BP - $67.83 - BP Plc. ** No Stop **
BP continues to climb and is approaching resistance at $69. A strong oil day could go a long way on breaking that resistance.
BP is a very strong U.S. producer although many people have never heard of them. Prudential started them at overweight and they are rending up off their lows. Options are cheap relative to some of the highly volatile favorites.
BP p.l.c. is an oil company trying to remake itself into an energy company. The operating business segments were Exploration and Production; Refining and Marketing; Petrochemicals, and Gas, Power and Renewables. Exploration and Production's activities include oil and natural gas exploration and field development and production, together with pipeline transportation and natural gas processing. The activities of Refining and Marketing include oil supply and trading, as well as refining and marketing. The Petrochemicals segment ceased to operate separately as of January 1, 2005. Gas, Power and Renewables activities include marketing and trading of natural gas, natural gas liquids , new market development and liquefied natural gas (LNG), and solar and renewables. The Company formed the TNK-BP joint venture between the Company and the Alfa Group and Access-Renova (ARR). In addition, it plans to incorporate AAR's 50% interest in OAO Slavneft, a Russian oil company, into TNK-BP.
Buy 2007 $70 LEAP Call VAO-AN currently $5.20
Put Insurance: April $60 Put BP-PL currently $1.30
Entry $66.43 (11/20)
VLO - $101.17 Valero ** Stop loss $96 **
Exit target $108
Valero continues to be rather dormant compared to the days after the hurricanes. With gasoline prices falling the crack spreads are compressing but once heating oil inventories start to fall they should increase. I would like to see a strong bounce in oil to push VLO to $108 before the split. After the split I want to go long on some leaps for the next cycle but we have plenty of time to pick an entry.
Valero will split 2:1 on Dec-16th. We will want to exit before the split.
Valero Energy Corporation (Valero) owns and operates 15 refineries having a combined throughput capacity, including crude oil and other feedstocks, of approximately 2.5 million barrels per day. Valero produces environmentally clean refined products, such as reformulated gasoline (RFG), gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur diesel fuel and oxygenates (liquid hydrocarbon compounds containing oxygen). It also produces conventional gasolines, distillates, jet fuel, asphalt and petrochemicals. Valero 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 more than 4,700 retail and wholesale branded outlets in the United States, Canada and Aruba. Valero's retail operations include approximately 1,500 company-operated sites that sell transportation fuels and convenience store merchandise.
January $110 Call VLO-AB @ $5.50
LEAPS are far too expensive and I would expect to be out of the trade by Christmas at the latest.
Exit target $108
Entry $100 (11/09)
CHK - $29.40 Chesapeake Energy ** No Stop **
CHK continues to remain dormant just under $30 as we await the winter gas demand. CHK is also suffering from a continuing acquisition program. They are actively acquiring reserves, which will be very positive for the future but analysts wonder at what cost. CHK tries to pay for its acquisitions out of revenue from the acquired reserves by hedging them for several years in advance. This way there is no large debt service to choke them. With several acquisitions pending closure just ahead investors seem to have taken a wait and see attitude. We are protected so no problem on this end except boredom.
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 - $54.93 Ultra Petroleum ** Stop loss $50 **
UPL gain nearly +$3 for the week despite closing more than $1 off its highs. UPL has risen to test resistance at $56 and a breakout here could really get things moving. UPL was our best performer last week. There are rumors that China is going to make an offer on the Bohai Bay development off the coast of China. They should sell it if China offers since they would be unprotected from aggression when the oil wars start.
I cancelled the put insurance entry and raised the stop to $50.
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 (cancelled not triggered)
Entry $55 (11/02)
STR - $78.09 Questar Corp ** Stop Loss $74 **
Questar continues to hold over its 100-day average and like CHK and UPL any gains will depend on natural gas demand. Questar is finally showing life and rebounded on Friday to its two-week resistance at $78. A drop in gas reserves should push it back over $80.
STR traded -3 cents below $75 on Monday and we were triggered on the Put insurance @ 80 cents. It only has three weeks to run but it was cheap. Personally I would not have entered on the -3 cent spike under $75 but rules are rules.
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 - $64.00 Conoco Phillips ** Stop Loss $57 **
Conoco is struggling with resistance at $65 and is dependent on a bounce in oil prices to move higher. They are still using their cash to acquire assets with the acquisition last week of a 275,000 bbl refinery in Germany. The 200-day average at $59.12 is still our support cushion.
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)
UNH - $60.16 Unitedhealth Group ** Stop Loss $57 **
UNH is struggling with $61 after trading higher intraday on Fri/Mon. After several weeks of decent gains UNH may be falling victim to sector rotation and to worries about a bird flu pandemic. Several analysts reports last week suggested that healthcare companies are not equipped to handle the expenses associated to a potential breakout and millions of flu cases. I considered exiting it this week but with no human flu on the horizon investors could decide that earnings are safe for the next few quarters.
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
Insurance put: CANCELLED NO ENTRY
Entry $56.75 (10/31)