For Immediate Release
Chicago, IL – April 2, 2012 – 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 McGraw-Hill Companies Inc (MHP), Ultra Petroleum Corp. (UPL), Talisman Energy Inc. (TLM), Exxon Mobil Corp. (XOM) and ConocoPhillips (COP).
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Here are highlights from Friday’s Analyst Blog:
Nat Gas Stocks in Record Territory
Stockpiles held in underground storage in the lower 48 states rose by 57 billion cubic feet (Bcf) for the week ended March 23, 2012, above the guidance range (of 43–47 Bcf gain) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Companies Inc (MHP).
The increase – the second injection of 2012 – is well above last year’s build of 7 Bcf and the 5-year (2007–2011) average addition of 8 Bcf for the reported week.
As a result of last week’s stock build, the current storage level – at 2.437 trillion cubic feet (Tcf) – is now up 816 Bcf (50.3%) from last year and 900 Bcf (58.6%) over the five-year average.
With this huge and sharply widening natural gas surplus, inventories in underground storage have started to climb weeks earlier than the usual summer stock-building season. They have persistently exceeded the five-year average since late September last year and are likely to beat the previous winter (March 31) record of 2.1 Tcf set in 1983.
A supply glut has pressured natural gas prices during the past year or so, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remain robust, thereby overwhelming demand.
As a matter of fact, natural gas prices have dropped approximately 56% from 2011 peak of $4.92 per million Btu (MMBtu) in June to the current level of around $2.15 (referring to spot prices at the Henry Hub, the benchmark supply point in Louisiana). Incidentally, prices hit a 30-month low of $2.01 earlier in March.
To make matters worse, a near-record mild weather across most of the country curbed natural gas demand for heating all winter, leading to an early beginning for the stock-building season. The grossly oversupplied market continues to pressure commodity prices in the backdrop of sustained strong production.
This has forced several natural gas players to announce drilling/volume curtailments. Exploration and production outfits like Ultra Petroleum Corp. (UPL), Talisman Energy Inc. (TLM) and Encana have all reduced their 2012 capital budget to minimize investments in development drilling.
On the other hand, Oklahoma-based Chesapeake – the second-largest U.S. producer of natural gas behind Exxon Mobil Corp. (XOM) – and rival explorer ConocoPhillips (COP) have opted for production shut-ins to cope with the weak environment for natural gas that is likely to prevail during the year.
However, we feel these planned reductions will not be enough to balance out the massive natural gas supply/demand disparity and therefore we do not expect much upside in gas prices in the near term. In other words, there appears no reason to believe that the supply overhang will subside and natural gas will be out of the dumpster in 2012.
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