Option Investor

Weekly Newsletter, Saturday, 10/06/2007

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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

Almost But Not Yet

I feel like an expectant father with repeated attacks false labor. Every drop has me rushing to the hospital expecting that oil correction baby only to be turned away in admittance when the false labor disappears. Fortunately, just like having a wife with false labor pains we know that eventually that baby is going to come. I continue to firmly believe that a correction in oil prices will come before winter.

In 9 of the last 10 years there has been a 10% correction in oil prices between Labor Day and Thanksgiving. That does not guarantee one this year but all the factors are in place for it to happen. The storm front has gone quiet. There is nothing in the forecast for at least the next week. Crude inventories are rising along with refinery utilization. There was a small drop in distillates and gasoline inventories were flat. There was nothing in the inventory report to support oil prices. Gasoline demand fell 115,000 bpd from the prior week and right inline with expected reduced demand for this time of year. Note in the chart below that it is moving under the demand for 2005-2006. There are currently 193 days of supply in inventory according to the EIA.

You may have noticed the integrated oils and refiners have not been following oil higher. There have been several profit warnings from the various majors and analysts are downgrading refiners like Tesoro due to shrinking crack spreads. One analyst said refiners could miss earnings by as much as 60%. Can you imagine this scenario? Oil prices are at record highs and have been for over a month and oil companies are warning on earnings? I know it sounds strange but it all comes back to higher costs getting it out of the ground, higher royalties to the country of origin, breakdowns at ancient refineries and the lack of new discoveries. Oil prices will move higher and so will oil stocks after this earnings cycle. This warning cycle is helping prepare our watch list targets for entries.

On Friday Nabors (NBR) the worlds largest land based driller warned that earnings will miss street expectations because of weak natural gas drilling activity in North America. They said there was potential for this weakness to persist through 2008. Nabors now expects to earn 73-76 cents and analysts had expected 81 cents. This warning is unique to Nabors but the entire sector should suffer. Nabors has warned three times since January and this is getting to be a regular habit. Analysts claim it should mean stay away from North American drillers and service companies but I think it is Nabors specific. New rigs are coming online and they are replacing Nabors contract rigs in the drilling fleet. The Baker Hughes rig count for the U.S. in September was 1,783, down 21 from August. That is definitely not an earth-shaking drop. I have a son who works in the gas drilling business and he is seeing rigs moved to new fields but none going without work. I read in the Rocky Mountain News a couple weeks ago officials in the Rocky Mountain region had approved 127,000 more well sites across Colorado, New Mexico, Wyoming and Utah. That should keep the gas drillers busy for a few more years.

Using my false labor analogy above I think we are getting ready for a delivery. The Fed is not likely to cut rates again given the strong jobs report. Cutting rates devalues the dollar. Cheaper dollars means it costs more dollars per barrel of oil. Once the Fed signals the cuts are over or analysts start doing it for them the dollar should strengthen on our economic strength and that will help push oil prices lower. We also have the +500,000 bpd of oil coming on Nov-1st that OPEC authorized. I suspect it is already being pumped but we won't know that for a couple more weeks. Be patient, without some new development our correction is about to be born.

Two weeks from now I am going to meet with Boone Pickens and I am going to pick his brain on many things including his view on Saudi oil and the falling gas supplies in the Canada oil sands. He is a big investor in the oil sands and I want to ask him if the reported natural gas crunch is real or a smoke screen for other problems. It should be interesting and you will read about his answers right in these pages.

I am closing the RIMM play this weekend. The call spread has reached a point where any further gains from shrinking premiums on the short side could be offset by a retracement of Friday's gain. Let's take our profits and prepare to reinvest them in something else.

Thank you Merrill, Citigroup, UBS, DB, WM, etc. Every time one of those banks said the worst was over and normalcy was returning to the credit markets Bear Stearns spiked higher. Our patience is finally paying off on that position.

The Russell 2000 finally caught fire and our IWM call play is nicely profitable at +64%. I expect the Russell to break out to a new high soon but there could be a testing phase when it reaches 856. Still a nice filler play that is producing profits while we wait for a correction in oil.

