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SLB $98.82 -0.69 - Schlumberger

SLB can't seem to find any traction with every other service company complaining about falling service revenues in Canada and the Gulf of Mexico. SLB has repeatedly said they are swamped with business around the globe and the gulf slowdown is not going to be material to them. Several recent sound bites have said things may be starting to look up in the gulf for Q4 now that hurricane season has passed. No specific news on SLB and resistance at $100 is still firm as is support at the 100-day average at $95.

Breakdown target: $95.00 hit Oct-22nd

Position: 2009 $100 LEAP Call VWY-AT @ $15.60


CVX $88.48 -3.17 - Chevron

Chevron declined back to near our entry after reporting dismal earnings that fell -26% on weakness in refining profits. With oil at $96 that should not be a problem today. Hopefully the bad news is now priced in and we can start moving higher again after the VLO earnings this week. No stop today.

Breakdown trigger: $87 hit Oct-22nd

Position: 2009 $100 LEAP Call VCH-AT @ $6.40


OII $72.82 -5.73 Oceaneering International

OII reported earnings that increased 40%, raised full year guidance and gave initial guidance for 2008, all higher. YTD earnings have already surpassed all of 2006. Pricing was up +15% and days on hire increased by 10%. Fleet utilization was 88%. Demand was continuing to rise and the company had only good things to say. The stock price was held down by poor results by others in the sector. Strong support at $70 and no change in the play.

Earnings Nov-1st: +40%

Breakdown trigger: $72 hit on Oct-22nd

Position: APR $80 Call OII-DP @ $5.40


W-H $55.77 -4.19 Energy Services ** Stop Loss $53 **

That was an ugly week for WHQ. The earnings misses by Exxon, Chevron and others muddied the sector and WHQ suffered. Since WHQ had already warned there was nothing to look forward to when they announced earnings on Tuesday. WHQ beat lowered expectations with $1.11 per share compared to $1.09 estimates by analysts. Earnings were helped by higher revenue in its drilling segment.

I added a stop just in case this decline becomes permanent.

Position: April $65 Call WHQ-DM @ $5.10


NOV $73.99 +1.49 - National Oilwell Varco

NOV moved sideways for the week after its earnings and considering the misses elsewhere in the sector sideways was some thing to cheer about. No specific news for NOV.

Breakout Trigger: $80, hit 10/11/07

Position: 2008 May $90 Call NON-ER @ $7.20


MDR - $60.52 +.18 McDermott International

MDR also moved sideways less than $2 from its historic high. No complaints here. MDR said it won a $400 million contract to supply steam generators for a coal fired plant in Illinois. Earnings are this Thursday. No other news.

Earnings schedule: Nov 8th

Breakout trigger: $53, hit 9/20

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


UPL $68.20 +0.81 - Ultra Petroleum *** Stop Loss $52 ***

Ultra reported stellar earnings despite some adversity in the sector and sales of a principal asset. Production in the U.S. increased +26% and that was after 12% of the U.S. production was shut in for the quarter. Gas prices in the Rockies were pushed significantly lower by a perfect storm of events not specific to Ultra but Ultra was able to increase margins to 33% and cash flow by 71%. They are on track to increase production by 27% for the year even with the shut ins. The Cheyenne Plains Pipeline had a fire at a major compression station and that took 450 mcf per day of transport capacity offline causing serious problems upstream and the inability to get gas to market. Still Ultra posted a strong quarter. UPL hit a new high on Thursday at $71 before profit taking hit on Friday.

Ultra Petroleum presentation

Breakdown target: $52.50 Hit 8/30

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


CHK $40.07 +1.26 Chesapeake Energy

CHK blasted off to a new high on Friday after reporting first gas sales from 11 wells on the DFW airport property. CHK said it started production of about 30 mmcf from the first 11 wells to be completed. CHK plans to drill 300-325 wells on the airport and produce up to 1 TCFe from the property. Development costs are said to be in the range of $2 per mcfe. CHK has drilled 33 wells so fat, is completing 18 and has 11 under production. They expect to produce 250 mmcfe per day by year-end 2011. Production is expected to continue for 50 years. Earnings are next Wednesday.

Earnings schedule: Nov 7th

Link to Enercom presentation

Position: 2010 $35 LEAP Call WZY-AG @ $6.60
10/28 Price update: Expired Oct Put +90 cents, $7.50

Insurance put:
Oct $30 Put CHK-VF @ 90 cents. Expired


HP $31.84 +1.19 Helmerich & Payne *** Stop Loss $27.50 ***

HP rebounded despite no news and has so far eluded our stop. The earnings date was announced for Nov-15th. We still have the insurance put so we are covered against any further declines.

Earnings scheduled for Nov-15th

Enercom presentation here

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

Insurance put:
Position: Nov $30 HP-WF. @ .50, Stop $28.50


HERO $27.85 +2.81 Hercules Offshore ** Stop Loss $24.00 **

HERO posted strong earnings that rose +63% despite weakness in the gulf. Revenue rose more than 300% due in part to the Todco acquisition. Analysts were surprised by the lower than expected costs and better than expected integration of the Todco assets. Day rates in the Gulf declined by 9% to $77,200 but HERO said there were signs of improvement heading into Q4. Maintain the stop at $24.

Earnings Oct-30th. +63%

Enercom presentation

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


BHP - $83.73 -2.43 BHP Billiton ** Stop Loss $60.00 **

BHP was all over the map last week and hit a new historic high twice on Monday and Wednesday. The volatility in the global markets is beating BHP like a rented mule but it never strays too far from the highs. BHP does not report quarterly earnings so no earnings risk here until February. No specific news.

Breakdown target: $55 hit 8/15/07

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


CCJ - $47.59 -2.98 Cameco ** No Stop **

Cameco posted profits that rose +25.4% and roared off to a new 3-month high. That high was short lived before a Russian company (TENEX) requested a renegotiation of their contract for uranium. Basically Tenex said uranium has gone up since we signed the supply agreement and we want more money. CCJ purchases about 7 million pounds of uranium from Tenex annually. That uranium comes from dismantled Russian nuclear weapons. The agreement ends in 2013. To date nearly 12,000 warheads have been dismantled. The 1999 agreement has been modified twice before so this is not unexpected but it did cause a sharp drop in CCJ stock on Thursday. CCJ saw a +2.37 rebound on Friday as the explanation hit the wires.

Earnings schedule: Oct-31st

Breakdown target: $35 Hit 8/16/07

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

Non-Energy Positions


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