SandRidge Mississippian Trust II Announces Pricing of Initial Public Offering at The Top End of Price Range

SandRidge Mississippian Trust II (the Trust) announced today that it has priced its initial public offering of 26,000,000 common units at a price per common unit of $21.00, which represents the top end of the expected price range of $19.00 to $21.00. The 26,000,000 common units being sold in the offering represent a 52% beneficial interest in the Trust. The underwriters have 30 days to exercise an option to purchase an additional 3,900,000 common units from the Trust to cover over allotments, if any. 

Following completion of the offering, SandRidge Energy, Inc. (NYSE: SD) as sponsor of the Trust, will own approximately 11.3 million common units, assuming no exercise of the underwriters' option, and approximately 12.4 million subordinated units convertible into common units, and the Trust will have a total of 49,725,000 trust units outstanding. The common units have been approved for listing on the New York Stock Exchange, and will trade under the symbol "SDR." The offering, which is subject to customary closing conditions, is expected to close on or about April 23, 2012.

The Trust will own royalty interests conveyed to it by SandRidge that will entitle the Trust to a percentage of the proceeds received by SandRidge from the production of hydrocarbons from currently producing wells and development wells to be drilled by SandRidge on approximately 53,000 net acres in the Mississippian formation in northern Oklahoma and southern Kansas.

Visit the SandRidge Investors page for a list of sponsors and more info.

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EXCO Resources to Release 1st Quarter 2012 Results

COT holding EXCO Resources [NYSE: XCO] will be releasing first quarter 2012 results on Tuesday, May 1, 2012, after market close. EXCO will host a conference call on Wednesday, May 2, 2012, at 10:00 a.m. (Dallas time) to discuss the contents of this release and respond to questions.

 Please call (800) 309-5788 if you wish to participate, and ask for the EXCO conference call ID# 70531704. The conference call will also be webcast on EXCO’s website at www.excoresources.com under the Investor Relations tab. Presentation materials related to this release will be posted on EXCO’s website on Tuesday, May 1, 2012, after market close.

 EXCO Resources, Inc. is an oil and natural gas exploration, exploitation, development and production company headquartered in Dallas, Texas with principal operations in East Texas, North Louisiana, Appalachia and West Texas.

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Chevron Announces Webcast on 1st Quarter Earnings

Chevron’s discussion of first quarter 2012 earnings with security analysts will take place on Friday, April 27, 2012, at 8:00 a.m. PST. A webcast of the meeting will be available in a listen only mode to individual investors, media, and other interested parties on Chevron’s website at www.chevron.com under the “Investors” section.

Additional financial and operating information will be contained in the Earnings Supplement that will be available under “Events & Presentations” in the “Investors” section on the website.

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Crude Oil Remains Locked in March's Down Trending Channel

Crude oil [May contract] closed lower on Thursday, as it remains locked in March's down trending channel. The mid-range close sets the stage for a steady opening on Friday. Stochastics and the RSI remain bullish signaling that a low might be in or is near. 


Closes above the 20 day moving average crossing at 103.83 are needed to confirm that a short term low has been posted. If May renews the decline off March's high, the 38% retracement level of the October-March rally crossing at 97.84 is the next downside target. 


First resistance is the 20 day moving average crossing near 103.83. Second resistance is the reaction high crossing at 105.49. First support is last Tuesday's low crossing at 100.68. Second support is the 38% retracement level of the October-March rally crossing at 97.84.

Schlumberger Declares Quarterly Dividend

The Board of Directors of Schlumberger Limited (NYSE:SLB) today declared a quarterly dividend of $0.275 per share of outstanding common stock. The dividend is payable on July 13, 2012 to stockholders of record at the close of business on June 1, 2012.

Webcast - Live Q1 2012 Schlumberger Earnings Conference Call 04/20/12 at 9:00 a.m. ET Click here for webcast

Halliburton 1st Quarter Earnings Soar by a Whopping 23%

Halliburton (HAL) announced today that income from continuing operations for the first quarter of 2012 was $826 million, or $0.89 per diluted share, excluding $300 million ($191 million, after-tax, or $0.20 per diluted share), for an estimated loss contingency related to the Macondo well incident. Income from continuing operations for the first quarter of 2011 was $558 million, or $0.61 per diluted share, excluding a charge of $46 million, aftertax, or $0.05 per diluted share, related primarily to reserving certain assets as a result of political sanctions in Libya.