November Crude Futures Chart - 60 min

November Natural Gas Futures Chart - Daily

November Gasoline Futures Chart - RBOB Daily


Changes in Portfolio

New Energy Plays

None but very close on several watch list entries

New Non-Energy Plays


Dropped Plays
RIMM Research In Motion

New Watch List Plays Triggered

None but very close on several watch list entries

Portfolio Listing & Top Picks

New Plays

Most Recent Plays

None this week.

Play Updates

Existing Plays

XLE $75.11 Energy Spyder - PUT *** stop at $76.50 ***

Still waiting for that drop and 74 is definitely the support level that has to crack. One more dip by crude should do it. The weak refiners and integrated oils are already holding the XLE back.

Breakdown Trigger: $74.75 hit 9/25/07

Position: Dec $73 Put XBT-XU @ $3.20


MDR - $58.19 +4.11 McDermott International

Nothing holding McDermott back. New highs every day and no pause in sight on no news. I am canceling the insurance put entry.

Breakout trigger: $53, hit 9/20

Position: 2009 $60 LEAP Call OYZ-AL @ $9.00


UPL $64.71 +2.67 - Ultra Petroleum *** Stop Loss $52 ***

Investors can't seem to get enough UPL after they announced in the prior week the sale of their property in China. I continue to expect some profit taking when the news wears off.

Ultra Petroleum presentation

Breakdown target: $52.50 Hit 8/30

Position: Jan 2009 $60 LEAP Call OZH-AL @ $8.00


CHK $36.87 +1.61 Chesapeake Energy

CHK is nearing its high at $38 and has been moving up quickly since the CEO resumed his insider buying. With gas holding over $7 investors must believe it will be higher later this winter. The October insurance put we bought months ago is now worthless and hopefully will remain worthless. I deleted it from the portfolio list.

CHK was recently upgraded to 5 stars by Morningstar.

Link to Enercom presentation

Position: 2010 $35 LEAP Call WZY-AG @ $6.60 ** No Stop on LEAP **

Insurance put:
Oct $30 Put CHK-VF @ 90 cents. Profit stop $28


HP $33.09 +0.26 Helmerich & Payne *** Stop Loss $27.50 ***

HP is still holding over support at $32.75 on no news. The warning from Nabors on Friday on lower rig activity is probably going to weigh on HP next week. Let's buy a November $30 put for insurance.

Insurance put: Put trigger HP at $32.50
Buy Nov $30 HP-WF. Stop $28.50

Enercom presentation here

Position: Jan 2009 $35 LEAP Call ZQA-AG @ $4.50


HERO $27.04 +0.93 Hercules Offshore ** Stop Loss $24.00 **

No news but four days of advances after Monday's dip. Maintain the stop at $24.

Enercom presentation

Position: 2008 April $30 Call HIQ-DF @ $3.00


GLBL $27.74 +1.98 Global Industries ** Stop Loss $18.50 **

Nice move! GLBL finally found some traction and sprinted past the resistance at $26. The only news was the announcement of their earnings on Nov-1st. An analyst mentioned the underwater sector favorably but did not mention GLBL. We will take the gains even if they were not meant for us. No change in play.

Earnings schedule: Nov-1st

Enercom presentation

Position: 2008 March $25 Call GQO-CE @ $3.30


BHP - $79.52 +0.92 BHP Billiton ** Stop Loss $60.00 **

A needed rest for BHP came with the China markets closed for the holidays. Credit Suisse also downgraded them to a hold. BHP also bought 14 licenses to search for oil and gas offshore of the Falklands in the South Atlantic. The leases give BHP 40% interest in 18 million acres of territory and names them the designated operator for any discoveries.

Breakdown target: $55 hit 8/15/07

Position: 2010 $70 LEAP Call LPH-AN @ $9.00


CCJ - $42.56 -3.69 Cameco ** Stop Loss $30 **

CCJ was beaten severely and gave back two weeks of gains on no news. There was a couple articles playing down the new applications for nuke plants but none of them had any direct mention of CCJ. I suspect it was just profit taking. They did announce an earnings date of Oct-21st. No change in play.

Earnings schedule: Oct-31st

Breakdown target: $35 Hit 8/16/07

Position: 2010 $50 LEAP Call LTA-AJ @ $7.20

Non-Energy Positions

IWM $84.13 +4.09 Russell 2000 iShares ** Stop Loss $79.50 **

Now we are rocking! The Russell finally caught fire and I suspect we will see a real breakout over the next couple weeks. However, the coming week is one we need to worry about. No material news, lots of warning potential and a possible correction when China reopens on Monday. Maintain the new stop.

