it also shortens the life of the well by recovering the available oil more quickly.
Talisman Horizontal Well Diagram
Core Labs (CLB) is active in reservoir management in 900 of the worlds 4000 fields with most of the largest fields under management. They have probably the best grasp of the actual decline rates of those fields and the potential for future production. The various agencies that predict demand growth, EIA, IEA, etc, are currently targeting +1.5% to +2.0% through 2011. Demand is expected to reach 88 mbpd in 2008, up from the 86 mbpd in 2007. Core Labs questions if the world will ever produce more than 88-89 mbpd due to current decline factors in existing fields. They believe a global decline rate closer to -5% to -7% is the harsh reality and when coupled with the current rise in demand this produces a startling divergence.
World Demand Growth Forecast - Source: Talisman
World Decline Forecast - Source: Talisman
The punch line for those two charts is the world is very close to peak oil. Adding +32 MBPD of oil by 2011 is technically impossible. That is the equivalent to adding three times the current production of Saudi Arabia. In order to add 32 mbpd those new fields would have to have been discovered over the last five years. It takes 5-9 years to go from a discovery to full production and 20-40 years to extract the oil. There have been no major discoveries since 1970 large enough to produce even a 2 mbpd increase in production. We consume 30 billion barrels per year and have averaged finding only 5 billion since 1995. Technically it is impossible to increase production from existing fields by more than 3-4 mbpd per year over the next five years. Assuming we achieved the nearly impossible global production increase of 4 mbpd per year that would still leave us short by 12 mbpd in 2011.
The world is headed for a train wreck of monumental proportions and there is nothing we can do to stop it. No amount of conservation, ethanol switch or bio-fuels can cut demand by -5 mbpd over the next five years. The momentum of oil dependency is too great. The world will only switch to alternative fuels when forced to switch by astronomical prices at the pump. Today there is nothing to switch to. If a global edict appeared tomorrow demanding everyone switch to an alternative fuel it would be years before enough vehicles and fuel could be produced to make any material dent in oil demand. Prepare yourself for the coming disaster.
The best way to prepare is to invest in energy stocks. I promised to show the ten best presenters from the 75 I saw last week but I could only come up with nine I am comfortable recommending. Times are getting tougher in the oil patch and I believe we need to focus only on the cream of the crop for our invested dollars.
I have run out of time and space today so I am only going to give you the companies and the link to their Enercom presentation so you can see it yourself. I will expound on these companies in future newsletters. Click the links below for the audio and video presentation. (The slides must be advanced manually. Expand your browser to view the slides.)
HP - Helmerich & Payne
October Crude Futures Chart - Daily
September Natural Gas Futures Chart - Daily
September Gasoline Futures Chart - RBOB Daily
Changes in Portfolio
Portfolio Listing & Top Picks
Most Recent Plays
CHK - Chesapeake Energy
Chesapeake was a presenter at the Enercom Conference and I was very impressed with the long-term outlook. Several years ago CHK undertook a massive expansion program when they predicted that gas prices would rise sharply in future years. They went on an acquisition binge spending more than $8 billion on leases in the United States. This massive ramp up impacted their earnings because very little of the acreage had existing wells. CHK then implemented a massive drilling program that brought them to where they are today. They have 12.2 million net acres under lease, 153 operated rigs and 105 non-operated rigs working. This is allowing them to drill more than 2500 wells per year to turn their massive leasehold assets into proven and productive resource plays. They have vaulted into 3rd place in the U.S. in terms of gas production. They are now producing nearly 2 BCFE per day and are expanding production by 20% per year. They have proven reserves of 10.1 TCFE, unproved of 20.8 TCFE and a 10-year inventory of 28,500 new locations to drill. They will have ebitda of nearly $5 billion in 2007 with net income of nearly $1.6 billion. Their reserve replacement rate in Q2 was 416%. Their finding and acquisitions costs of $2.11 per MCFE is one of the lowest in the industry. Their business is all onshore U.S. east of the Rockies in lower cost fields.
