We saw oil and natural gas plays rise significantly with those who have been hit hardest rising the fastest yesterday. The same can be true of the coal sector which had what we suspect was a relief rally. Until we can break from these lower lows and lower highs trading patterns our money is on the sidelines - unless of course we see an opportunity for trading. As a side note this morning, we were preparing to purchase Patriot Coal shares around the $1/share level looking for a bounce but yesterday morning the shares were already higher. Arch and Alpha were looking appealing too and we will continue to monitor the sector, but will probably only trade the names at first.
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Oil & Natural Gas
Chesapeake Energy (CHK) saw shares move higher by $0.88 (5.16%) to close at $17.93/share on volume of 22 million shares. The entire oil and natural gas E&P sector was up, with the hardest hit names experiencing the largest gains yesterday. Chesapeake is still held back by management issues and the fear that they do not get their asset sales done, but they have not disappointed in that regard yet and until they do we will not worry about it. There are interested buyers out there who are hungry for these assets, and we do hear their names being thrown out as interested in making asset purchases in the same areas Chesapeake is trying to do their sales in. Maybe these dots get connected in the next few weeks or months, that is what we are betting on.
For those believing that the natural gas decline is over, which we are not one, Southwestern Energy (SWN) is probably a pretty good bet to play that theme. Granted they are hedged, unlike Chesapeake, but more of their production is geared toward natural gas so it is more of a pure-play. With natural gas prices on the upswing yesterday investors bid up shares by $1.61 (5.45%) to close at $31.14/share on volume of 8.5 million shares. This was one of the better days that the company has had lately, but like we stated earlier we are not believers in this natural gas rally even with the hot temperatures the country is experiencing.
Alpha Natural Resources (ANR) announced yesterday that they were able to alter their credit facilities which gave investors reason to pause in their being so bearish of the shares. Shares rose $0.46 (5.95%) to close at $8.19/share on volume of 14.8 million. Yesterday's news came a day after the stock hit a fresh 52-week low, so this was more than welcomed by holders of the shares.
Peabody Energy (BTU) also supplied the coal sector with a bit of good news as their CEO stated that Chinese demand for imports was growing. We believe he is telling the truth, but we must take that statement with a grain of salt as we know for a fact that there are freighters sitting off of the coast of China loaded with coal and looking for buyers. Granted that was probably speculator demand but it is obvious that the pipeline is fully loaded at some points - a bottleneck as operations managers would call it. Regardless, investors liked what they heard and bid shares up by $1.15 (5.45%) to close at $22.27/share on volume of 9.7 million shares.
The big winner yesterday was of course Patriot Coal (PCX) which saw their shares rise by $0.19 (17.76%) to close at $1.26/share. Volume was above normal as well, coming in at 10.5 million shares for the day. On Tuesday the shares hit a new 52-week low but did not break the $1/share threshold. This one will be volatile as it has a myriad of issues plaguing it, basically all of the individual issues various coal companies have lumped together under one roof (think credit, liquidity and high cost production).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.