Today we will focus on natural gas and oil and forget the rest of the commodity space as this is where the news is today. Oil has risen the past few trading days, and we have earnings out or due out in some of our companies we follow. We are still bearish natural gas short-term, but are beginning to like the transformation some of these companies are undergoing with the NGLs - and at current rates we might be forced to play our hand quicker than we would have liked for fear of missing the boat on this one.
Oil & Natural Gas
Chesapeake Energy (CHK) traded over 77 million shares yesterday and above the $20 handle early in the morning on news that Aubrey McClendon would be replaced as Chairman and agreed to end his participation in the well program at no cost to the company. In regular trading the shares traded up $1.16 to close up 6.29% at $19.60/share, however after their earnings release the shares fell $1.07 (5.46%) to $18.53 in after hours trading. The earnings were disappointing, and the lack of natural gas hedges did not help and will not help going forward, but there was a lot of good news regarding the liquids and oil plays. As we have stated before, we are long-term bulls, but short-term bears on this one and that trade has paid off for those heeding that advice for some time now. Conference call starts at 9AM today.
Kodiak Oil & Gas (KOG) could not hold $9/share yesterday and sold off into the close to actually finish down for the day...not showing strength there at all. The company has earnings out May 3rd and we already got a glimpse at them with the guidance they released earlier. One good thing was that volume was 6.6 million, higher than the average and much more than recently (volume has been falling on the E&P plays lately - except for Chesapeake - for those who follow that sort of thing).
Cheniere Energy (LNG) reports today, and the company is still trading near its 52-week highs. Everything seems to be falling into place for LNG right now, but one has to wonder whether it is happening a year or two ahead of schedule. Timing is everything in the commodity business and as trivial as 12 months seems it can mean the world. The earnings will be trivial, no one cares about that, but we do want to hear how things are progressing with getting their LNG export terminal up and running. That news could move the stock, especially if environmentalists or the government are trying to get involved.
Rex Energy (REXX) has been strong lately. We almost initiated a trade on this one when it was in the low $9s - but we did not and the rest is history. Shares rose $0.43 (4.09%) in regular trading to close at $10.94/share, but fell $0.42 in after hours once earnings were released. The company had daily production rise 23% Q/Q (Quarter over Quarter) and increased their full year 2012 production guidance. Also of importance, Rex added 2800 acres in the Utica in what appears to be the wet gas window. Oil and NGLs now make up 57% of revenues and 43% is dry natural gas - the company is hedged.
We are watching out of interest Southwestern Energy (SWN) as they have earnings May 3rd and are a big natural gas producer. The company is hedged from the latest material we read, but it will be interesting to see what they have to say regarding their outlook on the price this year and next (if only to give us an idea of how Chesapeake will fair being unhedged). Shares are trading off of their 52-week lows, but it will be interesting to see how traders treat this the day after, so far most with high exposure to nat gas - even when hedged - have fared poorly.