Saturday, October 04, 2008

BNET Update: Monday, October 6, 2008

On September 9, Ken Huseman, Chief Executive Officer of Basic Energy Services (BAS-$17.54), said selected operating data for August 2008 — utilization in well servicing and drilling segments — signaled that the company was successfully leveraging its wide footprint and range of services to take advantage of market conditions over the last year. Left unanswered, however, was whether the increased level of activity in each of the company’s three primary business segments (well servicing, fluid services, and completion/remedial services) would lead to pricing and margin improvements, too.

Carnival Corp. (CCL-$32.74), the largest cruise ship operator in the world, with a portfolio of cruise brands that includes Carnival Cruise Lines, Princess and Cunard Line, reported in its third-quarter 10-Q filed with the SEC on Friday that AIG is the payment intermediary for some of its estimated $1.06 billion in contingent obligations.

At the Cisco Systems (CSCO-$21.28) annual meeting to be held in November, shareholders will be asked
to vote on a Human Rights resolution, again.

Effective January 2009, FedEx Corp (FDX-$79.36) is increasing its rates by an average 6.9 percent. While the rate increase may seem
like a shot in the foot, it may turn out to be a smart move for FedEx’s bottom line.

JA Solar (JASO-$9.54) confirmed its production guidance in the range of 340-megawatts (MW) to 350MW for fiscal 2008, and remained cautiously optimistic about the potential for raising its 2009 projected output beyond 700 MW at its Ningjin plant. However, it was reported this week that Jiangsu Shunda, a major solar wafer supplier, suffered a silicon tetracholoride leak and was shutting down for repairs until October 10,
calling into question JA Solar’s ability to meet output goals.

The North American gas drilling industry suffered an earthquake of uncertain magnitude last week when Chesapeake Energy (CHK-$29.00), third-largest overall producer of natural gas in the US, slashed its drilling capital expenditure budget by $3.2 billion, or 17 percent, for the second half of 2008 through 2010. Contract drillers, like Patterson-UTI Energy (PTEN-$16.76), which are highly dependent on onshore drilling activity, will likely witness an adverse tectonic shift in forward demand for drilling rigs and services.

Petrohawk Energy (HK-$16.20) said Wednesday it
would reduce its 2009 capital budget by a third to $1.0 billion and intends to shift spending to those projects with the highest internal rates of return and greatest potential for reserve growth, namely, development in the Haynesville and Fayetteville formations.

Looking to divert attention away from their own incompetence, many investment bankers on Wall Street are calling for the elimination of mark-to-market accounting, a framework adopted by companies to make more transparent the current values of certain (often illiquid) financial instruments. In my opinion,
a likely critic of fair value would be RenaissanceRe Holdings (RNR-$44.25), the Bermuda-based provider of reinsurance and individual and property risk insurance.

As the housing market continues to deteriorate, Washington Federal (WFSL-$19.14), which has thrift operations in eight western states, could feel more pain.

Editor David J Phillips and Columnist Debra Fiakas do not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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