Adjusting Targets, Part 2
I sent out an update last Wednesday night to lower some of the targets in light of the current inventory levels on oil and the lack of storms. The targets changed were as follows.
I lowered the breakdown targets on these watch list entries:
CEO $86.01 - Old target $85.00, new target $80
SUN $73.01 - Old target $70.00, new target $65
UPL $50.27 - Old target $47.50, new target $45
SLB $62.15 - Old target $60.00, new target $57
Targets left unchanged:
FST $33.50 - target $30
NBR $32.94 - target $30
PBR $89.50 - target $85
PXP $44.21 - target $41
SU $78.09 - target $70
XTO $46.18 - target $42
I mistakenly added a target for VLO and FTI and neither were on the watch list. They were on my personal list to be added but I had not yet put them in the mix. I am adding VLO this weekend and removing FTI from consideration.
I hesitate to add any new positions until we know what oil is going to do. We have 12 possibles and that should be enough for the time being.
Current Watch List
CEO - CNOOC Limited
CNOOC Limited is a producer of offshore crude oil and natural gas and an independent oil and gas exploration and production company. It mainly engages in oil and natural gas exploration, development, production and sales. The Company has four major oil production areas offshore China, which are Bohai Bay, Western South China Sea, Eastern South China Sea and East China Sea. It is an offshore oil producer in Indonesia. The Company also has certain upstream assets in regions, such as Africa and Australia. As of December 31, 2005, it owned net proved reserves of approximately 2.36 billion barrels-of-oil equivalent (BOE) and its annual average net production was 424,108 barrels-of-oil equivalent per day (BOEPD).
CEO does not have LEAPS. I am going to target $80 for an entry and use the March $90 Call for the trade.
This is a firm entry trigger
Breakdown target: $80
UPL - Ultra Petroleum
Ultra Petroleum Corp. (Ultra) 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 primarily in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. As of December 31, 2005, Ultra owned interests in approximately 148,007 gross acres in Wyoming covering approximately 230 square miles. The Company owns working interests in approximately 330 gross productive wells in this area and is operator of 53% of the 330 gross wells. Its domestic operations are focused on developing and expanding a tight gas sand project located in the Green River Basin in southwest Wyoming. During the year ended December 31, 2005, the Company's Wyoming production was approximately 87.4% of total oil and natural gas production on a thousand cubic feet of natural gas equivalent (MCFE) basis and 98.5% of the Company's estimated net proved reserves were in Wyoming on an MCFE basis.
Ultra has been extremely volatile for the last six months with the price of natural gas falling more than -50%. Ultra has current support at $50 but I would like to target something even lower if gas supplies hit a new storage record late in the summer. $45 would be my initial target based on recent information.
Breakdown target: $45.00 - This is a firm target.
SU - Suncor
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. During the year ended December 31, 2005, the Company produced approximately 206,100 barrels of oil equivalent (BOE) per day, comprised of 174,500 barrels per day (bpd) of crude oil and natural gas liquids and 190 million cubic feet per day (mmcf/d) of natural gas.
Suncor has performed better than the sector over the last month and appears to be holding above $75. I would normally like to target the 200-day average at that $75 range but June's low of $68 is slightly more appealing. I am going to shoot for $70 as a compromise.
Breakdown target: $70 - This is a firm target
SLB - Schlumberger
Schlumberger Limited (Schlumberger) is an oilfield services company, supplying technology, project management and information solutions. Schlumberger consists of two business segments: Schlumberger Oilfield Services and WesternGeco. Schlumberger Oilfield Services is an oilfield services company supplying a range of technology services and solutions to the international oil and gas industry. WesternGeco, 70% owned by Schlumberger and 30% owned by Baker Hughes, is an advanced surface seismic company.
SLB has decent support at $60 and again at $55. SLB said business was booming in its July earnings release and yet it still sold off. I am targeting $57 for an initial position based on the July dip. June's support at $55 should hold making $55 a secondary target.
Breakdown target: $57 - 1/2 position
PBR - Petroleo Brasileiro
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
Buy 2009 $100 LEAP Call VDW-AT
SUN - Sunoco
Sunoco, Inc. (Sunoco), operates through its subsidiaries, as a petroleum refiner and marketer, and chemicals manufacturer with interests in logistics and cokemaking. The Company's petroleum refining and marketing operations include the manufacturing and marketing of a range of petroleum products, including fuels, lubricants and petrochemicals. Sunoco's chemical operations include the manufacturing, distribution and marketing of commodity and intermediate petrochemicals. The petroleum refining and marketing, and chemicals and logistics operations are conducted principally in the eastern half of the United States. Sunoco's cokemaking operations are conducted in Virginia, Indiana and Ohio. The Company operates in five business segments: Refining and Supply, Retail Marketing, Chemicals, Logistics and Coke.
SUN has refused to die after that sprint to $80. There is plenty of congestion in the $60-$70 range and the best we can hope for is probably in the high $60s range so I am targeting $65 as the middle of that congestion.
