We would expect to see some sectors in the commodities arena down, but short lived based on the results of the elections. Since we have a winner and the whole process will not be drawn out, we think that the fiscal cliff will be avoided and that cooler heads will finally prevail. The president won via what appears a landslide in the electoral college, but by the slimmest of margins in the actual vote count. The Republicans lost big in the Senate races as their candidates were too extreme but maintained control of the House. It should be very clear to our leaders how the American people feel and we expect them to get to work to resolve all of these issues surrounding the fiscal cliff. There is nothing better for the market than humbled politicians willing to make deals, and that is what we sorely need right now.
Oil & Natural Gas
We only had a chance to read over the press release last night regarding Gulfport's (GPOR) quarterly results, but what we read there we liked. It seems that January 2013 is going to be the target date for getting the infrastructure hooked up in their area of the Utica and we should see a jump in production once that happens. The company forecast higher production next year and also released some new results from a well they tested after only a 30-day resting period. It would be nice to get information on whether the well was simply tested or if Gulfport has found a spot in the Utica where 30-day resting periods work best because if that is the case then they could bring on wells anywhere from twice to three times as fast as others. We doubt this (as the well will not be tied into production until late January 2013), but something to pay attention to nevertheless during the conference call for clarification. We really like the results here and 2013 will be the year of the Utica for the company as they drill roughly 50 wells. Look for shares to rise today on the news and results.
We noticed that shares in Quicksilver Resources (KWK) were tumbling in trading yesterday with sharing declining by $0.35 (9.43%) to close at $3.36/share. The company saw revenue decline, a trend which has been taking place for some time now and they did beat expectations on the earnings side - although there were no earnings there was a loss. This is one of those leveraged natural gas plays investors could look to if expecting natural gas prices to rebound but we need to see a large drawdown in the storage rates here in the US. The fact that a large percentage of the population was 'homeless' or without power after the storm which hit the northeast certainly did not help with the demand side of the equation. The supply issues appear to be working themselves out as we are seeing declining dry gas production as the rig counts come down.
Coeur d'Alene Mines Corp (CDE) saw shares get nailed in yesterday's session as investors pushed shares lower by $6.27 (20.65%) to close at $24.10/share. Volume was quite strong with 12.9 million shares trading hands as the company reported results below expectations of the market. The company's Chief Executive Officer indicated that the company was unpleased with the results, he also stated that the shortfall in production was mainly the result of lower production from a mine in Mexico. The issue appears to deal with timing, and for those buying into this then the current price might be a buying opportunity as the shares were hit hard. The company has reported production shortfalls before and rebounded and this happens in the mining industry all of the time -especially when moving from one area of the mine to another and having to recalibrate mining techniques to accommodate changes in the ore composition.
Thompson Creek (TC) saw shares pop back above $3/share yesterday as the shares rose a bit over 9% during the session. The company saw volume increase to 6 million shares as the stock moved through the $2.90/share area - a level that the stock had not been able to break through over the past month or so. It looks like it was a rally on technicals, but it is important to note that some of the talking heads on TV took notice and have been discussing the action here. The company reports financial results after the close today.
Investors cheered the industry after one company raised prices, and US Steel (X) was a beneficiary of that euphoria as shares rose $1.13 (5.35%) to close at $22.26/share. Now there have been issues with production across product lines worldwide with the industry but we have seen that same company announce other price hikes. Last time they did it we saw them report weak earnings the next quarter so we would be hesitant to initiate positions in the industry right now. In fact we would stay away from most of the names in the industry save for a select few, with US Steel being among one of the few good ones we like.
Disclosure: I am long GPOR.