Energy Stock Trader: Monday Outlook

Includes: L, NBL, NFX
by: Steve Zachritz
Newfield Merger Watch: So far nothing. The Houston Chronicle ran a story over the weekend indicating some investors were speculating that Noble Energy Inc. (NYSE:NBL) would be the acquirer. Time will tell, but a one for one trade of shares would yield a neat, if not low, 20% premium based on Friday's prices. That's probably a bit convenient and doesn't fully reflect the value of Newfield Exploration Co.'s (NYSE:NFX) Rockies and Midcontinent growth potential. We took $50 and $55 calls as the situation heated up on Friday, and I'll be setting tight stops this morning. Note positions and performance are updated through Friday on my primary site.

Anadarko Keeps Paring Back: This time it is midstream assets on the block in the form of 6,000 miles of gas-gathering lines and processing plants located in Oklahoma and southern Kansas. Price tag: $1.85 billion. They'll be at their goal of $12 billion in debt well before the end of 2007 at this rate (down from $26B at 3Q06). Pre-market trading has them nudging over $50, and I may punt my August $50 call position today as I'm not that greedy.

Alaron commenting on the move higher in crude on Friday:

"The pipeline and refinery news today was definitely supportive. We can't afford to lose a drop of fuel," said Phil Flynn at Alaron Trading in Chicago. But Phil, we just found 3.3 million barrels of gasoline by virtue of the 1.3 mm barrel build in gasoline stocks relative to your 2 million barrel draw expectation. Can't you just be happy about that?!

Nigeria Watch: MEND asked for a 1 month ceasefire on Saturday, and then went on to kidnap half a dozen Russians and kill their driver plus four Schlumberger Ltd. (NYSE:SLB) workers. I wouldn't put a lot of faith in MEND's idea of a truce.

CNBC's Hurricane 2007 Watch Watch: Nothing to report. No storms crashed across Mexico from the Pacific, and tropical storm Barry may go down in the record books as the shortest lived "storm." Unless the reporters can find a way to turn a HIGH pressure system dominating the Gulf of Mexico into a hurricane, they should have nothing to talk about today.

CFTC Natural Gas Watch: The non-commercial net position took a dip towards the short side last week. Shorts remained virtually unchanged, but longs took profits, increasing the net position:

CFTC Numbers 04 06 2007

New Entrant To E&P Land: Loews Corp (LTR) buys 2.5 Tcfe of reserves from Dominion Resources Inc. (NYSE:D) for $4.025 billion in cash. The assets are in the Permian Basin and Black Warrior Basin, and the acquisition price would appear very reasonable. Until now, Loews had been known as insurance company and cigarette maker. They did have 44 drilling rigs, but this is the first step towards becoming an energy player. This is a pretty good step in that direction, and shouldn't do anything bad for the stock which has done nothing but go up.