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FTO - $60.59 - Frontier Oil Corp

FTO was knocked back into early April by the various factors in play last week. The covered call was stopped out on the first dip to $60 and had no time to bleed premium. We exited with +60 cents for our efforts so we can't complain. FTO rebounded quickly and exhibited far more relative strength than may others.

The board announced a 2:1 split subject to shareholder approval on June 9th. I have never seen one voted down.

FTO is a strong takeover candidate and should be very profitable since they can refine the cheaper heavy crude.

Stock split: 2:1 scheduled for June 26th

Earnings schedule: May 8th.

Company Info:

Frontier Oil Corporation (Frontier) is an independent energy company engaged in crude oil refining and wholesale marketing of refined petroleum products. The Company operates refineries (the Refineries) located in Cheyenne, Wyoming, and El Dorado, Kansas, with a total annual average crude oil capacity of 162,000 barrels per day (bpd). Both of the Refineries are complex refineries, capable of processing heavier, less expensive types of crude oil, while producing gasoline, diesel fuel and other high-margin refined products. Frontier purchases crude oil to be refined and markets refined petroleum products, including various grades of gasoline, diesel, jet fuel, asphalt and other by-products. The Company focuses its marketing efforts in the Rocky Mountain region, which includes the states of Colorado, Wyoming, Montana and Utah, and in the Plains States region, which includes the states of Kansas, Oklahoma, Nebraska, Iowa, Missouri, North Dakota and South Dakota.


Breakdown trigger $56.00 hit (4/11)

Position: Oct $60 Call FTO-JL @ $6.50
Cost reduced by -60 cents 4/25. Cost = $5.90

Cost reduction play April 18th
Sell May $65 Call FTO-EM @ $2.15, exit $1.55 4/25, +.60
Stop loss $64.95
Profit stop $60.00, hit 4/25

Entry $56.00 (4/11)

CSX - $68.46 - CSX Corp

CSX was one of the few stocks to finish higher on the week. No complaints here and I believe we are about to see an uptick. CSX is actually one stock that could rise on a drop in oil prices.

CSX operates the largest railroad in the eastern US and Bear Stearns thought increased operating efficiency and higher volumes of coal would raise earnings dramatically. Looks like they were right.

Earnings: April 18th $1.06 vs estimates of 89 cents

Company Info:

CSX Corporation (CSX) based in Jacksonville, Florida, owns companies providing rail, intermodal and rail-to-truck transload services that combine to form transportation companies, connecting more than 70 ocean, river and lake ports. CSX's principal operating company, CSX Transportation Inc. (CSXT), operates the railroad in the eastern United States with approximately 21,000-mile rail network linking commercial markets in 23 states, the District of Columbia, and the Canadian provinces of Ontario and Quebec. CSX Intermodal Inc. (Intermodal) is a coast-to-coast intermodal transportation provider, an integrated intermodal company serving customers from origin to destination with its own truck and terminal operations, plus a dedicated domestic container fleet. Containers and trailers are loaded and unloaded from trains, with trucks providing the link between intermodal terminals and the customer.


Breakout trigger $60.50 hit Apr-3rd
Position 2008 $65 LEAP Call YYD-AM @ $8.30

Entry $60.50 (4/03)

PBR - $98.83 - Petro Brasileiro ** No Stop **

PBR refused to die despite the various negative factors. The announcement of a new discovery the prior week had investors buying every dip.

The drop on the 25th tagged our stop on the covered call before it had time to bleed premium. We exited with a +35 cent gain but it was hardly worth the effort.

With any positive energy news next week I expect PBR to breakout given its relative strength over the past week.

Earnings schedule: May 12th.

Company Info:

Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a mixed-capital enterprise of which a majority of voting capital is owned by the Brazilian Government. The Company is engaged in a range of oil and gas activities, which include segments such as exploration and production, refining, transportation and marketing, distribution, natural gas and power, international, and corporate. Besides the dominant market position in Brazil, Petrobras has oil and gas activities in international locations, with significant international operations in Latin America, the Gulf of Mexico and West of Africa. During the year ended December 31, 2004, the Company had estimated proved developed and undeveloped crude oil and natural gas reserves of approximately 11.82 billion barrels of oil equivalent in Brazil and other countries.

Position: 2007 $95 LEAP Call VDW-AS @ 8.40
Cost reduced by -.35 on 4/25. Cost = 8.05

Cost reduction play Apr-18th
Sell May $100 Call PBR-ET @ $2.05, exit $1.70, 4/25, +.35
Stop loss $$101.00 (in the money)
Profit stop $95 hit 4/25

Entry $87.00 (3/07)

SLB - $69.14 - Schlumberger Ltd. ** No Stop **

SLB was another star performer yet again. The price pressures barely caused a ripple in the SLB price with one dip at the open on the China news. SLB closed higher for the week.

We entered a covered call on Monday using the August $75 call. With the relative strength shown by SLB I don't have high hopes for a dip.

Maintain a tight stop loss at $72.
Maintain a profit stop at $66.

Earnings: April 21st, 59 cents vs estimates of 55 cents

Company Info:

Schlumberger Limited (Schlumberger) is an oilfield services company that supplies technology, project management and information solutions for the oil and gas industry. Schlumberger consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company that supplies a range of technology services and solutions to the international petroleum industry. WesternGeco, jointly owned with Baker Hughes, is a surface seismic company. On January 29, 2004, Schlumberger completed the sale of its SchlumbergerSema business to Atos Origin. During the year ended December 31, 2004, Schlumberger completed the initial public offering of Axalto and no longer retains any ownership interest in this business.

