CHK - $27.43 Chesapeake Energy ** No Stop **
CHK imploded at the open on Monday and triggered the insurance put at $28. It appeared to stop at this level until the oil crash on Thursday. We are fully protected with an April put so this will be a long-term position. Banc America reiterated a buy on CHK last week with a price target of $43. CHK continued on its acquisition spree by acquiring 19% interest in Gastar Exploration and 33% interest in some of its properties in Texas.
Chesapeake Energy Corporation is an oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs and the marketing of natural gas and oil for other working interest owners in properties that it operates. The Company's properties are located in Oklahoma, Texas, Arkansas, Louisiana, Kansas, Montana, Colorado, North Dakota and New Mexico. The proved oil and natural gas reserves as of December 31, 2004 were approximately 4.9 trillion cubic feet of gas equivalent (tcfe). At December 31, 2004, approximately 89% of the Company's proved reserves (by volume) were natural gas, and approximately 70% of its proved oil and natural gas reserves were located in the primary operating area, the Mid-Continent region of the United States, which includes Oklahoma, western Arkansas, southwestern Kansas and the Texas Panhandle.
2007 $35 LEAP VEC-AG @ $4.00
Entry $29 (11/04)
UPL - $50.90 Ultra Petroleum ** Stop loss $45 **
We dodged a bullet on UPL this week with our stop loss at $48 and the post oil crash dip to $48.50. The rebound was lackluster due of course to the lack of a rebound in crude. UPL is primarily a gas producer and cold weather should produce a rebound in gas ad UPL.
I am adding an insurance put this week but only if UPL trades at $48.50 again. I also lowered the stop.
Headlines from their earnings on Oct-26th:
Ultra Petroleum Corp. 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 in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. During the year ended December 31, 2004, it owns interests in approximately 166,974 gross (92,997 net) acres in Wyoming covering approximately 260 square miles. The Company owns working interests in approximately 241 gross productive wells in this area and is operator of 41.5% of the 241 gross wells. Through Pendaries Petroleum Ltd., it is active in oil and gas exploration and development in Bohai Bay, China. The Company also owns interests in 15,518 gross (14,652 net) acres in Pennsylvania, as well as interest in approximately 720 gross (320 net) acres and interests in three productive wells in Texas.
MARCH $60 Call UPL-CL @ $5.20
Insurance Put: Dec $45 Put UPL-XI
Entry $55 (11/02)
STR - $76.62 Questar Corp ** Stop Loss $70 **
Questar held its ground very well considering the carnage in the energy sector. The trading range from $76-$80 is still in place and it appears to be waiting for the cold weather. No change in plan here.
STR did not trade below $75 so we are still naked on the Put insurance. We are not going to buy the put unless we are hit with a decline. I would rather not stop, reenter, stop, reenter and therefore the wide stop and the potential for put insurance instead of a tight stop.
Questar Corporation (Questar) is a natural gas focused energy company with three principal lines of business gas and oil exploration and production, interstate gas transmission, and retail gas distribution. Questar conducts most of its operations through its subsidiaries Questar Market Resources (Market Resources), Questar Pipeline Company and Questar Gas Company (Questar Gas). Market Resources is a sub-holding company that owns Questar Exploration and Production Company (Questar E&P), Wexpro Company (Wexpro), Questar Gas Management Company (Gas Management) and Questar Energy Trading Company (Energy Trading). Questar Pipeline provides interstate natural gas transmission, storage and gas processing and treating services. Questar Gas conducts retail natural gas distribution.
April $85 Call STR-DQ @ $5.60
Entry $78.76 (10/31)
COP - $63.53 Conoco Phillips ** Stop Loss $59 **
Conoco took the mandatory drop with the rest of the sector but appears to be marking time well over support at $60. COP is still my favorite big oil stock. COP will hold its annual analyst meeting on Wednesday and it will be webcast live at www.conocophillips.com/investor. I expect them to be very positive and explain the development plans for Russia. This could supply a boost for the stock price. COP is the most aggressive big oil in attempting to acquire reserves. Their exploration budget for 2006 increased by +127%.
Earnings were Oct-27th
ConocoPhillips is an integrated energy company. The Company's business is organized into six operating segments. The Exploration and Production segment primarily explores for, produces and markets crude oil, natural gas, and natural gas liquids on a worldwide basis. The Midstream segment gathers and processes natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids. The Refining and Marketing segment purchases, refines, markets and transports crude oil and petroleum products. The LUKOIL Investment segment consists of the Company's equity investment in LUKOIL, an international, integrated oil and gas company. The Chemicals segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Emerging Businesses segment encompasses the development of new businesses, including new technologies related to natural gas conversion into clean fuels and related products, technology solutions, power generation and emerging technologies.
