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New Watch List Entries

NXY - Nexen

MDR - McDermott Intl

Current Watch List

XLE - S&P Energy SPDR

Company Info:

The S&P Energy sector SPDR represents about 13% of the S&P-500. Energy companies in this Index primarily develop and produce crude oil and natural gas, and provide drilling and other energy-related services. Leaders in the group include ExxonMobil Corp., Chevron Corp, and ConocoPhillips.

Breakdown trigger: $44 *** New Trigger ***

BUY 2010 $50 LEAP Call WHA-AX

NXY - Nexen

Nexen is a very well run exploration and production company and was recently rumored to be a takeover target of Total SA (TOT). That $19.7 billion bid never occurred and NXY dropped back to support last week. I believe that Total and others are waiting to see if oil prices fall further before making any bids. If oil prices drop they can buy assets cheaper. If oil prices rise their stock is worth more as a currency.

On Tuesday the 9th Nexen announced its budget for 2009 and expects more than $1 billion in free cash flow to add to their current $1.8 billion cash balance and use for share buybacks. They expect to spend $2.6 billion on oil and gas projects in 2009. They have another $2 billion in fully committed, undrawn credit.

This is a small but strong company with great prospects.

Company Info:

Nexen Inc. (Nexen) is an independent, Canadian-based, global energy company. Nexen operates in four segments: oil and gas, Syncrude, energy marketing and chemicals. The Company owns 7.23% of the Syncrude Joint Venture, which develops and produces synthetic crude oil from mining bitumen in the oil sands in northern Alberta. Energy marketing includes its crude oil, natural gas, natural gas liquids, ethanol and power marketing business in North America, Europe and Asia. Chemicals includes operations in North America and Brazil that manufacture, market and distribute sodium chlorate, caustic soda and chlorine through the Canexus Limited Partnership.

Breakdown trigger: $15

BUY 2010 $17.50 LEAP Call KJA-AW

Breakout trigger: $19.50
(Do not buy on any deal announcement)

BUY 2010 $22.50 LEAP Call KJA-AX

MDR - McDermott Intl

McDermott is a major infrastructure company with an emphasis in oil and gas. They have a huge backlog despite oil prices in the 40s. They are diversified into several segments and would fit well in an Obama infrastructure package. They have fallen from $70 to $6 and appear to have found a bottom.

Company Info:

McDermott International, Inc. is an engineering and construction company with specialty manufacturing and service capabilities and is the parent company of the McDermott group of companies, including J. Ray McDermott, S.A. (JRMSA) and The Babcock & Wilcox Company (B&W). The Company operates in three business segments: Offshore Oil and Gas Construction, Government Operations and Power Generation Systems. On July 27, 2007, the Company acquired Secunda International Limited. On May 1, 2007, it acquired Marine Mechanical Corporation.

Breakdown trigger: $7.50

BUY 2010 $10 LEAP Call YAE-AY

Breakout trigger: $10.50

BUY 2010 $12.50 LEAP Call YAE-AV

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