Position: (2) 2007 $60 LEAP Call VWY-AL @ $7.00

April 24th cost reduction play:
Sell Aug $75 Call SLB-HO @ $2.95
Set a profit stop at $64, changed to $66 4/30
Set a stop loss at $72

Entry $57 (3/08) (split adjusted)

BTU - $63.86 - Peabody Energy ** No Stop **

BTU roared out of the Thursday dip as traders took advantage of the weakness to add to positions. BTU appears unstoppable which could cause troubles for our covered call. The Thursday dip missed our profit stop at $58 by 50 cents but I am sure the profit would have been minimal given the relative strength.

Maintain a stop loss at $67.50
Maintain a profit stop at $58.50

Peabody profits are not related to the price of oil and coal prices will rise along with gas prices. Summer cooling season is just ahead and BTU is going to be a long-term hold. We bought the 2008 LEAP in anticipation of a long-term position.

Earnings schedule: April 18th, +151% jump on +21% revenue gain.

Shareholder meeting: May 5th

Company Info:

Peabody Energy Corporation (Peabody) is the largest 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.

Position: 2008 $55 LEAP Call LLW-AK @ $9.50
Cost increased 4/19 by +1.30 to $10.80

April 8th covered call:
Sell June $60 Call BTU-FL @ $2.20, stopped $3.50, 4/19, -1.30

April 24th covered call:
Sell Sept $70 Call BTU-IN @ $4.20
Set stop loss at $67.50
Set profit stop at $58.00, changed to 58.50 4/30

Entry $48.00 (3/07)

PCU - $98.93 - Southern Copper Corp ** No Stop **

The $100 level for PCU proved to be stubborn with every spike sold but the Thursday dip was bought with equal vigor.

I lowered the stop loss on the covered call last week to avoid an expensive stop on the continued bullishness. That stop was tagged at the open on Tuesday when PCU spiked to $102.01 for a -45 cent loss.

PCU was upgraded by UBS to a "Buy" and Bear Stearns to an "Outperform". Deutsche Securities upped them to a "buy" on April 11th.

Earnings date Apr-26th: EPS +41%, revenue flat due to strikes.

Company Info:

Southern Copper Corporation, formerly Southern Peru Copper Corporation (SPCC), is an integrated producer of copper that operates mining, smelting and refining facilities in the southern part of Peru. The copper operations of the Company involve mining, milling and flotation of copper ore to produce copper concentrates, the smelting of copper concentrates to produce blister copper and the refining of blister copper to produce copper cathodes. SPCC also produces refined copper using the solvent extraction/electrowinning (SX/EW) technology. Silver, molybdenum and small amounts of other metals are contained in copper ore as by-products. Silver sold is recovered in the refining process or as an element of blister copper. Molybdenum is recovered from copper concentrate in a molybdenum by-product plant.

Position: Sept $85 Call PCU-IQ @ $6.20
Cost increased 4/25 on CC stop by +45 cents. Cost = $6.65

Tuesday April 18th
Sell May $105 Call PCU-EA @ $2.10, exit $2.55, 4/25, -.45
Stop loss $103.50, lowered to $101.50 4/23

Entry $78.00 (3/07)

XLE - $57.14 - Energy Select SPDR ** No Stop **

That was a major setback for the XLE since it contains so many components suffering from profit taking. Strong support at $55 is our fall back position.

SPDR Info:

The Energy Select Sector SPDR Fund (the Fund) is an index fund that seeks to replicate the total return of the Energy Select Sector Index of the Standard & Poor's 500 Composite Stock Index (S&P 500 Index). During the fiscal year ended September 30, 2004 (fiscal 2004), the Fund had a return of 48.27%, as compared to the Energy Select Sector Index return of 48.91% and the S&P 500 Index return of 13.87%. The Fund invests in industries, such as energy equipment and services, and oil and gas services, among others. In fiscal 2004, its top five holdings were Exxon Mobil Corp., ChevronTexaco Corp., ConocoPhillips Inc., Schlumberger Ltd. and Occidental Petroleum Corp.

Breakdown of components of the XLE:
http://www.spdrindex.com/spdr/index.cfm?story=composition&symbol=XLE

Position: 2007 $55 LEAP Call OJW-AC @ $4.10

Entry $52.00 (3/07)

RAIL - $66.90 FreightCar America ** Stop loss $61 **

Rail was hammered for a huge loss after posting blowout earnings of +1.67 per share compared to 22 cents in Q1-2005. The drop was due in part to a drop in orders in Q1 to 1031 railcars compared to the orders in Q1-2005 of 5070 railcars. The CEO explained that their backlog of 17,794 railcars was still larger than the backlog in 2005 of only 14,146 units. He explained that order patterns were erratic due to the nature of the business but they were not seeing any slowdown. Investors were quick to take profits rather than evaluate the statements.

RAIL appears stuck in a range between $61 and $71 but the prospects are still strong.

UBS upgraded them to a buy while CIBC downgraded them to a hold.

I raised the stop to $61 just in case the bounce fails.

Earnings schedule: April 26th. +1.67 EPS compared to .22 in 2005.

You may think RAIL is not an energy play but you would be wrong. 78% of its rail cars are for coal. You may remember in mid 2005 the coal companies saw a period of soft earnings because there was not enough rail capacity to get their coal to market. RAIL saw a +120% increase in orders in Q4 and saw a backlog of nearly 21,000 cars at year-end. As more energy products are shipped from Canada and into Mexico the demand will continue to grow.


Company Info:

FreightCar America, Inc. is a manufacturer of aluminum-bodied railroad freight cars (railcars) in North America. The Company specializes in the production of coal-carrying railcars, which represented 78% of its deliveries of railcars, during the year ended December 31, 2004, while the balance of its production consisted of a broad spectrum of railcar types, including aluminum-bodied and steel-bodied railcars. It also refurbishes and rebuilds railcars and sells forged, cast and fabricated parts for all of the railcars that the Company produces, as well as those manufactured by others. Prior to April 1, 2005, the Company was named FCA Acquisition Corp. On April 1, 2005, a former parent company, also named FreightCar America, Inc., merged with and into FCA Acquisition Corp., with FCA Acquisition Corp. being the surviving corporation. In connection with the merger, FCA Acquisition Corp. changed its name to FreightCar America, Inc.

