Chesapeake Energy (NYSE:CHK), EnCana Corp. (NYSE:ECA) and Devon Energy Corp. (NYSE:DVN), along with Anadarko Petroleum Corp. (NYSE:APC) and Halliburton (NYSE:HAL), on news of the warmer summer increased demand for natural gas for the generation of electricity.
Most of the companies with exposure to the commodity are up today, but there is downward pressure coming as the supply continues to grow in spite of the demand.
The increase in share price of the companies today are based on past demand, and not on future prospects.
For example, for the week ending August 20, stockpiles of natural gas in the lower 48 states increased by 40 billion cubic feet.
There also continues to be ample supply as storage levels are 6.2 percent above their five-year average, even with the recent strong demand. And the natural gas inventories have risen over the Tcf level for only the second time in 2010.
A number of companies with significant exposure to natural gas understand the threats, even in a high-demand period of time, as the huge amount of resource and increasing number of companies entering into the field ensure downward pressure on natural gas prices for some time to come.
Some have been diversifying into oil to help them maintain revenue and earnings growth.
2 comments:
This is probably the worst equity analysis I've ever seen. "Stockpiles of natural gas increased by 40 billin cubic feet" and "natual gas inventories have risen over the (?) Tcf level for only the second time in 2010" to support a bearish statement are either patently deceptive or show complete lack of understanding of the normal build cycle for natual gas inventories during this time of the year. Please, study http://ir.eia.gov/ngs/ngs.html before posting again about natual gas E&P companies.
The commodity price for natural gas has been on a downward trend. Today the price for Oct. contract dropped to $3.70. The normal seasonality in price has not happened.
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