Position: Jan $80 Call IOW-AB @ $4.25


RIMM - $113.37 +14.82 - Research in Motion

RIMM exploded on short covering after earnings and the Goldman Sachs upgrade to its conviction list. I am closing it today and we will exit with a nice profit.

For initial commentary see the July 1st newsletter.

Earnings schedule: Oct 4th

Breakdown trigger: $56.00 hit 6/25

Call spread pre-split:
Position: LONG 2009 $180 LEAP Call VHO-AP @ $32.60
Position: SHORT 2009 $230 LEAP Call VHO-AF @ $10.47

Call spread post-split: (3:1)
LONG (3) 2009 $60 LEAP Call VHO-AL @ $10.87, exit $60.00 x3
SHORT (3) 2009 $76 LEAP Call VHO-AU @ $ 3.62, exit $48.55 x3


BSC $131.58 +8.77 - Bear Stearns *** Stop Loss $110 ***

BSC rocketed even higher on the positive outlooks from numerous banking stocks. The close on Friday was a new two-month high! Outstanding! Our patience finally paid off. I would love to see resistance at $160 tested before year-end. I raised the stop but let's hope we never see it.

Breakdown target $100 hit 8/06/07

Position: 2010 $120 LEAP Call YBO-AD @ $25.60


CFC - $20.25 +1.24 Countrywide Financial ** Stop Loss $15 **

CFC is so close to breaking resistance at $21. I am hoping their report on financings in September is up strongly and they have good things to say about the corporate credit market. Once we move over $21 I am hoping to see a lot of short covering. The message boards are full of bankruptcy comments from those who don't actually read the current events. We will steam roll right over them once it is confirmed that CFC had a good September.

CEO Mozilo has a 10B5-1 stock sales plan that was put in force in October 2006 and it expires on Oct-8th 2007. The plan requires that any unsold shares that were not sold due to price limits be sold between Oct-8th and 12th of 2007 under no limits. The press release did not say how many shares were left to be sold. The plan did not sell any shares in August and September because the price was under the plan limits.

Breakdown target $20.00 hit 8/15/07

Position: 2010 $30 LEAP Call YJD-AF @ $7.00

Leaps Trader Watch List

Dropped Entries

New Watch List Entries
CAM Cameron International
FTI FMC Technologies
OII Oceaneering International

Current Watch List

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.

Company Info:

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: $70.00

Buy APR 2008 $80 Call JEC-DP


VLO - Valero Energy

Looking to buy Valero cheap on the fall dip.

Company Info:

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. COP announced a new $15 billion buyback at the end of September.

Company Info:

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: $80

Buy 2009 $90 LEAP Call OJP-AR


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%.

Company Info:

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: $52

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.

Company Info:

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: $95.00

Buy 2009 $100 LEAP Call VWY-AT


TSO - Tesoro

Company Info:

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: $43

Buy 2009 $50 LEAP Call ZGC-AJ


PTR - PetroChina

The last correction on PTR knocked $40 off the price. I know it sounds stupid to keep a $150 price target on a $190 stock but that $40 gain took less than 2 weeks and it can come down even faster than that.

Company Info:

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: $150

Buy 2009 $160 LEAP Call ZJK-AL


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.

Company Info:

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: $85

Buy 2009 $90 LEAP Call ODU-AR


CVX - Chevron

Company Info:

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: $87

Buy 2009 $100 LEAP Call VCH-AT


CNQ - Canadian Natural Resources

Company Info:

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: $66.00

Buy 2009 $70 LEAP Call OKR-AN


PBR - Petrobras

Company Info:

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: $65

Buy 2009 $70 LEAP Call VDW-AN


DO - Diamond Offshore

Company Info:

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: $100

Buy 2010 $110 LEAP Call VCT-AB


CLB - Core Labs

Company Info:

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: $115

Buy 2009 $120 LEAP Call ZYM-AD


FXI - China Ishares (includes CEO, SNP and PTR)

ETF Info:

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: $150

Buy 2009 $160 LEAP Call VHF-AU


SPW - SPX Corp

Company Info:

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: $85

Buy 2009 $90 LEAP Call OWM-AR


APA - Apache Corporation

Apache was upgraded to 5 stars by Morningstar in late August.

