NEW YORK, NY--(Marketwire - Nov 6, 2012) - An abundance of natural gas has continued to pressure prices of the commodity in 2012. Natural gas futures last week fell to their lowest levels in over a month after the Energy Information Administration (EIA) reported inventories climbed to an all-time high. Five Star Equities examines the outlook for companies in the Natural Gas Industry and provides equity research on Chesapeake Energy Corporation (
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A mild winter last year resulted in a drop in natural gas demand of 600 bcf from November-March. The drop in demand caused a glut of inventory, which pressured prices to the decade lows seen in April. The recent report released by the EIA showed that natural gas inventories increased by 65 billion cubic feet to a record 3.908 trillion cubic feet (TCF), surpassing the previous record of 3.852 tcf set in November 2011. According to analysts' the recent surge in prices have likely caused a drop in demand from utility companies who have reverted back to coal.
"The report was pretty bearish," said Aaron Calder, an analyst at Gelber & Associates. "It showed a lot of reverse fuel switching, or power generators switching from gas to coal."
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Shares of Chesapeake energy fell sharply last Friday after reporting a 25 percent decline in revenues for the third quarter, despite daily production rising 24 percent when compared to a year ago. During the third quarter the company sold natural gas at an average of $1.97 per 1,000 cubic feet, compared to an average of $4.82 per 1,000 cubic feet a year ago.
Devon's operations are focused onshore in the United States and Canada. The company also owns natural gas pipelines and treatment facilities in many of their producing areas. Devon recently announced plans to consolidate their U.S. exploration and production operations. "Consolidating our U.S. operations will improve our ability to quickly shift the focus of our workforce between project areas as economic conditions dictate," said Dave Hager, Devon's executive vice president of E&P.
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