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COP $88.13 -$3.71 - ConocoPhillips

It was a heck o a week to announce your production fell by 60,000 barrels per day. The drop was due to planned maintenance but income was boosted by higher crude prices. Conoco preannounced expected results for their earnings two weeks from now. Conoco's market price received for oil was up +$26 from the first quarter and nearly double the same period in 2007. COP actually said refining margins improved in Q2 and that was a surprise given the slaughter in the refining sector. COP repurchased $2.5 billion in shares in Q2.

Earnings are July 23rd

Breakdown trigger: $90

Position: 2010 $100 LEAP Call YRO-AT @ $11.70


TRN $31.33 -.57 - Trinity Industries

No news but support at $31 is holding. Stop is at $30.

Breakdown trigger: $35 Hit 6/26

Position: 2010 $40 LEAP Call YJS-AH @ $6.90 6/26


GDP $74.18 +.88 Goodrich Petroleum

Excellent two day rebound gaining +6 on Friday alone. Even more surprising GDP announced they were offering 3 million shares at $64 on Wednesday to close on Monday. Obviously the offering will be grossly oversubscribed. Proceeds will be used to payoff its senior revolving credit line. No changes.

Good article on Goodrich here

Prior commentary:

This company is rocking on its newfound fame. It quietly collected a huge acreage position in the Haynesville Shale natural gas field before it was widely known as a monster discovery. In late June Chesapeake agreed to pay Goodrich $178 million for a 50% ownership in a portion of the acreage. Chesapeake is planning on drilling 440 horizontal gas wells on the property. This is a monster win for Goodrich and it has been somewhat of a secret until recently.

Breakout trigger: $66 Hit 6/23

Position: 2010 $80 LEAP Call LP-AP @ $21.00


HK $47.90 +.98 Petrohawk Energy

Petrohawk released some production information on its wells in the Haynesville shale. They had a tested flow rate of 16.8 million cubic feet per day. This was double prior data from Penn Virginia (PVA) on similar wells in the area. The geology and well history is now projecting 30-40 trillion cubic feet in the Haynesville putting it on par with the Barnett Shale in Texas.

Prior commentary:

Chesapeake said it had sold 110,000 acres of its Haynesville Shale acreage to Plains Exploration for $25,600 an acre plus development concessions of $1.65 billion. This price tag on land means HK's current holdings are worth more than $7.4 billion in this play. HK only has a market cap of $9 billion meaning all the other assets are seriously undervalued. It may take several weeks for the news on HK to sink in but it should be going a lot higher even at its current valuation. Revenues are exploding.

Breakout trigger: $40.75 Hit 6/23

Position: DEC $50 Call HK-LJ @ $4.50


CHK $63.52 -3.26 Chesapeake Energy

CHK lost some ground this week after announcing a secondary offering priced at $57.25 per share on July 8th. This covered 25 million shares with an option for 3.75 million more. The offering will close on July 15th and proceeds will be used to payoff outstanding indebtedness under its revolving bank facility. That is a lot of shares and CHK dropped $6 on the news to $58. That ground was quickly recovered and the offering is expected to be fully subscribed.

There was an error on the option symbol in the portfolio graphic that an astute reader pointed out to me. The symbols have been corrected.

Previous commentary:

This is another stock that refuses to pull back but the news is too good to let it continue to run away from us. As I mentioned in the GDP lead CHK paid $178 million to Goodrich for a 50% working interest in some Haynesville Shale acreage. As I read further CHK said the Haynesville Shale could end up being the biggest asset they own and produce more gas than any other CHK property. That is a huge statement given CHK's massive footprint in places like the Barnett Shale in the DFW area. Encana (ECA) is the largest gas producer in North America and they said the Haynesville Shale could be the biggest deposit in North America.

Breakout trigger: $67 Hit 6/23

Position: 2010 $80 LEAP Call WZY-AP @ $8.60


ENER - $67.22 +3.16 Energy Conversion Devices

ENER caught a bid this week after an upgrade to BUY from Broadpoint Capital. No other news but ENER gained the most of any stock in the portfolio this week.

Breakout trigger: $68.50 hit 6/16

Position: 2010 $80 LEAP Call KYU-AP @ 23.10


BTU $76.85 -.77 - Peabody Energy

After the beating coal stocks took in the prior week anything approximating a gain would be appreciated. Unfortunately BTU did not respond as strongly as ANR but support at $72 held on two tests. Shipments of coal across the Midwest are still being delayed almost a month after the record-breaking floods. Parts of two rail lines owned by BNSF are still closed. UNP and NSC are back in service. How this will impact BTU earnings for the quarter is unknown.

Earnings July 23rd

Breakout target: $81 Hit 6/09

Position: 2010 $90 LEAP Call LLW-AR @ $19.92


PDE $42.59 -.75 Pride International *** STOPPED ***

Pride hit our stop at $42 on Monday and held at that level all week. I heard two analysts recommending it on Friday so it is still a buy even if it is no longer in the portfolio.

Position: Jan 2009 $50 Call PDE-AJ @ $3.70, exit $2.70

Stop @ $42 hit 7/07


CRR $53.79 -.48 - Carbo Ceramics

Good solid bounce from support after missing our stop at $50 by 4-cents. No complaints!

Breakout trigger: $48 Hit 5/12

Position: Dec $50 Call CRR-LJ @ $5.80


PBR $61.71 -4.01 Petrobras *** Stopped ***

Petrobras continued lower on news of the pending strike in Brazil next week. Our stop at $62 was triggered on Tuesday. Once the strike is over we will take another run at PBR.

Prior commentary:

Petrobras reportedly made another light oil discovery offshore in block BM-S-9. This is an ultra-deep field like the rest and reportedly it is a large discovery. The government officials continue to get in trouble for spilling confidential data before Petrobras does and that happened again last week. Petrobras said the Tupi field will be operational by 2010 with 100,000 bpd and will be producing 500,000 bpd by 2020. The first actual production test is set for Q1-2009. Lifting costs are expected to be $8.20 per barrel. Tupi reserves are expected to be between 5-8 billion barrels. They have only drilled two wells at Tupi and the first one took 14 months and $240 million. Now they are drilling wells in 2-3 months at $60-$80 million each. Petrobras is going out for bids on the construction of 28 new drilling rigs. They will be Brazilian made and delivered between 2013-2017.

Every dip is a buying opportunity.

Breakout trigger: $62.75 hit 4/28

Position: 2010 $150 LEAP Call YMO-AV @ $22.10, exit $24

Stop $62 hit 7/08


NE $58.91 -2.74 - Noble Corp *** Stopped ***

I believe this was just a bear market decline but NE had been dormant for several weeks. We will watch this for the next move higher.

Noble recently won a $4 billion contract to drill for Petrobras off the coast of Brazil. This is a monster payday and just one area of exploration for Noble.

Breakdown trigger $56.00 hit 4/29

Position: 2010 $70 LEAP Call YVJ-AN @ $8.10, exit $8.70

Stop $60 hit 7/08


NOV $83.12 -2.00 - National Oilwell Varco *** Stopped ***

No specific news but NOV declined to exactly our stop at $78 on Tuesday. We still escaped with a profit so no harm no foul.

Breakdown trigger: $67 Hit 4/30

Position: NOV $80 Call NOV-KP @ $5.40, exit 9.70

Stop $78 hit 7/08

Non-Energy Positions


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