It seems that the Middle East has erupted again with numerous U.S. embassies under fire as protestors have taken to the streets in quite a few countries. At this point there are no further deaths, however the situation looks bleak and it now appears that we are but one event away from oil prices heading much higher due to revolution, military attacks or terrorism, which seem like likelier events after the occurrences of the past few days.
Ben Bernanke speaks today and we have jobs numbers, so we could see some volatility in the commodities arena today as investors trade around this economic news.
Oil & Natural Gas
Shares in Chesapeake Energy (CHK) fell $0.21 (1.04%) to close at $19.89/share in yesterday's session after the company announced that they had sold the remaining assets for sale in their Permian Basin portfolio. Volume was 33.3 million as investors repositioned their portfolio. This sale sets the table for further sales later this year, and although this took about 5% of the company's daily production out of the equation we believe that the next round of sales will contain far less production and be geared towards exploration property. That will be news that investors are able to cheer as Chesapeake will effectively be monetizing future "liabilities" - at least that is the way many market participants view the situation. The company still expects to have the largest land position in the Utica once their non-core assets there are sold.
Kodiak Oil & Gas (KOG) traded higher yesterday on relatively light volume of 5.2 million shares. Much as we thought, once shares were able to break above the $9/share level we have moved smartly higher, however we are now looking at the chart and thinking that the $9.55 area may be a new resistance level on the way to $10/share. The company has a lot going for it as pipelines have been reversed to increase oil flowing out of the Bakken and infrastructure has been built to lower the transportation costs, all increasing margins. Bakken crude still trades at a discount to other crudes, but moving forward this should change and that is just further wind behind the company's sails.
Rex Energy (REXX) is back above the $13/share level and we wanted to once again highlight this Utica player. The Utica exposure has put a floor on the shares, which we were lucky enough to call around the $10/share level. That was not the low, but just as the market was turning, and that timing has led to an impressive short-term trade thus far. We think the gains should continue, as it appears that Rex may very well be located in a sweet spot of the Utica. By year-end we expect to see the company trading near their current 52-week highs at the very least.
Halcon Resources (HK) saw shares fall $0.97 (11.35%) to close at $7.58/share after the company announced that there would be a secondary via a major shareholder who is looking to sell 35 million shares with another 5.25 million shares available to underwriters for 30 days after the secondary. The company is one which we have been watching as they have a great management team that has a proven track record in the industry and has a portfolio which looks intriguing as well. Those two factors always draw our attention, so as this one bottoms out and finds new footing we will watch and see if there is an entry point for readers. Nibbling here would not be a bad thing though as we do see value.
We wanted to alert readers this morning that Freeport-McMoRan (FCX) has crossed the $40/share level once again and was able to maintain that momentum and close at $40.10/share. Volume was strong yesterday with 16.9 million shares traded, and we think that now at these levels one could set up the portfolio for a trade with tight parameters. We would look for $41 to be resistance, and if shares cannot get through that level we would quickly walk away from the trade. We would allow $1/share downside here, and if that was achieved the trade should be closed. The news from the Fed today could very well make this a one day trade, but volatility is never a bad thing when trading.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.