We have jobs numbers being released today along with OPEC looking at cutting production. One could take a guess or flip a coin to try and figure out whether this is good news or bad news for commodities today. In our opinion even with good news we are probably looking at a muted rally as all eyes will still be upon Europe in the next few days for elections, bond yields and the such. There is just too much noise coming out right now that investors are unable to focus on the bottom line right now.
Oil & Natural Gas
Chesapeake Energy (CHK) closed down $0.54 (3.09%) to finish at $16.93/share on volume of 33.7 million shares. It appears that OPEC will raise the price of oil via production cuts. We say appears because everyone wants to see production cut in order to support prices at these levels. This would be good for the likes of Chesapeake who are trying to switch production towards liquids and oil, so stable prices would be quite beneficial. Regarding the company's asset sales, investors might have to wait until we are closer to the end of the quarter to get news on the sale of certain properties. That is how they have operated recently, and they have always come through and closed deals. It will be interesting to see how much of a discount they must offer in order to close on properties currently listed, and that will be something to certainly watch.
Kodiak Oil & Gas (KOG) closed at $7.67/share down $0.15 (1.92%) on volume of 6.25 million shares. The stock traded between $7.55 and $7.90 during the day. It looks like a breakdown that is not stock specific, but rather industry-wide and now investors will need to wait until news can push this back above $8/share. Higher oil prices will help Kodiak as well, and a rebound in prices here in North America would be appreciated by the company and its peers, and as stated earlier that might be on the agenda with OPEC meeting today.
Patriot Coal (PCX) was down hard again while the rest of its peers were mixed. This has become the whipping boy in the sector, and deservedly so. Investors saw shares fall another $0.17 (12.06%) to close at $1.24/share on volume of 8.6 million shares. It is getting quite ugly and this one appears headed to break par (headed below $1/share). This is the riskiest play in the coal sector at this point, and the only time we would want to enter as an investors in shares is after the sector has confirmed to us that coal is on the upswing. Attempting to time this would be akin to trying to catch a falling sword as we are way past the time to consider this a simple knife.
Hecla Mining (HL) traded 4.6 million shares yesterday and finished at $4.69/share down $0.04 (0.85%). They have a mine reopening soon and although there could be ramp up issues (it seems in the mining business there is always something that was unforeseen) growing production bases is one of the criteria we like to see in a company. it should also be noted that since this mine has produced recently there is minimal risk that crippling issues will arise. We are not investors yet, but with the current economic climate and the company's profile we may circle back to this one after further research. Proven track records and low production costs do go a long way in swaying our opinion though.
Thompson Creek (TC) is another play we are looking at here. Not a pure play by any means, the company is a precious metals and moly producer. The gold mine is not open yet, but going forward this will be highly levered to the world economic growth. We think most of the dilution has already taken place here, and would like to get shares once we think the general market has bottomed. We will not know that before this weekend as we must wait for the Greek news though to get a better idea. We are adding Thompson Creek to our watch lists this morning. Shares closed at $3.19/share down $0.04 (1.08%) yesterday.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.