Reported income from continuing operations for the first quarter of 2012 was $635 million, or $0.69 per diluted share, compared to $512 million, or $0.56 per diluted share, for the first quarter of 2011. Reported net income attributable to company for the first quarter of 2012 was $627 million, or $0.68 per diluted share, compared to $511 million, or $0.56 per diluted share for the first quarter of 2011.....Read the entire First Quarter Earnings Announcement.

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Crude Oil Closes Lower on Unexpected Inventory Build

Crude oil [May contract] closed lower on Wednesday following today's stocks report that showed crude oil supplies increased more than expected. The low range close sets the stage for a steady to lower opening on Thursday.

Stochastics and the RSI remain bullish signaling that a low might be in or is near. Closes above the 20 day moving average crossing at 104.07 are needed to confirm that a short term low has been posted. If May renews the decline off March's high, the 38% retracement level of the October-March rally crossing at 97.84 is the next downside target.

First resistance is the 20 day moving average crossing near 104.07. Second resistance is the reaction high crossing at 105.49. First support is last Tuesday's low crossing at 100.68. Second support is the 38% retracement level of the October-March rally crossing at 97.84.

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Natural gas [May contract] closed lower on Wednesday as it extended the multi year decline. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If May extends the multi year decline, monthly support crossing at 1.620 is the next downside target. Closes above the 20 day moving average crossing at 2.147 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 2.023. Second resistance is the 20 day moving average crossing at 2.147. First support is today's low crossing at 1.940. Second support is monthly support crossing at 1.620.

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Gold closed lower [June contract] on Wednesday extending the decline off last week's high. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are bearish signaling sideways to lower prices are possible near term.

If June extends the decline off February's high, the 75% retracement level of the December-February rally crossing at 1595.00 is the next downside target. Closes above the reaction high crossing at 1685.40 are needed to confirm that a short term low has been posted.

First resistance is the reaction high crossing at 1685.40. Second resistance is the reaction high crossing at 1699.60. First support is this month's low crossing at 1613.00. Second support is the 75% retracement level of the December-February rally crossing at 1595.00.

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Williston Basin Crude Oil Production and Takeaway Capacity are Increasing

Crude oil production from the Williston Basin (primarily the Bakken formation) recently increased to more than 600 thousand barrels per day (bbl/d), according to Bentek Energy, LLC (Bentek), testing the ability of the transportation system, oil pipelines, truck deliveries, and rail to move crude oil out of the area (see chart below). The current price gap between Bakken crude oil and West Texas Intermediate (WTI) shows the effects of this constraint. Bentek projects more transportation capacity coming online in 2012, potentially alleviating this constraint.




 Due to pipeline capacity constraints, Williston Basin producers rely on rail and trucks to move additional crude oil out of the region. Because of these transportation constraints, Bakken crude oil currently sells at a discount of $7.50 per barrel to WTI. This discount was as much as $28 per barrel in February 2012 and is expected to continue as long as transportation constraints persist.

Currently, North Dakota has only one refinery, which processes about 58 thousand bbl/d of crude oil. Crude oil is delivered to other markets using a combination of pipeline, rail, and truck. Delivery capability as of April 2012 was: 450 thousand bbl/d by oil pipeline; 150 thousand bbl/d by rail; and small volumes by truck. However, in 2012, incremental additions to rail and oil pipeline capacity for the Williston Basin could total 350 thousand bbl/d.

Which Bakken picks should you trade? Here is a preview of our MarketClub Trade Triangle Chart Analysis and Smart Scan technology that will help you get in and out of those trades.

Another Oil Price Shock, Another Global Recession?

Brent crude ended trading above $120 a barrel on Friday, April 13, while WTI crude on NYMEX for May delivery settled at $102.83 a barrel.  Oil has traded above $100 for all but a couple of days in the past year (see chart below).  This persistent high oil price has many concerned to start threatening a nascent recovery of the global economy.

Studies show that historically, around 90% of US recessions post World War II were preceded by oil price shocks.  The most recent occurrence took place when oil more than doubled in price from January 2007 to July 2008 due to a sharp increase in Chinese demand.  The pullback of US consumer and corporate spending already put a drag on economic growth before the subprime induced financial crisis closed the deal on the Great Recession.

