· Energy was mostly in line with the tape despite a $6 drop in crude on the week.
· Integrateds were off around 5-6%, sliding on weakness in crude. Despite the weakness in integrateds, BP was up over 8% and had its first positive week since the Gulf spill occurred.
· Reasons for BP strength included below:
1. There continues to be talk that BP is ripe for a takeover given its $100B drop in market value since April 22. In addition, JP Morgan's Fred Lucas highlighted the possibility of a takeover in a note early Tuesday morning, saying the company could be worth 473 pence a share to a potential buyer (BP was trading at 331 pence last night).
2. There is talk that BP’s two relief wells could be ready much sooner than expected, although BP said they are planning on sticking to their August schedule as they would rather underpromise and overdeliver. Reuters
3. The company has also approached banks w/ a goal to raise up to $10B in a private placement in debt and lines of credit. Fox Business
4. There are also reports that APC will be held culpable for its quarter share of the spill liability. Reuters
· Services and drillers were off fairly sharply on continued regulatory risk. The group rallied a bit with BP’s positive news, but still lagged the tape as investors await the new moratorium from the Obama administration. Bucking the trend in drillers was NE, which jumped over 10% after acquiring Frontier Drilling and receiving a lot of positive sell-side comments regarding the deal.
· Refiners were off close to 10%, weighing heavily on the group due to another poor weak for crac k spreads.
· E&Ps were down fairly sharply, and coals even more, as a 2-3% drop in natural gas and general market weakness weighed heavily on the space.
· Shipping/tankers continued to underperform as the Baltic Dry Index fell every day this week, now marking 26 straight days of declines.
· Solars were mostly lower on general market weakness, although we saw a few bright spots in the space thanks to some reduced worries out of Europe, their largest market.
Disclousure- I am short BP common stock, Long July Puts
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Disclosure: Short BP common stock and long puts