Currently the longest option you can buy is the September series.

Position: Sept $80 Call RQN-IP @ $4.00

Entry $67.00 (3/07)

OIH - $157.54 - Oil Service Holders ** No stop **

The OIH gave up -$5 due to the profit taking in many of the components. $155 appeared as new support and we are still on track.

Maintain a profit stop on the short $160 ZJO-ML put at $10.00

Holder Info:

The Oil Service HOLDRS Trust issues depositary receipts called Oil Service HOLDRS, representing an undivided beneficial ownership in the common stock of a group of specified companies that, among other things, provide drilling, well-site management, and related products and services for the oil service industry. The Bank of New York is the trustee. The Oil Service HOLDRS Trust was formed under a depositary trust agreement dated February 6, 2001. The 18 issuers of the underlying securities represented by Oil Service HOLDRS, as of August 1, 2005, were Baker Hughes Incorporated, BJ Services Company, Cooper Cameron Corporation, Diamond Offshore Drilling, Inc., ENSCO International Incorporated, Grant Prideco, Inc., GlobalSantaFe Corp., Halliburton Company, Hanover Compressor Company, Nabors Industries Ltd, Noble Corporation, National Oilwell Varco Inc., Rowan Companies, Inc., Transocean Inc., Smith International, Inc., Schlumberger Limited, Tidewater Inc. and Weatherford International Ltd.

(LEAP PUT SALE)

Position: SHORT 2007 $160 LEAP PUT ZJO-ML @ $29.60
Position: LONG July $125 Put OIH-SE @ $1.95
Position: LONG April $120 Put OIH-PD @ $1.95, expired worthless

4/17/06
Buy July $125 PUT OIH-SE currently $1.95 to replace April put

Entry $135 (2/28)

CNI - $44.90 Canadian National Railway ** Stopped @ $45.50 **

CNI never gained any traction after the split. The weakness last week triggered our tight stop at $45.50 to exit the play. The dip did take it back to the 100-day avg at $44.50 and decent long term support. While I would be tempted to reenter at this level on a technical basis there are far better uses for our money.

Earnings: April 20th, EPS +27%, revenue +19%, Income +21%

Company Info:

Canadian National Railway Company (CN), directly and through its subsidiaries, is engaged in the rail and related transportation business. As of December 31, 2005, the Company had a network of approximately 19,200 route miles of track. CN's network spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, British Columbia, Montreal, Halifax, New Orleans and Mobile, Alabama, and the cities of Toronto, Buffalo, Chicago, Detroit, Duluth, Minnesota/Superior, Wisconsin, Green Bay, Minneapolis/St. Paul, Memphis, St. Louis and Jackson, Mississippi, with connections to all points in North America. The Company's revenues are derived from the movement of seven commodity groups, including petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, intermodal and automotive.

Position: Oct $50 Call CNI-JJ @ $3.00, exit 4/27, 1.15, -1.85

Entry $47.95 (3/02)

TLM - $56.45 - Talisman Energy ** Stop Loss $50 **

The drop took us back to uptrend support at $54 and Friday saw a rebound appear. We are about three weeks away from the split and
$54 is strong support.

Earnings date: May 9th.
Shareholder meeting: May 9th.

3:1 Stock split scheduled for around May-26th

Prior play commentary:

Talisman is an aggressive driller operating worldwide. Net income increased +139% for 2005. Production increased +7% to 470,000 boe/d and Talisman replaced 189% of those reserves produced. This makes Talisman a very likely takeover target for somebody like Conoco looking to acquire Talisman's nearly 2 billion bbls of proven reserves and its worldwide drilling operations.

Talisman recently announced a 3:1 split to be effective on May-25th. This should provide some added lift to the stock price as we move into the summer rally period. I believe we should buy the October $60 call, which will split into (3) $20 calls and hopefully be in the money before the split occurs. A $20 stock of this caliber should be catnip to players on a budget and I expect it to be bought quickly. With option premiums currently $4.50 they will split to a cost of $1.50 each. It is hard to go wrong with a price like that.

3:1 Split scheduled for May-25th.

Company info:

Talisman Energy Inc. (Talisman) is an independent international upstream oil and gas company whose main business activities include exploration, development, production, transporting and marketing of crude oil, natural gas and natural gas liquids. The Company's operations, during the year ended December 31, 2004, were conducted principally in four geographic segments: North America, the North Sea, Southeast Asia and Algeria. The Trinidad Angostura project began production in January 2005. Exploration is being advanced in other areas outside the principal geographic segments, including Alaska, Colombia, Qatar and Peru. During 2004, total production averaged 438 million barrels of oil equivalent per day (mboe/d) and the Company exited the year producing 452 mboe/d in December. In 2004, the Company drilled 641 successful wells.

Position: October $60 Call TLM-JL @ $6.00

Entry $56.44 (3/05)

DO - $90.72 - Diamond Offshore Drilling ** Stop Loss $84 **

I am concerned that Diamond showed so much weakness with a -$6 drop from the highs and very little rebound. $89 is strong support but a break there could see a $10 drop. Diamond posted blowout earning that more than quadrupled due to higher rig rates. Earnings were $1.06 per share compared to only 23 cents. Analysts were expecting 98 cents. 97% of their rigs were working compared to 91% a year earlier. Day rates were up between 60-77% over last year. The CEO said conditions were strong and there was no reason to expect the fundamentals to change.