Analysts generally see the $120-130 level as a price that would prompt consumer and corporate to cut back on spending sharply, and hurt the recovery and growth of key economic sectors. A recent Reuters survey of 20 equity strategists put $125 a barrel as the point economy and stock markets could start to suffer.

The most recent study on the link between oil price and economic recession came from energy industry consultancy Wood Mackenzie (WoodMac) published earlier this month.  The chart below from WoodMac illustrates "the mechanism" of how an oil price shock would derail the global economy. 

According to WoodMac's model,

".... the US will fall into recession within 12 months if WTI increases to $130 per barrel and the price remains elevated. If WTI reaches $150 per barrel and remains elevated, recession will be more pronounced with US GDP estimated to contract 0.4% in 2013."

U.S. domestic petroleum products are priced off of Brent since WTI has become a less relevant oil price marker due to the inventory glut at pipeline capacity challenged Cushing, OK depressing the WTI price.  So using the current spread between WTI and Brent of around $15-$20, WTI $130 would suggest Brent at about $150 range.  Brent futures already hit $128.40 a barrel, the highest since 2008, in early March, but has since given back some of the gains.. 

However, the difference between now and 2008 is that when oil spiked to almost $150 in 2008, there was a strong demand from China and a real shortage of supply, whereas the current world oil market is a lot more balanced than the current Brent oil price suggests.

IEA (International Energy Agency) said in its monthly report that there had potentially been a rise in global oil stocks of 1 million barrels per day (bpd) over the last quarter, and the impact on prices had not yet been fully realised.  Reuters quoted the IEA that:

"Easing first quarter 2012 fundamentals have seen prices recently lose most of the $5 per barrel they gained in March. The muted impact so far is partly because much of this extra supply has been stockpiled on land or at sea."

Rather than reflecting market fundamentals, dollar prices for Brent crude, up more than 15% this year, has been pushed up mainly by fears about Iran, and the loss of supply from three relatively small oil producing countries--Syria, Yemen and South Sudan--adding to the supply worries.  In other words, the oil price is bid up primarily by trading actions on the geopolitical factors (chiefly Iran). 

Meanwhile, Saudi Oil Minister Ali Al Naimi said on Friday, April 13 in a statement during a visit to Seoul that

“We are seeing a prolonged period of high oil prices. We are not happy about it. (The Kingdom of Saudi Arabia) is determined to see a lower price and is working towards that goal.” 

“Fundamentally the market remains balanced — there is no lack of supply.  Saudi Arabia has invested a great deal to sustain its capacity, and it will use spare production capacity to supply the oil market with any additional required volumes.”

Naimi earlier this year indicated $100 a barrel as an ideal price for producers and consumers earlier this year.

Chart Source: Reuters.com

Typically, oil price shock occurs when price goes out of the normal range.  Currently, oil is not trading at an unprecedented level as in the case of 2008, which is hard to hit given the projection of a subdued global GDP, weak oil demand outlook, and an eventual resolution of the Iran situation.

Thus we believe oil has gotten way ahead of itself, and could experience a correction later this year and in the next three years or so.  End user behavior change is starting to manifest, and the latest CFTC trading position reports already showed that money managers cut their net-long position roughly 12% in light, sweet crude-oil futures and options (see chart above).  (Brent already went down to $118.57 on Monday, April 16.)

So no, unless something totally unexpected shocks the oil price into no man's land, WTI and Brent are unlikely to hit the levels that could possibly bring about a global recession any time soon.  In fact, among the major possible drivers of a global recession, European economic and debt crisis looks to be the greater risk than an oil price shock. 


Posted courtesy of AsiaBlue at Econmatters

President Obama Looks into Oil Manipulation … Pure Political Theater

This is just pure political pandering to the masses. The world oil market does not just revolve around the US anymore. India and China are increasing players and are buying more oil in the world markets. It is the demand from the world for energy that is pushing prices higher, not the speculators.

And speaking of higher, crude oil [May contract] closed higher on Tuesday as it extended the rally off last week's low. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signaling that a low might be in or is near.

Closes above the 20 day moving average crossing at 104.25 are needed to confirm that a short term low has been posted. If May renews the decline off March's high, the 38% retracement level of the October-March rally crossing at 97.84 is the next downside target.

First resistance is the 20 day moving average crossing near 104.25. Second resistance is the reaction high crossing at 105.49. First support is last Tuesday's low crossing at 100.68. Second support is the 38% retracement level of the October-March rally crossing at 97.84.

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