CEO Aubrey McClendon said CHK has been dragging that $8 billion in acquisitions and 100+ rig build out phase for several years while ramping up to be the largest driller in America by a wide margin. Now that $8 billion in acquisitions has turned into a massive gas factory and is now turning into exploding profits for shareholders. CHK is an active hedger and the largest hedger in the industry. In the first half of 2007 CHK realized gains of $1.7 billion on their hedges alone. 59% of Q3-Q4 is already hedged at $8.66 per MCFE and 64% of 2008 production is hedged at $9.22 per MCFE.
The chart below shows how rapidly CHK has been growing its rig count and production.
I like CHK and I was very impressed with the presentation and their ongoing metrics. Since we already have an October put in place at $30 I am taking this implosion in gas prices as an opportunity to get into CHK cheap.
Chesapeake Energy Corporation (Chesapeake) is an independent producer of natural gas in the United States, and owns interests in approximately 34,600 producing oil and natural gas wells that are producing approximately 1.7 billion cubic feet equivalent (bcfe) per day, 92% of which is natural gas. The Company's operations are located in the Mid-Continent region, which includes Oklahoma, Arkansas, southwestern Kansas and the Texas Panhandle; the Forth Worth Basin in north-central Texas; the Appalachian Basin, principally in West Virginia, eastern Kentucky, eastern Ohio and southern New York; the Permian and Delaware Basins of West Texas and eastern New Mexico; the Ark-La-Tex area of East Texas and northern Louisiana; and the South Texas and Texas Gulf Coast regions. In July 2007, the Company announced the acquisition of Kerr-McGee Tower from Anadarko Petroleum Corporation and subsequent sale of tower to SandRidge Energy, Inc.
Buy 2010 $35 LEAP Call WZY-AG currently $6.60
Change profit stop on current insurance put to $28
HP - Helmerich & Payne *** Stop Loss $27.50 ***
HP is already starting to see some post conference buying so I added it as a play now rather than as a watch list candidate. They are somewhat insulated from oil and gas prices and business is booming. LEAPs are cheap!
Helmerich & Payne, Inc. is primarily engaged in contract drilling of oil and gas wells for others. It is also engaged in the ownership, development and operation of commercial real estate. The Company is organized into two separate operating entities: contract drilling and real estate. Helmerich & Payne, Inc.'s contract drilling business includes three business segments: U.S. land drilling, U.S. offshore platform drilling and international drilling. The Company's U.S. land drilling is conducted primarily in Oklahoma, Texas, Wyoming, Colorado, Louisiana, Mississippi, and New Mexico, and offshore from platforms in the Gulf of Mexico and California. During the fiscal year ended September 30, 2006 (fiscal 2006), Helmerich & Payne, Inc. also operated in eight international locations: Venezuela, Ecuador, Colombia, Argentina, Bolivia, Equatorial Guinea, Tunisia and Chile. Helmerich & Payne, Inc.'s real estate investments are located in Tulsa, Oklahoma.
Buy Jan 2009 $35 LEAP Call ZQA-AG currently $4.50
HERO - Hercules Offshore *** Stop Loss $24.00 ***
HERO just completed the acquisition of TODCO in July and their company size and distribution with the addition of the TODCO assets is very strong. Calls are cheap and they have a very strong support base at $25 from the depression related to the TODCO acquisition.
Hercules Offshore, Inc. (Hercules Offshore) provides shallow-water drilling and liftboat services to the oil and natural gas exploration and production industry in the United States Gulf of Mexico and internationally. It operates a fleet of nine jackup rigs that are capable of drilling in maximum water depths ranging from 85 to 250 feet and a fleet of 64 liftboats with leg lengths ranging from 105 to 260 feet. Its services are organized in four segments, Domestic Contract Drilling Services, International Contract Drilling Services, Domestic Marine Services and International Marine Services. The Company's Domestic Contract Drilling Services and Domestic Marine Services are conducted in the United States Gulf of Mexico, its International Contract Drilling Services are conducted offshore Qatar and India, and its International Marine Services are conducted in West Africa. In July 2007, the Company completed the acquisition of TODCO.