Part of the decline could be a call by Richard Suttmeier at the Stree.com to take profits on the drillers at the April peak. His fair value for DO is $89.15.

I raised the stop to $84 just in case the run is over. In addition to the stop I am recommending a covered call using the September $100 call. If we hit the stop the CC will offset any drop in the LEAP.

Sell Sept $100 Call DO-IT currently $5.60
Set a stop loss at $97.
Set a profit stop at $84.

Earnings schedule: April 26th, $1.06 compared to 23 cents in 2005

Company Info:

Diamond Offshore Drilling Inc. engages principally in the contract drilling of offshore oil and gas wells. As of December 31, 2004, the Company had a fleet of 45 offshore rigs consisting of 30 semisubmersibles, 14 jack-ups and one drillship. Diamond offers a range of services worldwide in various markets, including the deep water, harsh environment, conventional semisubmersible and the jack-up market. Its principal markets for its offshore contract drilling services are the Gulf of Mexico, including the United States and offshore Mexico, Europe, principally the United Kingdom and Norway, South America, Africa and Australia/Southeast Asia. From time to time, its fleet operates in various other markets worldwide. Diamond provides offshore drilling services to a customer base that includes private and independent oil and gas companies and government-owned oil companies.

Position: 2007 $80 LEAP VCT-AP @ $10.00
Cost adjustment +1.80 on 3/29 short call stop. Cost = $11.80

Tuesday Feb-21st cost reduction strategy:
Sell the September $95 Call DO-IS @ $4.90, stopped 3/29, $6.70
Set a stop loss on the call at DO $90, changed to $89 3/19
Buy back the call on a dip to $68. Changed to $75 on 3/05

Entry $75 (2/15)

RIG - $81.14 - Transocean Inc ** New Stop Loss $76 **

That was a very big hit with a drop from $87 to nearly $79 and very little rebound. $80 is strong support and a break below $78 means a change in the trend. The profit stop on the covered call was hit on 4/25 for a minimal gain of +45 cents. I definitely did not have the stops low enough.

I added a stop loss at $76

Earnings schedule: May 4th

Company info:

Transocean Inc., formerly known as Sonat Offshore Drilling Inc., is an international provider of offshore contract drilling services for oil and gas wells, related equipment and work crews, primarily on a dayrate basis, to drill oil and gas wells. The Company operates with a particular focus on deepwater and harsh environment drilling services. The Company also provides additional services, including management of third-party well service activities. The Company's Transocean drilling segment consists of drillships, semisubmersibles, jackups and other drilling rigs.

Position: 2007 $80 LEAP VOI-AP @ $9.00
Cost reduction:
Added +0.80 cents on 3/1 Call stop. Cost = $9.80
Added +1.70 on 4/6 call stop. Cost = $11.50
Cost reduced on 4/25 by -0.45 at CC stop. Cost = $11.05

Monday Mar-20TH cost reduction strategy:
Sell the May $85 call RIG-EQ @ $2.80, stopped @ $4.50 4/6, -1.70
Set a profit stop at $74
Set a stop loss at $84.95

Tuesday Feb-21st insurance strategy:
Sell the March $75 Call RIG-CO @ $1.90, stopped at $2.70 3/01
Buy the May $65 Put RIG-QM @ $2.00
Maintain a profit stop on the put at $57

Tuesday April 18th cost reduction call
Sell May $90 Call RIG-ER @ $1.80, exit $1.35, 4/25, +0.45
Stop loss $89.


Entry $75.00 (2/14)

GI - $71.88 - Giant Industries ** Stop Loss $66 **

Giant was hammered on Thursday as traders took profits on the China rate news. The dip to $68 was quickly bought with a rebound to $73. With our stop at $66 we narrowly escaped being taken out of the play. Earnings were announced for May 4th. I believe $70 should be initial support with $68 disaster level support. I am going to leave the stop at $66.

Earnings date: May 4th

Company info:

Giant Industries, Inc., through its subsidiary Giant Industries Arizona, Inc. and other subsidiaries, refines and sells petroleum products on the East Coast primarily in Virginia, Maryland, and North Carolina and in the Southwest primarily in New Mexico, Arizona, and Colorado, with a concentration in the Four Corners area where these states meet. Phoenix Fuel Co., Inc., another subsidiary, distributes commercial wholesale petroleum products primarily in Arizona. The Company has three business units: retail group, which operates service stations including convenience stores or kiosks; Phoenix Fuel, a commercial wholesale petroleum products distributor selling diesel fuel, gasoline, jet fuel, kerosene, motor oil, hydraulic oil, gear oil, cutting oil, grease and various chemicals and solvents, and refining group, which operates the Company's Ciniza and Bloomfield refineries in the Four Corners area of New Mexico and the Yorktown refinery in Virginia.

Position: Sept $65 Call GI-IM @ $8.50
Cost reduction:
Cost reduced by -3.75 on 3/12 to $4.75.
Cost increased by +2.00 on 4/05 to $6.75

Monday Mar-20TH cost reduction strategy:
Sell the June $75 call GI-FO @ $2.40, stopped 4/05 @ $4.40, -2.00
Set a profit stop at $58.50
Set a stop loss at $72.50

Tuesday Feb-21st cost reduction strategy:
Sell the June $75 Call GI-FO @ $5.60, closed 3/12 $1.85, +3.75
Set a stop loss on the call at $73, changed to $69 3/05
Set a profit stop on the call at $52, changed to $56 on 2/26

Entry $60 (2/14)

HP - $72.65 - Helmerich Payne ** Stop loss $66 **

HP posted very strong earnings of +1.22 per share compared to 43 cents in the prior year. Analysts estimates were for $1.05 per share. Revenue jumped +57% with daily rig rates increasing +50%. HP is currently operating 100% of its domestic land rig fleet.

