We will actually have to wait until Thursday for the crude inventory numbers, but we are becoming even more bullish of our Utica names. So bullish in fact that we are even contemplating adding more exposure via some new names we have been researching recently. We see value in the sector as the recent fall in oil prices has pushed shares lower but the prospects for these companies continue to improve, especially for those with properties next to the players reporting stellar results. We think that looking back, investors will view this period as one of the best to have invested in America's energy future and stories will be written about the tremendous wealth creation this movement caused.
Oil & Natural Gas
The solid exploration results in the wet gas window in Ohio's Utica continue for Gulfport Energy (GPOR) which once again reported a well with 4,000+ BOEPD yesterday. For shale wells these are huge and from all of the results we have seen it appears that Gulfport is having the most success across all of their wells in the Utica at this point. They are in what can only be described as a sweet spot and with the high IP rates these wells are offering very attractive payback periods. We are long the company via shares and options and believe that shares will hit $50/share as they continue to develop their property portfolio. Shares ended yesterday at $32.65/share having risen $2.22 (7.30%) on volume of 2.1 million shares.
For those who did go short Cheniere Energy (LNG) due to a belief that the market and energy prices were headed lower might want to look at covering that position (whether it was via stock or options or selling long positions) and go long this name as we think that it appears energy has put in at least a short-term bottom. Shares rose $0.46 (2.97%) to close at $15.46/share on volume of 5.4 million shares and if we see energy build off of yesterday's gains then we could test the yearly highs before we get through the fourth quarter.
Freeport-McMoRan (FCX) is one which our advised position to readers that got stopped out for a pretty decent short-term gain. We have gotten a few emails asking when it would be alright to initiate another position and we wanted to answer that today. Our view is that if shares can get down to the $37-38/share range that we would look to be buyers and then we would sell into any strength that took shares into the $40-41/share range. We view it as a trade only right now and not a long-term investment, preferring to put our capital allocated towards metals into precious metals stocks.
Agrium (AGU) shares continue to outpace the rest of the potash sector this year and it is quite impressive. It is the strongest play and seems to have been the strongest play all year, continuously trading near 52-week highs. Shares were up $1.88 (1.81%) to close at $105.32/share on volume of 670k, and we are very close to new 52-week high territory. We would look for stronger results here through the end of the year versus the rest of the industry as they are diversified and are benefiting from America's farming boom.
It is as if Alpha Natural Resources (ANR) shares were listening to us yesterday as we said that the shares could move higher off of those levels as that had provided a springboard previously. The shares did in fact bounce higher, rising $0.50 (7.37%) to close at $7.28/share on volume of 25.5 million shares. All commodities were strong yesterday as there were reports that China's lagging growth would come in in-line and the energy complex was up on Middle East fears. We would be taking profits here as a one day gain of 7% is a nice trade, but for those wanting to let the money ride we would advise to watch closely as the shares approach the $7.50/share level. Any breakdown there could send shares lower again.
Disclosure: I am long GPOR.