Gasoline inventories continue to fall as the domestic refining industry continues to have difficulties getting its act together in the wake of spring maintenance season. Utilization took an unexpected dip which more than offset a slight build in imports.
The EIA's report of a sizable draw in gasoline stocks (2.7 million barrels) where a small build was expected drove the energy equity markets into a buying frenzy at precisely 10:30:01 Eastern time -- and they never looked back.
First the refiners, then everyone else (even ConocoPhillips (NYSE:COP) with their miss yesterday morning) responded with "don't look back" type buying on strong but not massive volume. The XOI and XNG charts have broken out into uncharted territory, while the Oil Service HOLDRs ETF (NYSEARCA:OIH) is threatening to, and the ZBWI is, technically speaking, going ballistic (as I yell "talk to me Goose" to my remaining refining puts).
Around here we made several changes in the portfolio. We dumped our ill-fated and far-out-of-the-money sub-$100 strike Tesoro Corp. (NYSE:TSO) puts for bus fare and traded a little Valero Energy Corp. (NYSE:VLO) call position to a 29% gain on the day. I took the last of the Teekay Shipping Corp. (NYSE:TK) calls off the table for a 170% gain in 12 days, and doubled down on my position in Endeavor International Corp. (NYSE:END) which is still getting little to no respect. The performance page is updated with the latest victories and defeats for all to see.
Natural gas continues to stand firm in the upper $7s. I'm still waiting on a little weakness to set in, however the gassier E&Ps are leaving the station along with everything else in the energy sector rally.
I expect a slight NG build today, ~5 Bcf. This won't do much for the bear case as the year-ago week saw a much larger build of 80 Bcf on balmier, more spring-like weather.
Snafu Watch: Repair shutters Exxon's (NYSE:XOM) Beaumont cat cracker for 2 to 3 days (225,000 bpd of gasoline production offline); BP plc's (NYSE:BP) Toledo refinery, 160,000 bpd offline for an indeterminate period; a portion of Sinclair's 70,000 bpd Tulsa refinery down for a unit. Finally, BP announced it had cut production from Prudhoe Bay by some 90,000 bopd (out of a possible 400,000) after a power outage
Evergreen Energy (EEE) Watch (aka KFX): CEO Mark Sexton "departed" last night. CFO Kevin Collins takes the reigns. Both of these guys were excellent at the real Evergreen Resources. Mark was the visionary who took EVG from nothing to the first major CBM pure play in the Rockies and finally sold it for a pretty penny to Pioneer Natural Resources Company (NYSE:PXD). In my way of thinking this is a major blow to KFX (EEE), no offense meant to Kevin who is an excellent numbers guy. In the press release the company said:
"The Board acted decisively to bring a fresh approach at the top that would best accelerate Evergreen's strategy of optimizing operations at our Wyoming coal refinery, signing definitive agreements for K-Direct plants, obtaining financing agreements and beginning construction of those plants."
So it sounds like they haven't done any of that yet. Earnings are due out later today and I want to know a few things: 1) Are they continuously producing K-Fuel? 2) Have they signed any contracts to build a K-direct plant (if not, how soon)? 3) Financing agreements. 4) What happened with Mr. Collins. If he ever runs an E&P again I'd be in early.
ZEB Stocks of Interest: Performance in the small and mid cap names I've highlighted (snapshots) or done longer reports on since I added company specific reports at the behest of a friend back in February. See all the ZEB Reports to date.
Alaron Watch Day #7: Three days left and I'm getting a little nervous. Flynn made good on one of his two 10-day forecasts ($4 gasoline somewhere and $68 oil) as I heard a rumor that gas topped $4 at a station in San Francisco. The $68 claim ($73 if you want to go with the CNBC headline that fronted the story) may be just too tough a nut to crack this week though. The Brent to WTI relationship, which was the premise for the higher oil call has not reversed however. These are smart guys, no doubt, but they're always, always, always bullish so I kid them a bit. What about the barrels coming back from OPEC? What about the rising production in Nigeria? They're long oil, so they go on TV, much like T Boone, and say it's going up whenever CNBC offers them the chance (or do I have that relationship backwards). I don't fault them for that. CNBC however should take a journalism course: too many softballs guys.