For Immediate Release
Chicago, IL – January 5, 2010 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: ExxonMobil (XOM), XTO Energy (XTO), Chesapeake Energy (CHK), EOG Resources (EOG) and Devon Energy Corp. (DVN).
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Here are highlights from Monday’s Analyst Blog:
Natural Gas Stocks Dip Again
Continued strong domestic production (from a number of unconventional natural gas fields) and recessionary consumption (due to the economic downturn), particularly in the industrial sector, are at the core of the commodity’s current woes. Stockpiles have gone on to create new highs this year as the economic downturn eats into demand and natural-gas producers continue to unlock new supplies from onshore natural-gas fields known as shales. Months of mild weather further weakened demand for the fuel to heat homes and businesses.
Given the depressed state of the commodity, the lower-than-anticipated drop in reserves sent natural gas prices lower during the last few days of 2009. However, the commodity has fared extremely well during the month of December, giving returns of over 35% on the back of sustained inventory drawdown. Natural gas prices ended the year at about $5.50 per million Btu (MMBtu), up more than 100% from their September 2009 lows. This was also helped by the news that oil major ExxonMobil (XOM) has decided to pick up unconventional natural gas producer XTO Energy (XTO) in a $41 billion all-stock deal.
Nevertheless, we are not fully convinced about the sustainability of natural gas’ current gains, as the specter of a continued glut in domestic gas supplies (storage levels remain 13.6% above their five-year average) still weighs and the inventories remain higher compared to averages for this time of year. This translates into limited upside for natural gas-weighted companies and related support plays.
The gap between supply and demand is expected to reverse in the coming months as producers bet on forecasts for colder weather and the lagging effect of the sharp drop in domestic drilling activity takes hold.
Until then, we remain cautious on natural gas-focused E&P players such as Chesapeake Energy (CHK), EOG Resources (EOG) and Devon Energy Corp. (DVN).
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