Company Info:

Enercom presentation

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: $80

Buy 2009 $90 LEAP Call OWF-AR


FWLT - Foster Wheeler

This is a long shot but a great entry if we can get it.

Company Info:

Foster Wheeler Ltd. operates through two business groups, which also constitute its segments: Global Engineering and Construction Group (E&C Group), and Global Power Group. The Global E&C Group designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, and chemical and petrochemical, pharmaceutical, biotechnology and healthcare facilities and related infrastructure, including power generation and distribution facilities. Global Power Group designs, manufactures, and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities worldwide. On April 7, 2006, the Company completed the purchase of the remaining 51% interest in MF Power S.r.L., a joint venture that was 49% owned by the Company's Global E&C Group prior to the acquisition.

Breakdown trigger: $115

BUY 2009 $130 LEAP Call ZHF-AX


NOV - National Oilwell Varco

We want to enter this new position after the 9/28 2:1 split. I am putting the target at $70 to start.

Company Info:

National Oilwell Varco, Inc. (NOV) is a worldwide provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry. The Company operates in three segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services. The Rig Technology segment designs, manufactures, sells and services complete systems for the drilling, completion and servicing of oil and gas wells. The Petroleum Services & Supplies segment provides a variety of consumable goods and services used to drill, complete, remediate and workover oil and gas wells, service pipelines, flowlines and other oilfield tubular goods. The Distribution Services segment provides maintenance, repair and operating supplies, and spare parts. In March 2006, NOV acquired Soil Recovery A/S. In November 2006, it acquired Rolligon Ltd. In December 2006, it acquired 87% of NQL Energy Services Inc.

Breakdown Trigger: $72

Buy 2008 MAY $80 Call NOV-EP

Breakout Trigger: $80

Buy 2008 May $90 Call NON-ER


OII - Oceaneering International

Company Info:

Oceaneering International, Inc. is a global oilfield provider of engineered services and products primarily to the offshore oil and gas industry, with a focus on deepwater applications. Through the use of its applied technology capabilities, the Company also serves the defense and aerospace industries. The services and products the Company provides to the oil and gas industry include remotely operated vehicles, mobile offshore production systems, built-to-order specialty hardware, engineering and project management, subsea intervention services, nondestructive testing and inspection, and manned diving. Oceaneering International, Inc s business segments are contained within two businesses: services and products provided to the oil and gas industry (Oil and Gas) and all other services and products (Advanced Technologies). In July 2007, the Company announced the acquisition of Ifokus Engineering AS, a Norwegian designer and manufacturer of specialty sub-sea products.

Breakdown trigger: $72

Buy APR $80 Call OII-DP


FTI - FMC Technologies

Company Info:

FMC Technologies, Inc. (FMC Technologies) is a global provider of technology solutions for the energy industry and other industrial markets. The Company designs, manufactures and services systems and products, such as subsea production and processing systems, surface wellhead production systems, high-pressure fluid control equipment, measurement solutions, and marine loading systems for the oil and gas industry. It also produces food processing equipment for the food industry and specialized equipment to service the aviation industry. FMC Technologies business segments are Energy Systems (comprising Energy Production Systems and Energy Processing Systems), FoodTech and Airport Systems. In April 2007, the Company increased its stake in CDS Engineering BV to 91%. In June 2007, the Company acquired Technisys, Inc.

Breakdown Trigger: $50

Buy APR $55 Call FTI-DK


CAM - Cameron International

Company Info:

Cameron International Corp., formerly Cooper Cameron Corporation, is an international manufacturer of oil and gas pressure control and separation equipment, including valves, wellheads, controls, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications and provides oil and gas separation, metering and flow measurement equipment. It is also a manufacturer of centrifugal air compressors, integral and separable gas compressors and turbochargers. The Company's operations are organized into three separate business segments: Drilling & Production Systems (DPS), formerly the Cameron segment; Valves & Measurement (V&M), formerly the Cooper Cameron Valves segment, and Compression Systems (CS), formerly the Cooper Compression segment. In January 2006, the Company acquired the assets and liabilities of Caldon Company.

Breakdown target: $85

Buy 2009 $90 LEAP Call OKA- AR


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