MASTER LIMITED PARTNERSHIPS

Monday, September 22, 2008

As the action continues to border on sillyness...its time for a little monty python!

3 comments:

Anonymous said...: This can't be good.

Here is an article from tomorrow's WSJ:

BUSINESS
SEPTEMBER 23, 2008
Chesapeake Energy to Pare
Drilling for Natural Gas
By BEN CASSELMAN
The U.S.'s largest producer of natural gas is cutting back drilling in response to concerns about a glut, in what some analysts said is likely to be a trend among energy companies.

Chesapeake Energy Corp. said Monday that it would slash its capital budget by $3.2 billion, or 17%, through 2010, mostly by drilling fewer wells. The Oklahoma City company also said it would temporarily cut back its gas production by 100 million cubic feet a day, or about 4% of its capacity.

The company, which produces more than two billion cubic feet of natural gas a day, said it was responding to prices that, despite an increase Monday, have fallen to under $8 per million British thermal units, down from a high of $13 per million BTUs earlier this summer, and also to "concerns about the possibility of an emerging U.S. natural-gas surplus." Monday, natural gas for October delivery rose 12.7 cents, or 1.7%, to $7.658 per million BTUs, on the New York Mercantile Exchange.

U.S. natural-gas production has risen in the past two years, as higher prices and new technologies allowed companies such as Chesapeake, Devon Energy Corp. and XTO Energy Inc. to tap gas fields that were once considered too expensive or difficult to produce. The industry has discovered new reserves in Texas, Louisiana, Pennsylvania and elsewhere.

Industry executives, especially Chesapeake Chief Executive Aubrey McClendon, have touted the discoveries' potential to reshape the nation's energy picture, noting that natural gas is cleaner than coal and doesn't have to be imported from overseas.

But in recent months investors have become concerned about the possibility of a natural-gas glut driving down prices, and have called on companies to slow their spending. Companies have seen their shares plummet along with gas prices. Chesapeake's shares Monday fell 84 cents, or 2%, to $40.89, down 41% from their 52-week closing high in July.

Dan Pickering, an analyst with energy-focused investment bank Tudor, Pickering, Holt & Co., said other companies may now follow Chesapeake's lead.

"This is what Wall Street has been looking for and hoping for," Mr. Pickering said.

Observers said that at least for some companies, there may be another reason to cut back drilling: the credit crunch. In their rush to buy land and drill wells, many companies have been spending far more than they have been earning, making up the difference by borrowing money, issuing stock and, in some cases, entering into joint ventures.

With stocks down, credit more difficult and expensive to come by, and lower commodities prices driving down the value of assets, none of those options are as appealing now as they were earlier this year. That could force companies to cut back their spending.

"They're going to have to start counting paper clips," Subash Chandra, an energy analyst with Jefferies & Co., said last week. "The lax ways of the past half a year have got to end."; 9/22/2008 9:40 PM
Anonymous said...: Here's the real reason markets were slaughtered today.

http://www.cnbc.com/id/26839169

Senator Dodd proposed a contingent equity stake equal to the dollar value of any asset bought in the bail-out.

If the treasury loses money in the disposition of such assets then the treasury vests 125% of the value of the loss in the contingent shares.

IE they buy 10 billion of assets, the treasury sells it for 8 billion ( losing 2 billion ), then the bank has 2.5 billion in dilution.
If Congress is looking for a 700 billion plan that clears bad assets so that banks can lend again, this doesn't cut the mustard.

This would render the plan a non-starter imho in that most banks don't have market caps that could stand such dilution. Especially because the Treasury may not (and probably won't ) sell these assets at a optimal price.

WM has a market cap of 5.66 billion, WB 35 Billion, NCC 3.86 billion, C 109 billion, ZION 5.08 billion, GS 51.69 billion, MS 30.04billion, WFC 116.41 billion, BAC 115.73 billion, FITB 9.82 billion, RF 10.84 billion, STI 19.06 billion, and MI 5.92 billion.

HS; 9/22/2008 9:51 PM
Anonymous said...: Chesapeake Energy PR at 4.01 pm today released the most of the info contained in the WSJ article.

http://biz.yahoo.com/bw/080922/20080922006441.html?.v=1

Somehow it traded up after hours,
probably because Chesapeake will have a reduced need for capital going forward.

http://www.nasdaq.com/aspxcontent/ExtendedTradingTrades.aspx?selected=CHK&mkttype=after

I guess for Nat gas producer MLPs it's bad mnews, for pipelines it's good news, ( lower prices = more demand ). A Nat gas glut might take some pressure off of oil prices because of the substitution factor ( driven by lower nat gas prices ) and more nat gas = more NGLs which would negatively affect crude oil prices somewhat.

HS; 9/22/2008 10:09 PM