HP took the dreaded plunge on Thursday but the dip was quickly bought. We have strong support at $68-70 and a stop at $66.

Earnings date: April 27th, +1.22 vs 43 cents in 2005.

Company info:

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. The Company's contract drilling business is composed of three business segments: United States land drilling, United States offshore platform drilling and international drilling. The Company's United States land drilling is conducted primarily in Oklahoma, Texas, Wyoming, Colorado, and Louisiana, and offshore from platforms in the Gulf of Mexico and California. The Company also operated in seven international locations during the fiscal year ended September 30, 2005: Venezuela, Ecuador, Colombia, Argentina, Bolivia, Equatorial Guinea and Hungary. In addition, the Company is providing drilling consulting services for one customer in Russia. Its real estate investments are located in Tulsa, Oklahoma.

Position: Sept $75 Call HP-IO @ $7.20
Cost reduction: Cost reduced by -2.75 on 3/8 to $4.45.
Cost increased: Cost increased by +0.95 on 4/11 CC stop to $5.40

Monday Mar-20TH cost reduction strategy:
Sell the June $75 call HP-FO @ $2.05, $3.00, 4/11, -0.95
Set a profit stop at $62.00
Set a stop loss at $74.50

Tuesday Feb-21st cost reduction strategy:
Sell the June $70 Call HP-FN @ $4.70, closed 3/8 $1.95, +2.75
Set a stop loss on the call at $69.95
Set a profit stop on the call at $59, changed to $61 2/26

HP Entry $69 (2/13)

NOV - $68.98 - National Oilwell Varco ** Stop Loss $62 **

National Oilwell Varco who more than doubled earnings on nearly a double increase in revenue. Unfortunately NOV spiked to $72.50 on the news only to drop to $64.80 the next day on the post earnings depression and the China news. I am leaving the stop in place at $62.

Earnings date: April 26th, EPS 68 cents vs 33 cents in 2005

Company Info:

National-Oilwell Varco Inc., formerly National-Oilwell, Inc. designs, manufactures and sells systems, components and products used in oil and gas drilling and production, as well as distributes products and provides services to the exploration and production segment of the oil and gas industry. The Company's Products and Technology segment designs and manufactures complete land drilling and workover rigs, as well as drilling-related systems on offshore rigs. Non-capital revenue sources within its Products and Technology segment include drilling motors and specialized downhole tools that are sold or rented, spare parts and service on the large installed base of its equipment, expendable parts for mud pumps and other equipment and smaller downhole, progressive cavity and transfer pumps. Company's Distribution Services segment provides maintenance, repair and operating supplies and spare parts to drill site and production locations throughout North America and to offshore contractors.

Position: Aug $65 Call NOV-HM $6.90
Cost reduction: Cost reduced by -2.90 on 3/3 to $4.00.
Cost increased: Cost increased by +2.50 on 4/11 to $6.50

Monday Mar-20TH cost reduction strategy:
Sell the May $65 call NOV-EM @ $2.40, exit $4.90, 4/11, -2.50
Set a profit stop at $56.50
Set a stop loss at $66.75 (yes it is in the money) I am betting on resistance at $65 to hold ahead of hurricane season.

Tuesday Feb-21st cost reduction strategy:
Sell the May $70 Call NOV-EN @ $4.20, closed 3/7 $1.30, +2.90
Set a stop loss on the call at $69.95
Set a profit stop on the call at $58

NOV Entry $61.50 (2/14)

SUN - $81.10 - Sunoco ** Stop Loss $72 **

SUN sank -$9 dollars from its high for the week after refiners lost ground on the temporary removal of the ethanol requirement. SUN has very strong support at $78 and we have a long put if real disaster strikes with next week's earnings.

Maintain the profit stop on the May $70 put at $66. We should never hit it but we should be ready if it comes.

Earnings date: May 3rd
Shareholder meeting: May 4th

Original play description:

Sunoco has refining capacity of nearly 1 mbpd spread over five refineries and controls 4500 miles of pipeline and sells through 4528 retail outlets. They would make a very nice takeover target for Valero with a market cap of only $10.4 billion compared to $33 billion for Valero. Net income rose +61% in Q4 to $974 million. Valero made $1.35B for the same period.

Company Info:

Sunoco, Inc. operates through its subsidiaries as a petroleum refiner and marketer, and chemicals manufacturer with interests in logistics and coke making. Sunoco's petroleum refining and marketing operations include the manufacturing and marketing of a range of petroleum products, including fuels, lubricants and some petrochemicals. Sunoco's chemical operations consist of the manufacturing, distribution and marketing of commodity and intermediate petrochemicals. The Company's operations are organized into five business segments: refining and supply, retail marketing, chemicals, logistics and coke.

Position: 2007 $80 LEAP VUN-AP @ $8.70

Tuesday Feb-21st insurance strategy:
Sell the May $90 Call SUN-EA @ $2.95, closed 3/27 @ .85, +2.10
Buy the May $70 Put SUN-QN @ $2.75
Set a stop loss on the call at $89.95.
Set a profit stop on the put at $65, changed to $66 2/26.
Set a profit stop on the call at $70.

Entry $72.51 (2/12)

COP - $66.94 - Conoco Phillips ** Stop loss $59 **

Conoco collapsed back into the recent trading range but found initial support at $65. Conoco was upgraded by S&P with a price target of $77 after posting strong earnings on the 26th. Earnings of $2.37 per share were +7 cents above the street. Despite the upgraded earnings and price target S&P cut COP to a buy from strong buy.

Conoco earned $3.3 billion for the quarter and that is not chump change. S&P projected a +30% growth in earnings for the rest of 2006 due to the Burlington acquisition. Revenues increased nearly +$10 billion to $47.9 billion for the quarter. Their earnings report was very bullish and I encourage everyone to read it. Conoco remains my favorite of the big oils. They are the only company aggressively acquiring reserves, expanding production and refining capability.