2008 April $30 Call HIQ-DF currently $3.00
GLBL - Global Industries *** Stop Loss $18.50 ***
Global is also seeing some post conference buying and it appears we are about to see a surge over $24 on the 30-min chart. Options are cheap and business is good. No pressure from oil and gas prices on their operations.
Global Industries, Ltd. is an offshore construction company offering a range of marine construction and support services in the United States Gulf of Mexico, Latin America, West Africa, the Middle East (including the Mediterranean and India) and Asia Pacific regions. These services include pipeline construction, platform installation and removal, sub-sea construction, project management and diving services. The Company provides services from shallow water to depths of up to 10,000 feet. The Company's business consists of two principal activities: Offshore Construction Services, which includes pipeline construction and platform installation, and removal services, and Diving Services, which includes diving and marine support services.
2008 March $25 Call GQO-CE currently $3.30
BHP - $62.29 +7.49 BHP Billiton ** Stop Loss $47.50 **
BHP blasted off after posting profits of +35%, raising the dividend and guiding higher. BHP said demand from China and other Asian countries was powering the gains. Earnings increased to $7.1 billion.
Breakdown target: $55 hit 8/15/07
Position: 2010 $70 LEAP Call LPH-AN @ $9.00
NOV - $121.00 +12.35 National Oilwell ** Stop Loss 110.00 **
What an amazing rebound from our $100 entry point! NOV declared a 2:1 split last week with a record date of Sept-7th and a pay date of Sept 28th. I am planning on exiting our calls the weekend before the split and we will reenter the position with our profits. When a stock splits much of the premium disappears with the lower valuations. We want to capture the most premium possible.
Breakdown target: $100 hit 8/16/07
Position: FEB $110 Calls NOV-BB @ $9.70
CCJ - $39.74 +3.29 Cameco ** Stop Loss $30 **
Nice rebound along with the metals and miners. Hopefully this trend continues. No news.
Breakdown target: $35 Hit 8/16/07
Position: 2010 $50 LEAP Call LTA-AJ @ $7.20
RIMM exploded from the drop to $186 on the prior Thursday and then continued to move higher when the 3:1 split occurred on Tuesday. We now have 3 times the number of options we had pre-split and we are deep in the money on both strikes.
For initial commentary see the July 1st newsletter.
Earnings schedule: Sept 27th.
Breakdown trigger: $168.00 hit 6/25
Call spread pre-split:
Call spread post-split:
BSC $117.10 -1.10 - Bear Stearns *** Stop Loss $97 ***
BSC is still taking flack from the debt wreck with S&P slashing ratings on seven Bear Stearns Asset Backed Trust classes. Earnings are Sept-13th.
Breakdown target $100 hit 8/06/07
Position: 2010 $120 LEAP Call YBO-AD @ $25.60
CFC - $21.00 -0.43 Countrywide Financial ** Stop Loss $15 **
Countrywide appears to have dodged a bullet as Banc America took a $2 billion position in the company. The CEO said on Friday there were still tough times ahead but Countrywide was in no more danger today than they were at any other point in their history.
I believe Countrywide has a rocky road ahead but they will come out on top once the mortgage market opens up again. They are likely to face serious layoffs and a sharp reduction in revenue as they revert to primarily agency qualified paper.
Breakdown target $20.00 hit 8/15/07
Position: 2010 $30 LEAP Call YJD-AF @ $7.00
Leaps Trader Watch Listanother dip for energy stocks in general. I did raise some of the trigger points so check your settings for new entry points.
I also changed the strikes on most of the entries. With the dramatic increase in volatility over the last month the 2010 option premiums were out of sight. I backed off to 2009 strikes to make them cheaper. Since we will probably exit all of these plays during the spring dip we really don't need that much additional time.
