Oil continues its march higher and it is helping push our oil plays higher. An even greater driver behind prices as of late has been quarterly earnings with many of our plays and companies of interest posting respectable production gains, which should continue for years to come, although that rate of growth should decline a bit. Based on what we have already seen this quarter, we do believe that the Utica has positioned itself as the shale play to be in for the next 12-18 months. These plays are about to start their ramp up in operations and should see their shares follow suit.
Oil & Natural Gas
Gulfport Energy (GPOR), a holding of ours and a stock we have been buying as of late, rose strongly yesterday as investors cheered the company's first reported well result in the Utica. It was a monster well with over 4,500 BOEPD registering for the peak rate. It was a great well, probably one of the best ever drilled in a shale play in the US and shares rallied accordingly. Volume rose to 3.9 million shares as investors bid shares higher by $3.86 (17.19%) to close at 26.32/share. There is still a ways to go until the shares get back to the $30/share level, but with a few more Utica wells resting we could see some encouraging news on that front relatively soon, certainly no later than next quarter.
As important as this news was for Gulfport, it may have been even more important for Chesapeake Energy (CHK), a company which has effectively bet its future on the Eagle Ford and Utica plays. The company is the largest land holder in the play with a strong focus on the wet gas window, which is where this monster well was drilled. Chesapeake has had success already in the area, but with results like this we could see one of the richest wet gas plays in the US being developed right in the heart of America's manufacturing center. Shares in Chesapeake finished higher by $0.53 (2.74%) to close at $19.90/share on volume of 26.9 million shares. We like Gulfport, we like Chesapeake and most importantly we like all things Utica.
The move by AK Steel (AKS) raising prices caught the market and analysts by surprise. Admittedly it surprised us, but we do recognize that it is a bullish move and investors have realized this too with shares continuing their winning streak on the back of this news. Yesterday shares rose $0.33 (6.09%) to close at $5.75/share after CRT Capital upgraded the stock to a buy. As we have stated before, if the global economy is going to be recovering in the coming months then steel is going to be a play where solid returns will be made, along with iron ore and coal producers. Which brings us to …
Alpha Natural Resources (ANR) reported a large loss for the quarter and shares fell accordingly. We got restructuring and asset write-offs which helped to push the shares down $0.60 (8.70%) to close at $6.30/share, which is still much higher than the 52-week and all-time lows put in just a few weeks ago. Volume rose to 35.4 million shares on the news, but much of this was already expected. We are in the process of going through the conference call transcripts right now, so will add more color in the coming days.
Also down on the news was Arch Coal (ACI) which surprised investors with their own report a few weeks ago and helped set the sector on the path for a rally. The news was not that great we thought, but it was not nearly as bad as it could have been, so we understand why what happened took place. Shares here were down in sympathy with Alpha as shares fell $0.47 (6.35%) to close at $6.93/share on above average volume of 17.3 million shares. These two are some of the more liquid volatile plays in the sector and tend to trade in tandem (they also have similar assets which helps in the comparison for investors), so moving forward they will play off of each other just as they have played off of each other on the way down. We will say this morning that we think most of the damage is done for the sector here.
Disclosure: I am long GPOR.