Breakdown target: $65 - This is a firm target
PXP - Plains Exploration
Plains Exploration & Production Company (PXP) is an independent oil and gas company primarily engaged in the activities of acquiring, developing, exploiting, exploring and producing oil and gas properties in the United States. The Company owns oil and gas properties in six states with principal operations: the Los Angeles (LA) and San Joaquin Basins onshore California; the Santa Maria Basin offshore California; the Gulf Coast Basin onshore and offshore Louisiana, including the Gulf of Mexico, and the Val Verde portion of the greater Permian Basin in Texas. In April 2005, PXP acquired California producing oil and gas properties from a private company. In September 2005, the Company acquired Point Arguello Unit, Rocky Point development project and related facilities, offshore California, from subsidiaries of Chevron U.S.A. Inc. In May 2005, the Company closed the sale to XTO Energy, Inc. of interests in producing properties located in East Texas and Oklahoma.
Strong support for the current spike at $41 with additional support at $37. The recent news bounce is slipping and with any luck we could see $38 again. Options are relatively cheap and I am going to split the entry.
These are firm targets
FST - Forest Oil
Forest Oil Corporation (Forest) is an independent oil and gas company engaged in the acquisition, exploration, development, and production of natural gas and liquids primarily in North America. At December 31, 2005, Forest held interests in approximately 3,900 net oil and gas wells in the United States and Canada and sold 165.2 billion cubic feet of natural gas equivalent of oil and gas, or an average of 453 million cubic feet of natural gas equivalent per day during ther year ended December 31, 2005. Approximately 84% of the Company's total production was in the United States, and 16% was in Canada. In the United States, Forest's production of natural gas is generally sold in the areas where it is produced or at nearby pooling points. In Canada, the Company's natural gas production is sold by its subsidiary, Canadian Forest Oil Ltd., either through a joint venture with other producers, which is a long-term commitment, or under direct sales contracts or spot contracts.
Forest completed a major divestiture back in March of their offshore properties and made a major distribution to shareholders knocking -$20 off the stock price. Since early May the stock has been stuck in the $30-$35 range as investors digest their new onshore exploration focus. The change in direction appears to have confused many and the sharp drop in stock price probably confuses new investors. Their presentation at the energy conference made good sense to me and I think it was the right move. I am going to target a breakout and a breakdown.
These are firm targets:
NBR - Nabors Industries
Nabors Industries Ltd. (Nabors) is a land drilling contractor with almost 600 land drilling rigs. The Company conducts oil, gas and geothermal land drilling operations in the United States Lower 48 states, Alaska, Canada, South and Central America, the Middle East, the Far East and Africa. It is also one of the land well servicing and workover contractors in the United States and Canada. The Company owns approximately 565-land workover and well-servicing rigs in the United States, primarily in the Southwestern and Western United States, and approximately 215-land workover and well-servicing rigs in Canada. Nabors is a provider of offshore platform workover and drilling rigs, and owns 43 platform, 19 jack-up units and three barge rigs in the United States and multiple international markets.
Nabors said they are not seeing any weakness in rig pricing and have more than 100 new rigs on order. They said day rates were still climbing and the international and offshore business was strong enough to contract for terms long enough to recover 100% of the rig costs in most instances. With the strong emphasis on gas drilling rig backlogs for deep rigs were up to three years in some cases.
Support is $30 post reorganization and we could easily hit that on the next dip. I am willing to buy a cheap 2009 LEAP and forget it.
Breakdown target: $30 - This is a firm target
XTO - XTO Energy Inc
XTO Energy Inc. is engaged in the acquisition, development, exploitation and exploration of producing oil and gas properties, and in the production, processing, marketing and transportation of oil and natural gas in the United States. The Company's proved reserves are principally located in the Eastern Region, including the East Texas Basin and northwestern Louisiana; North Texas Region, including the Barnett Shale; San Juan Region; Permian and South Texas Region; Mid-Continent and Rocky Mountain Region, and Middle Ground Shoal Field of Alaska's Cook Inlet. As of December 31, 2005, its estimated proved reserves were 6.09 trillion cubic feet (Tcf) of natural gas, 47.4 million barrels (Bbls) of natural gas liquids and 208.7 million Bbls of oil. During the year ended December 31, 2005, the Company's average daily production was 1,033,143 thousand cubic feet (Mcf) of gas, 10,445 Bbls of natural gas liquids and 39,051 Bbls of oil. In April 2005, it acquired Antero Resources Corporation.
XTO was a presenter at the recent energy conference and I was impressed with their outlook and direction. I believe their stock is under priced already but with the impending drop in gas prices as storage fills up I am hoping to buy them cheaper. Link to presentation: http://tinyurl.com/qorbr
Breakdown target: $42 - This is a firm target
VLO - Valero
Valero Energy Corporation (Valero) owns and operates 18 refineries located in the United States, Canada and Aruba that produce 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). The Company also produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants and other refined products. Its business is organized into two segments: refining and retail. The refining segment includes refining operations, wholesale marketing, product supply and distribution, and transportation operations. The retail segment is segregated into two geographic regions: the U.S. System and the Northeast System. On September 1, 2005, Valero completed the merger of Premcor Inc. with and into Valero Energy Corporation.
I initially targeted VLO at $55 but after research this weekend I am lowering it to $50.
Breakdown target: $50
Buy 2009 $60 LEAP Call VHB-AL