*** Watch for the XLE put to be triggered at $69.50 ***
Current Watch List
UPL - Ultra Petroleum
Still looking for another drop. Maintain the entry target.
This is an unbelievable opportunity in progress. For some reason UPL has fallen out of favor even though production is rising and they are the lowest cost producer in North America. Cash flow in Q1 increased +15% on a +42% increase in production to record levels. They closed 2007 with more than 10 TCF of gas reserves in Wyoming and Utah. They have a 17-year drilling program on those assets alone. They raised guidance for 2007 to 114 BCFE for a +24% increase over 2006. Estimates for 2008 are 135 BCFE and 160 BCFE for 2009. They added $250 million to a $1 billion share repurchase agreement on April 30th. This company is printing money but suddenly the stock has fallen out of favor with investors. I would love to be a buyer at $50. Falling gas prices may give us a chance.
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 primarily in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. As of December 31, 2006, Ultra owned interests in approximately 147,917 gross (79,566 net) acres in Wyoming covering approximately 230 square miles. The Company owns working interests in approximately 464 gross producing wells in this area and is an operator of 50% of the 464 gross wells. During the year ended December 31, 2006, domestic production was approximately 89.5% of the Company's total oil and natural gas production on a thousand cubic feet of natural gas equivalent (Mcfe) basis and 99% of the Company's estimated net proved reserves were domestic on a Mcfe basis.
Breakdown target: $52.50
Buy Jan 2009 $60 LEAP Call OZH-AL
JEC - Jacobs Engineering Group
Jacobs has been on a very strong growth path and the recent market weakness has knocked it back into range. It has oil and gas exposure but it not an oil and gas company.
Jacobs Engineering Group Inc. is a professional services firm that focuses on providing a range of technical, professional and construction services. It provides project services, which include engineering, design, architectural, and similar services; process, scientific, and systems consulting services; operations and maintenance services, and construction services, which include direct-hire construction and construction management services. It concentrates its services on selected industry groups and markets, including oil and gas exploration, production and refining; programs for various federal governments; pharmaceuticals and biotechnology; chemicals and polymers; buildings, which includes projects in the fields of healthcare and education, as well as civic, governmental and other buildings; infrastructure and technology and manufacturing. In April 2006, its Canadian subsidiary acquired Techna-West Engineering Limited. In October 2006, it acquired W.H. Linder & Associates, Inc.
Breakdown target: $57.50
Buy APR 2008 $60 Call JEC-DL
VLO - Valero Energy
Looking to buy Valero cheap on the fall dip.
Valero Energy Corporation owns and operates 18 refineries located in the United States, Canada and Aruba that produce refined products, such as reformulated gasoline blendstock for oxygenate blending, gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur and ultra-low-sulfur diesel fuel, and oxygenates (liquid hydrocarbon compounds containing oxygen). It also produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals and other refined products. It markets branded and unbranded refined products on a wholesale basis in the United States and Canada through a bulk and rack marketing network. It sells refined products through a network of approximately 5,800 retail and wholesale branded outlets in the United States, Canada and Aruba. During the year ended December 31, 2006, it sold all of its ownership interest in Valero GP Holdings, LLC. In July 2007, the Company sold its Lima, Ohio refinery to Husky Energy Inc.
Breakdown target: $62.50
BUY 2009 $70 LEAP Call VHB-AN
COP - Conoco Phillips
I hesitate to add Conoco because of its Russian LUKOIL exposure but the company is doing everything else right. Now that it is out of Venezuela it should be more aggressive with other opportunities.
ConocoPhillips (ConocoPhillips) is an international, integrated energy company. The Company's business is organized into six segments. Exploration and Production segment primarily explores for, produces and markets crude oil, natural gas and natural gas liquids on a worldwide basis. Midstream segment gathers, processes and markets natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, primarily in the United States and Trinidad. Refining and Marketing segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia. LUKOIL Investment segment consists of its equity investment in the ordinary shares of OAO LUKOIL (LUKOIL). The Chemicals segment manufactures and markets petrochemicals and plastics on a worldwide basis. Emerging Businesses segment includes the development of new technologies and businesses outside the Company's normal scope of operations.
