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Penn West Petroleum Ltd. Message Board

  • mrpev mrpev Feb 7, 2014 3:49 PM Flag

    Small pullback

    I respect technicals even if I don’t trade short term. I have no idea when this stock will make a major move, but I do know that when it happens I want to be in the stock. It worked many times for me and hope it will work this time again.

    It feels that recent movements in many small-mid cap E&P names were mostly based on NG price movement rather than oil. This should be understandable for PWE more than for others as selling assets at right prices is critical for their plan implementation. Also hedge is about 2/3 of production so fluctuation in NG prices is also important for remaining 1/3.

    Yesterday and today’s drop in March NG futures to 4.80 makes no sense to me. The next Thursday weekly draw report as of today’s record day should indicate ~230 bcf with substantial fall in inventories to 1.7 tcf level. Next week will also be very cold, just very slightly warmer than current week, so my calcs show ~200 bcf draw.
    But after that the warmer than average 7-9 days are coming. I still calculated for ~100 bcf draw for a week.

    That coming warm may be a reason for recent pullback in NG prices. However remaining of February and entire March should be a little bit colder than average.

    So I expect 1.4 tcf inventory level in 3 weeks (record day – 2/21, release 2/27) which is very low level #$%$6 weeks of the heating season would still remain, and chances for inventories to plunge to 1.0 tcf are very high.

    Traders are still in denial of higher NG prices at this point. Let’s wait for 3 more weeks and see what happens, if my targets achieve. I believe PWE will benefit from NG price movement. OIL prices are also seasonally stronger until June.

    Upcoming ER should add more clarity in asset sales and 2014 production level. Hope it will put the bottom for the stock. We need institutions to be involved, and production clarity should provide such help.

    Sentiment: Strong Buy

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    • Yep, you are right, a little warmer GFS 6-10 and 11-15. Took advantage of the dip in NG prices to drop in some call spreads above $5 on summer NG, above some short call hedges I put on three weeks ago in mid $4's. Not liking the summer short NG position at all. My producer clients say sell, sell, sell, I tell them wait, wait, wait, this is far from over...

      Last year Feb and March were extremely cold, not saying this will repeat but if it did NG inventories would be at 1 TCF end of March. NG would easily be in a $5 to $6 range. My modeling is more conservative, hence my view that NG storage will end around 1.45 TCF. But if I am wrong (and if you have traded NG at all, you better be ready to admit it) my bias right now is we will see at least one more late Feb, early March strong cold shot and storage will be lower, prices higher.

      Sentiment: Buy

    • I bought UGAZ ahead of this weeks inventory report and got crushed b/c expectations were so high... I will try again next week as I believe expectations will be more realistic and the draw will still be over 200 mm btu

      • 1 Reply to snowdude550
      • I don’t play this game saving my nerves. I can’t even suggest anything valuable. This is drastically different game including emotions. 95-99% of traders use TA trying to get ahead of an event to sell the event. That’s what happened after this week report in my view. But once they unloaded, the game starts over and over again. At the end – end users will pay the price (higher I believe).
        I try to invest into prime beneficiaries from price movement (companies) rather than commodity itself.
        btw all triple etfs include futures with premiums so they lose their value even if underlying commodity remains flat. They are very short term vehicles. GL

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