PBR - $79.25 - Petroleo Brasileiro
Petrobras continued its decline from the prior week on its dispute with Bolivia but it appears they are winning. The Bolivian government suspended the measure that would have given Bolivia almost total control of the extraction and refining of Bolivian gas and oil. After a heated meeting with the Brazilian energy minister the Brazilian owned Petrobras was exempted from the controls at least temporarily. Petrobras refines 90% of the fuel used in Bolivia and is the biggest investor in Bolivia energy. Talks have been rescheduled for Oct 9th, eight days after the Brazilian elections. Petrobras has invested $1.5 billion in Bolivia since the mid 1990s and Bolivia is trying to nationalize their investment. The day after the suspension was announced the Bolivian Energy Minister quit in protest.
I believe this will work out where Brazil gets significant concessions but Petrobras will lose majority control in Bolivia thanks to the influence of Hugo Chavez on Evo Morales. Petrobras could walk away from the entire country and survive but they do receive significant cash flow from operations in Bolivia.
Continue to hold the Jan-$70 insurance put with no stop.
Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a mixed-capital enterprise of which a majority of voting capital must be 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 and distribution. The Company operates 95 platforms for production (72 fixed and 23 floating), 16 refineries, 30.318 kilometers of pipeline and 6,154 filling stations spread across the national territory. In addition, to its position in Brazil, Petrobras is present in 15 countries, such as Angola, Argentina, Bolivia, Chile, Colombia, Ecuador, the United States, Iran, Mexico, Nigeria, Paraguay, Peru, Tanzania, Uruguay and Venezuela. It also operates backup support of offices in New York, Tokyo, China and Singapore.
Petrobras has decent support at $85 and again at $80. I would like to see $80 again but we will monitor any drop for a hint of rebound. Try not to catch the knife.
Breakdown target: $85 hit 9/08
DO - $70.84 - Diamond Offshore
Diamond gave back its gains on the Gulf of Mexico discovery news but continues to hold just over support at $70.
Maintain a $60 profit stop on the October $70 insurance put.
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's 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 private and independent oil and gas companies and government-owned oil companies.
Breakdown target triggered @ $70 (8/29)
CSX - $31.63 - CSX Corp
CSX rallied for the week well over prior congestion. No complaints here but the transports in general are still under pressure despite $63 oil.
Maintain a $25 profit stop on the Nov-$30 insurance put.
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.
Position: 2009 $35 LEAP Call OBC-AG @ $4.90
WLT - $48.70 - Walter Industries
Walter got whacked for a -$3 loss after Intercontinental Coal (ICO) issued a profit warning. It was strictly an ICO problem with a mine closing but coal stocks in general were slaughtered. Live by the sector news, die by the sector news even if your coal is not used for generating electricity. Walter has two presentations at investor conferences in the coming week so hopefully things will improve.
Maintain a profit stop on the Dec $45 insurance put at $40.
Walter Industries, Inc. (Walter) is a diversified company with seven operating segments: Mueller, Anvil, Industrial Products, Natural Resources, Homebuilding, Financing and Other. The Company's seven segments are further grouped into Water Products, Natural Resources, Homebuilding and Financing, and Other. The Water Products group, which consists of Mueller, Anvil and Industrial Products segments, manufactures water infrastructure and flow control products. The Natural Resources segment consists of coal mining and methane gas operations. Walter markets and supervises the construction of detached, single-family residential homes, primarily in the southern United States, through the Homebuilding segment. The Financing segment provides mortgage financing on such homes and purchases mortgages originated by others. The Other segment includes the manufacturing of foundry and furnace coke, slag fiber and specialty chemicals, as well as the Company's land division.
Breakout target: $52 triggered 8/23
ATPG - $37.23 - ATP Oil and Gas Corp ** No Stop **
ATP continues to be a relative winner in the sector with only a -1.50 drop for the week. It is holding in a narrow range above support at $35 where we have an insurance put. No risk here.
Insurance put: No stop on the put.