Breakdown target: $75
Buy 2009 $80 LEAP Call OJP-AP
MRO - Marathon Oil
On July 31st Marathon announced its purchase of Western Oil Sands for $5.5 billion. This will be an immediate increase in production for Marathon of 31,000 bpd. The acquisition gives them 20% interest in the Athabasca Oil Sands Project in Alberta. The other partners are Shell 60% and Chevron 20%.
Marathon Oil Corporation (Marathon) is engaged in exploration, production and marketing of crude oil and natural gas worldwide. The Company operates in three segments: Exploration and Production (E&P), which explores for, produces and markets crude oil and natural gas on a worldwide basis; Refining, Marketing and Transportation (RM&T), which refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States, and Integrated Gas (IG), which markets and transports products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, on a worldwide basis, and is developing other projects. During the year ended December 31, 2006, Marathon completed leasehold acquisitions totaling approximately 200,000 acres in the Bakken Shale oil play. In July 2006, it completed a natural gas leasehold acquisition in the Piceance Basin of Colorado, in Garfield County in the Greater Grand Valley field complex.
Breakdown target: $48
Buy 2009 $60 LEAP Call VXM-AL
SLB - Schlumberger
SLB posted blowout earnings on its global services business and had only good things to say about the future.
Schlumberger Limited (Schlumberger) is an oilfield service company supplying a range of technology services and solutions to the international petroleum industry. It consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company supplying a range of technology services and solutions to the international oil and gas industry. WesternGeco, owned by Schlumberger and Baker Hughes, is an advanced surface seismic company. Schlumberger's products and services include the evaluation and development of oil reservoirs (controlled digging, pumping and testing services), well construction and production consulting, and sale of software programs. The Company also offers storage tank and seismic monitoring services. Schlumberger Limited is headquartered in Paris, France.
Breakdown target: $86.00
Buy 2009 $100 LEAP Call VWY-AT
TSO - Tesoro
Tesoro Corporation (Tesoro) is an independent petroleum refiner and marketer with two operating segments: refining, which is engaged in refining crude oil and other feedstocks at its six refineries in the western and mid-continental United States and selling refined products in bulk and wholesale markets (refining), and retail, which is engaged in selling motor fuels and convenience products in the retail market through its 460 branded retail stations in 18 states. Through its refining segment, the Company produces refined products, primarily gasoline and gasoline blendstocks, jet fuel, diesel fuel and heavy fuel oils for sale to a variety of commercial customers in the western and mid-continental United States. Tesoro's retail segment distributes motor fuels through a network of retail stations, primarily under the Tesoro and Mirastar brands.
Breakdown trigger: $45
Buy 2009 $50 LEAP Call ZGC-AJ
PTR - PetroChina
PetroChina Company Limited is engaged in a range of petroleum-related activities through its four business segments: Exploration and Production, Refining and Marketing, Chemicals and Marketing, and Natural Gas and Pipeline. The activities include the exploration, development, production and sales of crude oil and natural gas; the refining, transportation, storage and marketing of crude oil and petroleum products; the production and sales of basic petrochemical products, derivative chemical products and other chemical products, and the transmission of natural gas, crude oil and refined products, and the sales of natural gas. PetroChina Company Limited was established as a joint stock company as part of the restructuring of the China National Petroleum Corporation (CNPC). On December 28, 2006, the Company acquired a 67% interest in PetoKazakhstan Inc. from CNPC International Limited, a subsidiary of CNPC.
Breakdown target: $130
Buy 2009 $150 LEAP Call ZJK-AJ
XOM - ExxonMobil
I caved in and added Exxon to the list because of their performance in 2007. With 6 billion shares outstanding it takes a lot to move their stock price but they added +$30 since Sept-06.
