EARLY READ ON OIL INVENTORIES THIS WEEK: (from the Dow Jones survey)
- Crude -- down 1.2 million barrels. Starting to fall from elevated levels now that the refineries are coming back to life.
- Gasoline -- up 200,000 barrels. This would be the first increase in 11 weeks, and comes right on time (historically) for inventories to build. I'm looking for a small bump in refinery capacity utilization, but the real wildcards are demand and imports.
- Distillate -- up 400,000 barrels.
Nigeria Watch: From Reuters: Nigeria's ruling party's candidate Umaru Yar' Adua was declared the winner of the presidential poll, but observers and opposition groups said the result was manipulated through violence and rigging. June crude surged $1.78 to $65.89 yesterday on the back of supply disruption worries here yesterday. Gasoline jumped another nickel as well.
Natural gas rallied with everything else. I'm not touching E&P big cap shorts right now given the Pioneer Natural Resources Company (PXD) Master Limited Partnership [MLP] news yesterday. It may become commonplace to take a resources play, like a basin that has long reserve life, but it is pretty drilled up, and be able to package it and sell it to the market place with a 5% to 7% yield on it as an MLP. In that case then Anadarko Petroleum Corp. (APC), Chesapeake Energy Corp. (CHK), Devon Energy Corp. (DVN), EOG Resources Inc. EOG Resources Inc. (EOG), Quicksilver Resources Inc. (KWK) and even ConocoPhillips (COP) can/will do just that, thereby unlocking a pretty hefty chunk of value, and people are going to start bidding these stocks up in anticipation. Some of the MLPs are already in the works, and even announced -- others are many months away.
Odds & Ends
Regional crack spreads are leveling off. Once Nigeria cools off and utilization (and domestic production of gasoline) continues to rise, I think crack spreads will start to roll over a bit.
Analyst Watch: ExxonMobil Corp. (XOM) buy to hold at AG Edwards -- (that's the second chop in 2 days). Grant Prideco Inc. (GRP) got at least two price target upgrades after speaking at IPAA yesterday.
Petrohawk Energy Corp. (HK):
- Was planning production growth of 10-15% in 2007 -- upped that this morning to 13-16%.
- 1Q07 to exceed top end of production guidance.
- Falling cost structure.
- Are way below NAV; like maybe 30 to 40% below.
- Have a very good hedge position (costless collars) >70% of production at >$7 gas and $63 oil floors with lots high ceilings.
- This morning HK raised it's capital budget.
- Thursday is the company's annual analyst conference.
They speak at IPAA this morning, and I bought an opening position in the June $12.50 calls for $2.30 yesterday. If you're interested in an option play on this name, check with Phil at Phil's Stock World.