2007 $70 LEAP Call OJP-AN @ $6.40
Insurance Put: Cancelled - no entry
Entry $63.25 (10/31)
MO - $74.80 Altria Group ** Stop Loss $71.00 **
MO is wedging back up to resistance at $75 and hopefully we will get a solid break on this trip. With the market in rally mode heading into the holidays this is a relatively safe stock for institutions given their coming attractions.
Yes, MO, not an energy stock but one with special events in its future. The tobacco suits and legislation appear to be winding down but MO is taking no chances. Altria is taking steps to distance itself from the eventual decline of the tobacco business and will be spinning off the tobacco side sometime in 2006. Altria I working to upgrade its non-tobacco image and will be divesting itself of other non-core assets. Barron's expects Altria to split into three separate companies in 2006 and release lots of pent up shareholder value. As long as Altria is hampered by the tobacco image and all the claims it can never receive a true valuation on the rest of its very profitable businesses. An insurance put is a must given the unpredictability of the legal cases.
Altria Group, Inc. (ALG), through its subsidiaries, Philip Morris USA Inc. (PM USA), Philip Morris International Inc. (PMI) and Kraft Foods Inc. (Kraft), is engaged in the manufacture and sale of cigarettes, tobacco products, branded foods and beverages. PM USA and PMI are engaged in the manufacture and sale of cigarettes in the United States and internationally, respectively. Kraft is engaged in the manufacture and sale of branded foods and beverages in the United States, Canada, Europe, the Middle East and Africa, Latin America and Asia Pacific. Kraft manages two units, Kraft North America Commercial (KNAC) and Kraft International Commercial (KIC). The Company operates in five business segments, such as Domestic tobacco, International tobacco, North American food, International food and Financial services, which accounted for 27.7%, 41.2%, 24.3%, 5.9% and 0.9%, respectively, of the Company's income during the year ended December 31, 2004.
2007 $80 LEAP Call VPM-AP @ $5.50
Buy the put now instead of on a trigger since legal announcements tend to appear suddenly.
Entry $75.00 (10/31)
UNH - $59.60 Unitedhealth Group ** Stop Loss $50 **
UNH has rebounded from the November dip and is back within 30 cents of a new all time high over $59.90. Health care typically does well in Q4 and hopefully the weakness has worn off with the market in rally mode.
UnitedHealth is the leader in the managed heathcare sector. Earnings are soaring, +31% in Q3 to $2.43 billion and the outlook is only up. With health care costs rising more and more companies will turn to UNH to lessen their benefit expenses. We are also expecting a seasonal bounce now that October is behind us. There were two strong sell cycles in October as funds took profits from a long period of gains. Historically health care companies have done very well over the next three months as funds look for safe havens for year-end cash. UNH gained +37% from the October lows for the same period in 2004. Buyers appear on every dip to the 100-day average currently at $53.
UnitedHealth Group Incorporated is a diversified health and well-being company, serving approximately 55 million Americans. The Company provides individuals with access to healthcare services and resources through more than 460,000 physicians and other care providers, and 4,200 hospitals across the United States. It manages approximately $60 billion in aggregate annual healthcare spending on behalf of more than 250,000 employer-customers and the consumers it serves. The Company conducts its business primarily through four operating divisions: Uniprise, Health Care Services, Specialized Care Services and Ingenix. On July 29, 2004, the Health Care Services business segment acquired Oxford Health Plans, Inc. (Oxford). Oxford provides healthcare and benefit services for individuals and employers, principally in New York City, northern New Jersey and southern Connecticut.
2007 $60 LEAP Call VUH-AL @ $6.40
Entry $56.75 (10/31)
BTU - $76.13 Peabody Energy ** Stopped $73.00 **
The drop in BTU was extremely frustrating given the large amount of profit we had built up in the position. I had left the stop low thinking we could survive the volatility and it dipped just enough to trigger that stop at $73. Fortunately we only lost -50 cents because our entry point was also low. I will continue to own BTU personally but I am not going to play it again in the LEAPs portfolio until a new trend is established.
Earnings were OCT-18th
Peabody Energy Corporation (Peabody) is a private-sector coal company in the world. During the year ended December 31, 2004, the Company sold 227.2 million tons of coal. It sells coal to over 300 electricity generating and industrial plants in 16 countries. The Company owns, through its subsidiaries, majority interests in 32 coal operations located throughout all the United States coal producing regions and in Australia. Most of the production in the western United States is low-sulfur coal from the Powder River Basin. In the West, it owns and operates mines in Arizona, Colorado, New Mexico and Wyoming. In the East, it owns and operates mines in Illinois, Indiana, Kentucky and West Virginia. The Company owns four mines in Queensland, Australia. Most of the Australian production is low-sulfur, metallurgical coal. In addition to the mining operations, the Company markets, brokers and trades coal.
MAR 2006 $80 CALL BTU-CP @ $6.70, exit $6.20, -0.50, 11/10
Entry $73.88 (10/23)