Exxon Mobil Corporation (ExxonMobil) is an international oil and gas company. ExxonMobil operates facilities or market products in many countries, and explores for oil and natural gas on six continents. ExxonMobil is involved in the exploration and production of crude oil and natural gas; the manufacture of petroleum products, and the transportation and sale of crude oil, natural gas and petroleum products. ExxonMobil is a manufacturer and marketer of commodity and specialty petrochemicals, and also has interests in electric power generation facilities. In addition, the Company conducts research programs in support of these businesses.
Breakdown trigger: $81
Buy 2009 $90 LEAP Call ODU-AR
CVX - Chevron
Chevron Corp. (Chevron), manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and foreign subsidiaries that engage in fully integrated petroleum operations, chemicals operations, mining operations of coal and other minerals, power generation and energy services. Exploration and production (upstream) operations consist of exploring for, developing and producing crude oil and natural gas, and also marketing natural gas. Refining, marketing and transportation (downstream) operations relate to refining crude oil into finished petroleum products; marketing crude oil and the many products derived from petroleum, and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. Chemical operations include the manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant oil additives.
Breakdown trigger: $80
Buy 2009 $90 LEAP Call VCH-AR
CNQ - Canadian Natural Resources
Canadian Natural Resources Limited (CNRL) is an independent crude oil and natural gas exploration, development and production company head-quartered in Calgary, Alberta, Canada. The Company's operations are focused in North America, largely in Western Canada, the United Kingdom portion of the North Sea and Offshore West Africa. In November 2006, the Company completed the acquisition of Anadarko Canada Corporation from Anadarko Petroleum Corporation. The Company's crude oil and natural gas activities are conducted in three geographic segments: North America, North Sea and Offshore West Africa. These activities relate to the exploration, development, production and marketing of crude oil, natural gas liquids and natural gas. The Company's Horizon Project has been classified as a separate segment. Midstream activities include the Company's pipeline operations and an electricity co-generation system.
Breakdown Trigger: $62.50
Buy 2009 $70 LEAP Call OKR-AN
PBR - Petrobras
Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a wholly owned enterprise of the Brazilian Government, which is responsible for all hydrocarbon activities in Brazil. The Company is engaged in a range of oil and gas activities. Petrobras operates in six segments: exploration and production, supply, distribution, gas and power, international and corporate. In June 2007, Petrobras announced that it completed transfer of all of the shares of Petrobras Bolivia Refinancion S.A. to YPF S.A. In March 2007, the Company, Braskem S.A. and Ultrapar Participacoes S.A. announced the acquisition of Grupo Ipiranga. In September 2006, the Company announced the closing of the acquisition by Petrobras America, Inc. (PAI), its wholly owned subsidiary in the United States Gulf of Mexico, of 50% of Pasadena Refining System Inc. In June of 2006, it completed the acquisition of 66% of Gaseba Uruguay-Grupo Gaz de France S.A.
Breakdown Trigger: $55
Buy 2009 $60 LEAP Call VDW-AL
DO - Diamond Offshore
Diamond Offshore Drilling, Inc. (Diamond Offshore) provides contract drilling services to the energy industry worldwide and is also engaged in deepwater drilling with a fleet of 44 offshore drilling rigs. The Company's fleet consists of 30 semisubmersibles, 13 jack-ups and one drillship. The Company offers a range of services worldwide in various markets, including the deep water, harsh environment, conventional semisubmersible and jack-up markets. The Company provides offshore drilling services to a customer base that includes independent oil and gas companies and government-owned oil companies.
