We have a few big names reporting today but the big news will probably be the ruling out of Canada on Friday. It will force the market to reevaluate the current buyout targets and weigh the potential outcomes for when those deals come under the scrutiny of regulators. It appears that all foreigners will have difficulty in the years ahead trying to buy Canadian commodity assets, and it shall be even harder for foreign state sponsored entities to do so. It appears that Canada is going down a lonely road, but it may turn out that regulators are keeping their resource sector from being pillaged at these bargain bin prices. Only time will tell.
Oil & Natural Gas
As the election process winds down over the next few weeks expect Ohio, one of the larger swing states available this year, to become a focal battleground for the two candidates. We suspect both candidates will say they back the development of the Utica shale, even though the President has shown he is willing to block development when possible, and that this should be bullish moving forward for all things Utica. Obviously Chesapeake Energy (CHK), the largest player in the shale, shall be a big beneficiary and we would not be surprised if the Utica, Bakken or Eagle Ford were to be discussed during tonight's debate.
On Friday we saw shares in SandRidge Energy (SD) hit $7/share before recovering a bit, but with shares having closed lower by $0.23 (3.16%) to finish at $7.06/share we do wonder whether the shares will fall below the $7/share threshold in today's session. It appears likely, and we would point out that when the shares have crossed above $7/share it has been bullish and when below not so much. Long-term investors would do well to purchase below the $7/share threshold shall we fall below that level and traders would be wise to steer clear until the shares have bottomed out, unless of course there is some sort of bearish option trade you have engaged in.
Reuters is reporting that a campaign will begin today for the natural gas exporters seeking to use liquefied natural gas technology to export some of America's surplus natural gas production. One can read the article here. The advertisements shall do little initially to alter the current opinions of politicians, but it shall educate Americans on the abundance of natural gas we have and our options to profiting from our newfound wealth. If you believe in the long-term viability of this we would recommend looking at Cheniere Energy (LNG), which closed at $15.70/share after trading lower by $0.34 (2.12%).
Canadian stocks shall see a rough day today, especially those in the natural gas and oil sector due to the ruling by the government that Petronas would not be allowed to proceed with their deal for Progress- a mid-sized player which many US investors have probably not heard of. We expect stocks such as Talisman Energy (TLM) to fall in sympathy as the recent actions by the government appears to hurt the prospects of foreign buyers coming into the market and buying out small to midsized exploration and production names. This is going to be a story to watch moving forward, and in the end could force investors to place a premium on US energy plays and a discount to our northern neighbors in the next few months.
Freeport-McMoRan (FCX) reports their earnings today and we would not be surprised to see shares pull back a bit as the company's management should issue a conservative outlook. China and Europe's growth rates have slowed, and it might not be fair at all to even call it a growth rate for Europe! Investors should pay attention to what the company has to say about the future of their mines in Asia and Africa and if they can provide any guidance on where they think tax rates and their ownership interest will be at once the new regulations have been enacted in those areas.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.