The Zacks Analyst Blog Highlights Chesapeake Energy, Coterra Energy, Cheniere Energy
For Immediate Release
Chicago, IL – October 3, 2023 – 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: Chesapeake Energy CHK, Coterra Energy CTRA, Cheniere Energy LNG.
Here are highlights from Monday’s Analyst Blog:
Natural Gas Storage Rises, Investors Stay Focused on Weather
The U.S. Energy Department's weekly inventory release showed a higher-than-expected increase in natural gas supplies, which is seen as bearish for the price of the energy commodity.
In fact, the market hasn't been kind to natural gas in 2023, with the commodity trading considerably lower year to date and briefly breaking below the $2 threshold for the first time since 2020.
Because of uncertainty around weather-related demand at this time, we advise investors to focus on stocks like Chesapeake Energy, Coterra Energy and Cheniere Energy.
EIA Reports a Larger-Than-Anticipated Build
Stockpiles held in underground storage in the lower 48 states rose 90 billion cubic feet (Bcf) for the week ended Sep 22, above the analyst guidance of an 88 Bcf addition per a survey conducted by S&P Global Commodity Insights.
The build compared with the five-year (2018-2022) average net injection of 84 Bcf and last year’s growth of 103 Bcf for the reported week.
The latest increase puts total natural gas stocks at 3,359 Bcf, which is 397 Bcf (13.4%) above the 2022 level at this time and 189 Bcf (6%) higher than the five-year average.
The total supply of natural gas averaged 106.1 Bcf per day, edging up 0.2 Bcf per day on a weekly basis due to a slight increase in shipments from Canada.
Meanwhile, daily consumption fell marginally to 93.6 Bcf from 93.8 Bcf the previous week, mainly reflecting lower deliveries to LNG export terminals, offset by a pickup in power burn and residential/commercial usage.
Natural Gas Price Fundamentals
Natural gas futures for November delivery ended yesterday at $2.945 on the New York Mercantile Exchange. The commodity is down around 35% so far this year.
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. This adds significant uncertainty as to the scale and durability of the commodity’s demand.
With forecasts for benign weather in the days ahead, usage of the commodity to generate electricity to meet heating/cooling demand is expected to be tepid.
However, on a positive note, there are signs of curtailment in domestic output. According to energy services provider Baker Hughes, the U.S. natural gas rig count — a pointer to where production is headed — is down more than 26% from last year. Industry observers believe this could set the stage for a pullback in near-term drilling and supplies.
Meanwhile, a stable demand catalyst in the form of continued strong LNG feedgas deliveries is supporting natural gas. While falling from their April highs, LNG shipments for export from the United States have been elevated for months on the back of environmental reasons and Europe’s endeavor to move away from its dependence on Russian natural gas supplies following the war in Ukraine. Furthermore, with union workers calling off strikes at LNG facilities in Australia, flows to export plants should pick up again.
Final Thoughts
Based on several factors, the space is currently quite unpredictable and spooked by the sudden changes in weather and production patterns. As such, investors are clueless about what to do. As of now, the lingering uncertainty over the fuel means that they should preferably opt for holding on to fundamentally strong stocks like Chesapeake Energy, Coterra Energy and Cheniere Energy.
Chesapeake Energy: Chesapeake has a premier portfolio with more than 15 years of inventory spread over some 2,200 locations, and around 90% of its total output comprises natural gas. This company’s exposure to premium markets and focus on costs and margins should help it to benefit from any increase in natural gas prices.
Coterra Energy: It is an independent upstream operator primarily engaged in the exploration, development and production of natural gas. Headquartered in Houston, TX, the firm owns some 183,000 net acres in the gas-producing Marcellus Shale of the Appalachian Basin. The company churned out an average 2,204 million cubic feet on a daily basis from these assets in 2022.
Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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