Energy Stock Trader: Monday Outlook

Apr.30.07 | About: Chesapeake Energy (CHK)

Oil will probably trade sideways to up today.

After last week's advance, the result of a foiled terrorist plot in Saudi Arabia, I'd look for oil to try and hold the $65 level. June crude is trading flat to down, but I wouldn't expect it to last as gasoline is once again being buoyed by refinery snafu. This time lightning set fire to two storage tanks at a small (50,000 bpd) refinery in Oklahoma.

CFTC shows more traders are betting on a drop:

CFTC Net 30 04 2007

Gastar and Chesapeake Snuggle Up: Chesapeake Energy Corp. (NYSE:CHK) took a little undeveloped east Texas acreage off Gastar Exploration's (NYSEMKT:GST) hands for $92 million. This amount also includes the purchase of another 10 million shares of GST, bringing Chesapeake's ownership in Gastar to about 20.5%.

  • For GST this means no secondary is needed to fund the '07 capital program in East Texas and Australia.
  • For CHK it's a great deal, as the acquired acreage is ontrend and in close proximity to a couple on monster EnCana Corp. (NYSE:ECA) wells (100 Mmcfgpd combined rate) in the deep Bossier.
  • Back on April 2 I wrote: Gastar (GST) -- I've got a thing for minnows lately. This little E&P is gassy with high potential exploration in the tight gas sand Bossier play of East Texas and CBM development in the PRB and Australia. Near term catalyst abound in the form of multiple tests in the Bossier with partner CHK who also owns 17% of the company. I'm taking an entry position here ($2.25ish), and will continue to do a little more work to decide if this is a trade or something more interesting. Comment: It's something more interesting.
  • CHK reports 1Q07 results Thursday.

Analyst Watch: Citigroup cut all the fertilizer companies to hold Terra Industries Inc. (TRA), Agrium Inc. (NYSE:AGU), Potash Corp. of Saskatchewan Inc. (NYSE:POT) -- I'd assume the higher than expected price of natural gas played a big part in the downgrade.

Earnings This Week:

  • 4/30: Anadarko Petroleum Corp. (NYSE:APC), Cabot Oil & Gas Corp. (NYSE:COG)
  • 5/1: EOG Resources Inc. (NYSE:EOG),Southwestern Energy Company (NYSE:SWN), FreightCar America Inc. (NASDAQ:RAIL), Oceaneering International Inc. (NYSE:OII)
  • 5/2: Devon Energy Corp. (NYSE:DVN), Grey Wolf Inc. (GW)
  • 5/3: Canadian Natural Resource Ltd. (NYSE:CNQ), Chesapeake Energy Corp. (CHK), Tesoro Corp. (NYSE:TSO), Western Refining Inc. (NYSE:WNR)
  • 5/4: Warren Resources Inc. (NASDAQ:WRES)

Chavez Watch: Chavez takes control of operations in the Orinoco River area from BP plc (NYSE:BP), ExxonMobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX), Total S.A. (NYSE:TOT) and Statoil tomorrow. The Venezuelan state oil company, PDVSA, will end up owning a minimum of 60% in each their "joint ventures." All three of the U.S. companies have essentially stated that how they're treated well in the negotiation process (slated to run through the end of June) will determine future investments in the country. Comment: The action here could be as supportive to oil prices as rebels in Nigeria or Mahmoud's weekly rantings about nukes.