Conoco still posted great results despite being short the equivalent of two refineries for the entire first quarter. The Alliance refinery damaged by Katrina came back on line in mid April.

I did add a stop loss just in case.

Earnings Schedule: April 26th, EPS $2.37 vs $2.06

Play description:

Conoco continues to hover in the $58-$64 range. This should be support as the acquisition of Burlington Industries approaches. The companies expect it to conclude in the first half of 2006. Burlington reported earnings that nearly doubled the prior year in Q4 and Conoco reported earnings that rose more than +50%. Together they should receive some synergistic benefits and increase shareholder value. Conoco is the most aggressive integrated oil company when it comes to adding reserves. They are not afraid to pay for them and they are clearly planning for the future.

Company Info:

Conoco Phillips 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 Conoco Phillips 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.

Position: 2007 $65 LEAP OJP-AM @ $5.00

Insurance Put: None

Entry $60.00 (02/08)

SU - $85.71 - Suncor Energy ** Stop loss $78.00 **

Suncor continued to show very nice relative strength despite a sharp drop on the China news. Support at $82 held and we saw a nice rebound. No change in the play.

Earnings schedule: May 4th

Play description:

Suncor is very active in the Canadian oil sands and has a strong plan to ramp production for the next decade. This is a very strong company in charge of their own fate. There are no OPEC concerns, no terrorists and no problems like Hugo Chavez. With the new government in Canada their business problems will likely ease instead of get worse.

I ate lunch with the Vice President of Suncore a couple months ago and he answered my questions very positively and with lots of confidence. I strongly believe this will be a good company for a long time. That does not mean profits cannot be hurt if we suddenly end up with an oil glut but that is not likely.

Company Info:

Suncor Energy Inc. (Suncor), formerly Suncor Inc., is a Canadian integrated energy company that explores for, acquires, develops, produces and markets crude oil and natural gas, transports and refines crude oil and markets petroleum and petrochemical products. Periodically, the Company also markets third-party petroleum products. Suncor also carries on energy trading activities focused principally on buying and selling futures contracts and other derivative instruments based on the commodities the Company produces. The Company has four principal operating business units: Oil Sands; Natural Gas; Energy Marketing and Refining, Canada, and Refining and Marketing, United States of America.

Position: 2007 $85 LEAP OYX-AQ @ $10.40 2/06
Position: 2007 $85 LEAP OYX-AQ @ $7.70 on 2/13,
average cost $9.05
Cost reduction: Cost reduced by -3.60 on 3/8 to $5.45.
Cost increased: Cost increased by +3.95 on 4/6 to $9.40

Monday Mar-20TH cost reduction strategy:
Sell the June $85 call SU-FP @ $2.65, exit 4/6, $6.60, -3.95
Set a profit stop at $71.00
Set a stop loss at $83.50

Tuesday Feb-21st insurance strategy:
Sell the March $80 Call SU-CP @ $2.65, closed 3/8 .20, +2.45
Buy the March $70 Put SU-ON @ $0.85, closed 3/8 $2.00, +1.15
Set a stop loss on the call at $79.95.
Set a profit stop on the put at $65, changed to $70 2/26.
Set a profit stop on the call at $68, changed to $70 2/26.

CCJ - $40.65 - Cameco ** No stop **

Continued talk in the press about the uranium shortage is keeping the upward pressure on CCJ but the pause in oil prices last week produced a corresponding pause in CCJ. Earnings were scheduled for last week but were rescheduled for Monday. I don't believe expectations are quite as high as the oil stocks so hopefully we will not have a crash on Monday.

Earnings schedule: Changed to May 1st.

Original Play Description:

We were triggered on the breakout at $72.50 on Monday and again on the $67 breakdown target on Wednesday. Each trigger was for a 1/2 position giving us a full position with an average cost of $9.80 each. That turned out to be the closing price on Friday so if you missed either opportunity you did not miss anything. We are going to add another full position after CCJ splits on Feb-23rd.

This is my best single play in the list. Cameco just announced record earnings and raised their forecast for 2006 and beyond. They projected a +40% rise in revenue and a rise in margin from 23% to 28% for 2006. At the same time they announced a 2:1 split for Feb-23rd on the NYSE. They also raised the dividend to 32 cents from 24 cents payable on April 13th.

They also announced they were buying Zircatec for $108 million. Zircatec is a maker of nuclear fuel bundles for Canadian designed heavy water reactors. They said the acquisition would moderately boost 2006 earnings assuming no material changes in operations.

The combination of events including the purchase of Zircatec caused the stock to plunge from its all time high of $82.15 on Feb-1st to close at $69.97 on Friday Feb-3rd. That level remained support for the entire week through Feb-10th.

Company Info:

Cameco Corporation is engaged in exploring, developing, mining and milling uranium ore to produce uranium concentrates. The Company is also a commercial converter of uranium concentrates (U3O8) to UF6 (uranium hexafluoride), as well as a supplier of services to convert uranium concentrates to UO2 (uranium dioxide). Cameco, through its subsidiaries, has a 31.6% limited partnership interest in Bruce Power Limited Partnership, which operates six nuclear reactors in Ontario, Canada. Cameco also owns 53% of Centerra Gold Inc. (TSX: CG), a growth-oriented gold mining and exploration company engaged in the acquisition, exploration, development and operation of gold properties in Central Asia, the former Soviet Union and other emerging markets.