ATP is getting plenty of airtime. Cramer had an on-air interview with the CFO of ATP. You can watch the video here after a brief commercial interlude. Definitely a compelling case to buy ATP. http://tinyurl.com/nm3rw
Entry $38.16 (8/20)
MDR - $41.90 - McDermott ** Stop loss $38 **
Dang! MDR hit an air pocket and lost -$6 for the week to return to support at $42. Fortunately we had a September $45 put which we closed on Wednesday for $2.80 for a double. This covered the cost of the new October put we added on Monday for $1.40. Unfortunately the LEAP also lost ground but we broke even on the deal thinks to the September put.
Maintain a profit stop on the Oct-$45 put at $38.
J. Ray McDermott is a leading provider of engineering, procurement, construction, and installation services for offshore oil and gas field developments worldwide. McDermott International, Inc. is a leading worldwide energy services company. McDermott's subsidiaries provide engineering, construction, installation, procurement, research, manufacturing, environmental systems, project management and facility management services to a variety of customers in the energy and power industries, including the U.S. Department of Energy.
3:2 split on June 1st reduced the strike price by 1/3 and increased the contract size to 150 shares.
Position 2008 $75 LEAP Call YAE-AO @ $12.50
Position: June $60 Put MDR-RL @ $1.25 (5/22)
PTR - $107.30 - Petrochina ** No Stop **
PTR broke even for the week despite the drop in oil prices. This stock is stronger than XOM today and I am very happy with its performance in the face of imploding oil. China also asked the US to joint venture with them in developing new oil fields. Will wonders never cease?
We were stopped on the September $110 put at $106 and $5.00 for a profit of $2.60. We added a December $100 put last week and that cost is now covered.
Maintain a profit stop on the Dec insurance put at $90
Earnings schedule: August 24th, $10.1 billion, +29%
Petrochina is the fourth largest energy company in the world. It is a government monopoly but it acts like an independent. PTR is aggressively acquiring leases and rapidly expanding its drilling program. It currently has over 10.9 billion bbls of proven reserves and more than 44 TCF of gas. Warren Buffet owns $2.3 billion of PTR stock. It trades at less than $12 per BOE and has a 3.5% dividend yield. PTR owns 14,000 service stations and has 2,900 franchised stations. It is majority owned by China and has unlimited capital for expansion if China likes the deal. I expect several acquisitions by PTR over the next couple years but with a $208 billion market cap and China as the owner it will not be a target itself. China would never give up control of those oil assets. PTR saw its output rise +6.3% in Q1 to 267.7 million bbls when most companies were posting declines in reserves and production. Gas output rose +35.6%. PTR owns 75% of the oil and gas reserves in China and supplies 40% of its needs. This is as close to a permanent lock on a profit as we can get given the rapid growth of China's economy.
Cramer has been pounding the table on PTR saying it was not afraid to drill in communist countries, places torn apart by strife or run by two-bit dictators like Chavez or Morales. With the Chinese government and military behind it there is little chance of somebody trying to confiscate PTR assets.
PetroChina Company Limited operates a range of petroleum and related activities through four primary business segments: Exploration and Production Segment, Refining and Marketing Segment, Chemicals and Marketing Segment, and Natural Gas and Pipeline Segment. 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.
Position: 2008 $120 LEAP Call LJC-AD @ $16.20
Insurance put: (9/11)
Insurance put: (8/13)
Insurance combo: Closed
Insurance puts: (Closed 6/7)
Entry 5/14 $116.20
CCJ - $38.49 - Cameco ** No stop **
CCJ gave back some of its gains but remain in its recent range. The spike from the prior week faded but there is new talk of another wave of nuclear plants. We will continue to hold although it is very boring. Gold is a buy product of uranium mining and the price of gold was probably the destructive force on CCJ last week.
Current recommendation: Buy @ $35
Earnings: July 27th, +138%
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.
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.
Position: 2008 $40 LEAP LTA-AH @ $9.00 on 2/25.
No insurance put