Breakdown Trigger: $93
Buy 2010 $100 LEAP Call VCT-AT
CLB - Core Labs
Core Laboratories N.V. (Core Lab) is a provider of reservoir description, production enhancement and reservoir management services to the oil and gas industry. These products and services are directed toward enabling the Company's clients to improve reservoir performance and increase oil and gas recovery from their producing fields. It has over 70 offices in more than 50 countries. Core Lab derives its revenues from services and product sales to clients in the oil and gas industry. Its reservoir optimization services and technologies are interrelated and are organized into three complementary segments: Reservoir Description, which encompasses the characterization of petroleum reservoir rock, fluid and gas samples; Production Enhancement, which includes products and services relating to reservoir well completions, perforations, stimulations and production, and Reservoir Management, which combines and integrates information from reservoir description and production enhancement services.
Breakdown Trigger: $104
Buy 2009 $110 LEAP Call ZYM-AB
FXI - China Ishares (includes CEO, SNP and PTR)
iShares FTSE/Xinhua China 25 Index Fund (the Fund) is an index fund that seeks investment results that correspond generally to the price and yield performance of the FTSE/Xinhua China 25 Index (the Index). The Index is designed to represent the performance of the largest companies in the Chinese equity market that are available to international investors. The Index consists of 25 of the largest and most liquid Chinese companies. Securities in the Index are weighted based on the total market value of their shares. Each security in the Index is a constituent of the FTSE All-World Index. All of the securities in the Index trade on the Hong Kong Stock Exchange. The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. From its inception, on October 5, 2005, through July 31, 2005, the Fund returned 14.57%, while the Index returned 15.3%.
Breakdown Trigger: $130
Buy 2009 $150 LEAP Call VHF-AZ
SPW - SPX Corp
SPX Corporation is a global multi-industry manufacturing company. The Company provides flow technology, test and measurement products and services, thermal equipment and services, and industrial products and services. The Company's infrastructure-related products and services include wet and dry cooling systems, thermal service and repair work, heat exchangers and power transformers into the global power market. The Company has four business segments: Flow Technology, Test and Measurement, and Thermal Equipment and Services, and Industrial Products and Services. In October 2006, the Company sold its Dock Products business to management of Dock Products and an affiliate of Wynnchurch Capital, Ltd. SPX Dock Products, based in Carrollton, Texas. In December 2006, the Company acquired Aktiebolaget Custos within its Flow Technology segment. In April 2007, the Company completed the sale of its Contech business unit to Marathon Automotive Group, LLC.
Breakdown Trigger: $80
Buy 2009 $90 LEAP Call OWM-AR
XLE - Energy Spyder *** PUT ***
If we do get a bounce on hurricane Dean I want to reenter the put position in anticipation of another decline to a lower low.
Energy Select Sector SPDR Fund (the Fund) seeks to replicate the total return of the Energy Select Sector of the S&P 500 Index. The Fund utilizes a passive or indexing investment approach and attempts to approximate the investment performance of the Energy Select Sector Index, by investing in a portfolio of stocks that seek to replicate the Energy Select Sector Index. The Energy Select Sector Index includes companies from oil, gas and consumable fuels, and energy equipment and services industries. Energy companies in the Energy Select Sector Index develop and produce crude oil and natural gas, and provide drilling and other energy resources production and distribution-related services.
Breakout Trigger: $69.50
Buy Dec $67 Put GQQ-XO
APA - Apache Corporation
Apache Corporation is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. In North America, the Company's exploration and production interests are focused in the Gulf of Mexico, the Gulf Coast, East Texas, the Permian Basin, the Anadarko Basin and the Western Sedimentary Basin of Canada. It has interests in onshore Egypt, offshore Western Australia, offshore the United Kingdom in the North Sea (North Sea), and onshore Argentina. Its segments are the United States, Canada, Egypt, Australia, the North Sea and Other International. The Company also holds interests in many of its United States, Canadian and other international properties through operating subsidiaries, such as Apache Canada Ltd., DEK Energy Company (DEKALB), Apache Energy Limited (AEL), Apache International, Inc. and Apache Overseas, Inc. On January 6, 2006, the Company completed the sale of its 55% interest in the deepwater section of Egypt's West Mediterranean.
Breakdown trigger: $70
Buy 2009 $80 LEAP Call OWF-AP
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