Pre-split entries:
Breakout target $72.50 hit
Position: 2007 $80 LEAP ZBK-AP 1/2 position @ $10.60 (2/06)

Breakdown target $67.00 hit
Position: 2007 $80 LEAP ZBK-AP 1/2 position @ $9.00 (2/08)

Pre-split average cost: $9.80
Post split position: (4) 2007 $40 LEAP ZBK-AH @ $4.90
Cost reduction: -.75 on 3/21, cost now $4.15

Additional Position: 2008 $40 LEAP LTA-AH @ $9.00 on 2/25.
Added after the 2:1 split on 2/24

Put insurance: None

Monday Mar-20TH cost reduction strategy:
Sell the June $40 call CCJ-FH @ $1.75
Set a profit stop at $33.50, hit 3/21, exit $1.00, +0.75
Set a stop loss at $39.95

HAL - $78.14 - Halliburton ** No Stop **

HAL retreated -$5 after reporting profits that rose +33%. This is simply a bout of profit taking. HAL said they were implementing a series of price hikes citing the very strong environment.

Support at $76 should hold any further weakness unless crude prices dip to below $68. We should begin to see some play on the split now just three weeks away.

Earnings: April 21st, 91 cents

Play description:

Halliburton is planning on spinning off KBR, its construction and engineering unit. This should produce a significant bounce in HAL stock. (KBR stands for Kellogg, Brown and Root) HAL is a very strong service company and should soar when it is no longer held in check by the sins of KBR.

2:1 Split to be approved at May 17th shareholder meeting.

Company Info:

Halliburton Company is an oilfield services company, and a provider of engineering and construction services. The Company provides services, products, maintenance, engineering and construction to energy, industrial and governmental customers. Its six business segments are Production Optimization, Fluid Systems, Drilling and Formation Evaluation, Digital and Consulting Solutions, collectively the Energy Services Group, and Government and Infrastructure, and Energy and Chemicals, collectively known as KBR. In August 2004, the Company sold its surface well testing and sub-sea test tree operations to Power Well Service Holdings, LLC. In January 2005, the Company emerged out of the chapter 11 proceedings and can operate the businesses without Bankruptcy Court supervision.

Current position: 2007 $80 LEAP Call VHW-AP @ 11.25

Original Position: 2007 $85 LEAP Call VHW-AQ @ $9.80
Monday March 20th: Position change
Sold the 2007 $85 LEAP VHW-AQ, exit $4.25.
Bought the 2007 $80 LEAP VHW-AP, entry $5.70.

Our adjusted cost in the 2007 $80 LEAPS is now $11.25
The strike is lower and will split into (2) $40 LEAPS @ $5.63

Insurance Put: None until after the split

Entry $79.00 (2/06)

KMG - $99.81 - Kerr Mcgee ** Stopped $98.00 **

KMG collapsed from $107 to nearly $97 on the sector weakness and tagged my raised stop at $98 to exit the play.

Earnings date: Changed to May 4th

Company Info:

Kerr-McGee Corporation (Kerr-McGee) is an energy and inorganic chemical holding company whose consolidated subsidiaries, joint ventures and other affiliates (together, affiliates) have operations throughout the world. The Company's core businesses include exploration and production, and chemicals. Kerr-McGee's oil and gas exploration and production areas are onshore in the United States, in the Gulf of Mexico, the United Kingdom sector of the North Sea and China. In addition, the Company has exploration programs in Alaska, Brazil, Morocco, Bahamas and Benin. Kerr-McGee affiliates engaged in chemical businesses produce and market inorganic industrial chemicals, lithium-metal-polymer batteries and heavy minerals. On June 25, 2004, the Company completed a merger with Westport Resources Corporation. On March 8, 2005, the Company annonced its decision to proceed with the proposal to pursue alternatives for the separation of the chemical business, including a spinoff or sale.


Position: 2007 $115 LEAP Call OGM-AC @ $9.00
Cost reduction: Cost reduced by -2.20 on 3/7 to $6.80
Cost increased: Cost increased by +1.00, 4/10 to $7.80, exit $5.10, 4/27 on stop loss at $98, -2.70

Monday Mar-20TH cost reduction strategy:
Sell the July $110 call KMG-GB @ $2.50, exit 4/10, 3.50, -1.00
Set a profit stop at $92.00
Set a stop loss at $108.50

Tuesday Feb-21st insurance strategy:
Sell the April $105 Call KMG-DA @ $3.00, closed 3/7, .80, +2.20
Buy the April $90 Put KMG-PR @ $1.25
Set a stop loss on the call at $104.95.
Set a profit stop on the call at $93.
Set a profit stop on the put at $85. Changed to $88.50, 3/26

Entry $107.00 (2/06)

UPL - $63.99 - Ultra Petroleum ** No Stop **

UPL declined from the highs at $68 to strong support at $62 before rebounding on Friday. The scheduled earnings on April 26th did not occur. There is no posted date that I can find. Had earnings already been released I was considering a new covered call but that could be sudden death for a pre earnings environment. I am comfortable holding the position with support at $62 ahead of the event.

Earnings date: Unknown

Original play description:

Ultra was one of the few that did not get hit on Monday. The breakdown target at $62 was our trigger on Tuesday but unfortunately it was followed by a -$7 drop on Thursday. They announced earnings on Tuesday that beat the street but they were hammered on Thursday after announcing they entered into a pipeline agreement with Rockies Express Pipeline (REP) for $70 million a year for ten years starting in 2007. REP is obligated to build pipelines to southwestern Wyoming and transport 200,000 MMBtu per day of gas to connecting hubs for Ultra.

Ultra's finding and development cost for 2005 was $0.56 per MCFe and reserve replacement was 773%, both the best in the industry. Ultra has 17 years of drilling planned with 160 wells planned for 2006 in Wyoming alone. They produced 73.4 Bcfe of gas in 2005 which suggests the 200,000 MMBtu capacity being contracted above is only a portion of their expected Wyoming production. With Wyoming gas selling for more than $8 per MMBtu in January that represents $1.6 million in gas production through the pipeline per day or roughly $584 million per year. I would gladly pay $70 million for pipes to carry $584 million of gas to market.

