The stock prices of natural gas producers have remained stable despite a 30% drop in the price of natural gas since the beginning of December. A combination of warm seasonal weather and record high inventories have sent gas prices to several-month lows but stock prices haven't followed suit. The reason, according to Canaccord Adams analyst Irene Hass is that even at a 30% discount to its previous prices, natural gas continues to remain quite profitable, especially with the news that Canadian natural gas exports to the U.S. are expected to drop heavily. As a result, none of the gas drillers have really slowed down their operations. But if some of the current inventory buildup isn't drained this winter - something which would require colder weather - there are concerns 2007 revenues could be badly impacted for top gas producers like Devon Energy, Apache Corp., Anadarko Petroleum and Chesapeake Energy Corp. as well as energy service companies such as Halliburton Co. and BJ Services.
• Sources: Reuters, Washington Post
• Related commentary: Natural Gas Inventories Not Pressuring Supply in Meaningful Way, International Securities Exchange Launches Natural Gas Index, Natural Gas is Running Out of Steam, Chesapeake Energy: Hedging Its Way to the Top, The Short Case for Apache Corp.
• Potentially impacted stocks and ETFs: Apache Corp. (NYSE:APA), Anadarko Petroleum (NYSE:APC), Halliburton Co. (NYSE:HAL), Devon Energy (NYSE:DVN), BJ Services (BJS), Chesapeake Energy Corp. (NYSE:CHK). ETFs: iShares Dow Jones U.S. Oil & Gas Exploration/Production (IOE), PowerShares Dynamic Oil & Gas (NYSEARCA:PXJ)
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