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Severe winter weather hitting Chesapeake's natural gas output

  • Freezing weather across the U.S. this winter have pushed demand for natural gas to all-time highs, but at the same time a number of companies are saying the foul weather is hurting production.
  • The latest is Chesapeake Energy (CHK), whose oil and gas output in December was well below its expectations due to "weather challenges" that continued into January and February, CEO Doug Lawler told analysts on today's earnings call.
  • Anadarko (APC) said yesterday during its call that its operations in Colorado were finally returning to normal.
  • Estimated U.S. natural gas output is running ~800M cf/day lower than the 30-day moving average and is off 1.5B cf/day from the start of this year when temperatures were more moderate.
Comments (8)
  • papayamon
    , contributor
    Comments (1185) | Send Message
     
    the oil and gas industry is out of favor. huge dollars have rotated to other sectors. remember the old adage .. "the market can stay irrational longer than you can stay solvent".
    6 Feb, 07:54 PM Reply Like
  • WZT
    , contributor
    Comments (29) | Send Message
     
    Pauliene, the current price of UNG does not indicate a movement in upward price over the past few days. During the same period of time it is my understanding that we have had record withdrawals of NG from storage and due to the winter storms production is way off. So we have a significant increase in demand and renewal of supplies diminishing. Realizing that this might be a short term squeeze I can't understand why the price of UNG is moving down. Can you tell me if UNG price is contingent on futures contracts from 12 months ago that are just now being delivered thereby driving the fund price down. I am trying to understand why the price is moderating. Anyone else that might have insight on this please respond as well.
    6 Feb, 07:55 PM Reply Like
  • King Rat
    , contributor
    Comments (715) | Send Message
     
    I hope you weren't honestly asking for wisdom from somebody posting in all caps.

     

    The way the fund USED TO function afaik, was purchase of contracts with under 2 months in duration and selling of contracts with under 1 month of duration (regardless of issuance).
    Such a model would constantly lose money due to difference in price premiums or in contango.
    I was never satisfied with the price movement of UNG so stopped following it despite getting into some natgas producers. CHK was not one of them but as papayamon said...
    6 Feb, 08:22 PM Reply Like
  • WZT
    , contributor
    Comments (29) | Send Message
     
    King,
    I was born at night but not last night. Having said that, I never judge a book by it's cover and never take what I hear or read at face value. You are correct about what papayamon said, "The market can stay irrational longer than you can stay solvent." CHK certainly fits that statement.

     

    So why would "Backwardation" not come into play with UNG?

     

    Thank you for your comments. They are very much appreciated.
    6 Feb, 08:52 PM Reply Like
  • snoopy44
    , contributor
    Comments (838) | Send Message
     
    WZT:
    It could be a lot of things. My best guess is that its hedge funds "exiting" the sector as the winter weather begins to wind down. Hedgies are notorious for playing around in the energy market and you can understand why. Prices are volatile. There are huge seasonal swings in demand. In other words, there is a lot of "price action" which moves markets. This is how they make (and lose) money. You also have to remember that as recently as November, prices were around $2/bcf. We are now above $5. That is a huge move in ANY sector. Remember the market saying. "Pigs get slaughtered". Don't worry. We won't be revisiting $2/bcf anytime soon. Just be patient. Profits will come. If you are in a hurry, just take your profits now. There is no shame in that. Good luck.

     

    S.
    6 Feb, 09:10 PM Reply Like
  • Pgman701
    , contributor
    Comments (102) | Send Message
     
    No No No. It's Pigs get Fat Hogs get Slaughtered!!!! Just get me even on this pathetic company and I'm out of here.
    6 Feb, 09:30 PM Reply Like
  • WZT
    , contributor
    Comments (29) | Send Message
     
    Gentlemen, thanks so much for your thoughts. I am a long term player and not as impatient as I am curious. WZT
    6 Feb, 09:53 PM Reply Like
  • sethmcs
    , contributor
    Comments (3281) | Send Message
     
    California is asking for electric conservation due to shortage of natural gas. Since they killed their nuclear power base they are reaping what they sowed. 53% of CA power is natural gas. Why the market isn't going parabolic on natural gas prices is beyond me. We should be over the $6 handle.
    6 Feb, 11:25 PM Reply Like
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