Ultra ended 2005 with no debt. Their profit per MCFe was $6.94 in Q4. Net profit increased +111% in 2005, ROE was 55%. Proved reserves in Wyoming at the end of 2005 were 2.022 TCFe of gas, a +32% increase over 2004. Proved and probable reserves were 6.29 TCFe. This represents better than a 2000% increase in reserve growth since 1999. Ultra has more than 2877 scheduled wells to drill in Wyoming over the next 17 years.

Company Info:

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.

Position: 2007 $70 LEAP Call OZH-AN @ $10.70
Cost reduction: Cost reduced by -3.00 on 3/7 to $7.70
Cost reduction: Cost reduced by -3.30 on 3/7 to $4.40
Cost increased: Cost increased by +.85 on 4/18 to $5.25

Monday Mar-20TH cost reduction strategy:
Sell the June $70 call UPL-FN @ $1.85, exit 2.70, 4/18, -85
Set a profit stop at $52.00
Set a stop loss at $70.50

Tuesday Feb-21st insurance strategy:
Sell the June $65 Call UPL-FM @ $4.30, closed 3/7 $1.30, +3.00
Buy the June $55 Put UPL-RK @ $4.30, closed 3/7 $7.30, +3.30
Set a stop loss on the call at $64.95.
Set a profit stop on the put at $50.
Set a profit stop on the call at $50.

Entry $62 (2/08)

VLO - $64.66 Valero ** No Stop **

VLO lost -$10.25 after announcing earnings due to profit taking and the Presidents attack on refinery profits and relaxed ethanol restrictions. Profits at VLO jumped +60% to record levels. The rebound was quick with several analysts urging buys on weakness. The outstanding results came despite ongoing maintenance and upgrades on half of their 18 refineries during the first quarter. This suggests Q2 is really going to be strong. Valero said Gulf coast gasoline and diesel margins were at record levels sue to strong demand and the price of light sweet crude.


Earnings date: April 25th, +60%

Company Info:

Valero Energy Corporation (Valero) owns and operates 18 refineries having a combined throughput capacity, including crude oil and other feedstocks, of approximately 3.3 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 gasoline, 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.

Position: 2007 $60 LEAP Call VHB-AL @ $6.60
1/30 Cost reduced by spread on put/call -0.90, now $5.70
2/06 Cost reduced by -1.00 on closed call, now $4.70
2/09 Cost reduced by -3.10 on closed $57 put, now $1.60
2/14 Cost increased by +0.15 on exited Mar-$45 put, now $1.75
4/11 Cost increased by +1.20 on CC stop loss, now $2.95

Monday Mar-20TH cost reduction strategy:
Sell the June $67.50 call ZPY-FR @ $1.25, exit 2.45, 4/11, -1.20
Set a profit stop at $53.75
Set a stop loss at $64.50

Monday Feb-13th
Set profit stop on March $45 put at $48 on VLO, exit $1.05 2/14
Insurance Put: March $45 Put VLO-OI @ $1.20
Put entered on 12/27 when VLO traded at $51

Monday Feb-6th:
Close the March $65 Call VLO-CM @ $1.50, +1.00
Set a profit target on the March $57 put at $54, exit $4.70 (2/9)

Monday Jan-30th:
Sell March $65 Call VLO-CM @ $2.50 bid
Buy March $57.50 Put VLO-OY @ $1.60 ask
Set a stop loss on the call at $64. Profit stop at $54
Set a profit stop on the put at $52.

Entry $52.30 (12/16)

CHK - $31.73 Chesapeake Energy ** No Stop **

CHK pulled back to strong support at the 200-day average ahead of Monday's earnings. This will be the test of the gas producers and likely a telling indicator for Ultra as well. After earnings we will try to reduce the cost once again.

Earnings date: May 1st

Prior commentary:
The CEO said on Wednesday (2/01) that CHK is more likely a buyer of other companies and assets than a target of a takeover itself. He said there were many potential targets smaller than Chesapeake and the drop in gas prices made them attractive. He said gas prices should remain in the $7.50-$10.50 range the rest of the year. He did not expect any major to make a big play like Conoco did when it purchased Burlington late last year for $35 billion. He also said CHK's $2.2 billion acquisition of Columbia Natural Resources was going better than planned and the opportunity appears to be bigger than originally thought. McClendon said CHK had actively hedged its output when prices were higher and were profiting from the swings in prices. He said the plunge in gas prices was "fantastic" because it made acquisitions cheaper, stemmed demand destruction and gave consumers a break on their utility bills. CHK also announced the private placement of $500 million in 6.5% notes due in 2017. The proceeds would be used to pay off bank debt. What a deal! Gas will be $30 by then and the $500 million plus interest will be chump change.

Company Info:

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.

Position: 2007 $35 LEAP VEC-AG @ $4.00
Cost increased: +55 cents on 1/30 covered call. Cost $4.55
Cost reduction: -40 cents on 2/21 covered call. Cost $4.15
Cost increased: Expired put insurance +2.30. Cost = $6.45

Insurance Put:
April $25 CHK-PE when CHK traded at $28 on 11/07 @ $2.30, expired

Covered Call 12/27:
Sold the April $35 Call CHK-DG currently $2.15
Set a stop loss on the call at $34.95, exit @ $2.70, -.55, 1/30

Tuesday Feb-21st cost reduction strategy:
Sell the April $32.50 Call CHK-DZ @ $1.40, stop 3/30, 1.00, +.40
Set a stop loss on the call at $32.50.
Set a profit stop on the call at $27, change to $28 on 2/26.

Entry $29 (11/04)

 

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