Canaccord Genuity Morning Coffee on Natural Gas: A Little Holiday Gas Buildup
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Price: $13.82 +2.07%
Rating Summary:
9 Buy, 16 Hold, 6 Sell
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Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
9 Buy, 16 Hold, 6 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Canaccord Genuity Morning Coffee on Natural Gas: A little holiday gas buildup.
"For the week ended December 2, the EIA reported a 20 Bcf storage withdrawal, above the Street’s 11 Bcf expectation and Canaccord Genuity Energy Team’s 6 Bcf estimate. Storage stands at 3,831 Bcf, 3% above last year and 9% above the five-year average. The data implies a slight week-over-week loosening in the supply/demand balance and suggests the market has been 3+ Bcfpd oversupplied on a four-week moving average basis. However, this marks the fourthconsecutive week that injections/withdrawals have been bullish relative to consensus expectations. That said, over that period, inventories have gone from 5% to 9% above the five-year average and from slightly below to 3% above last year’s levels. So while the surprises relative to consensus are likely enough to keep a modest bid beneath January gas, the Energy Team believes absolute inventory levels will preclude a material rise in prices over the near term. While the may not be a material rise, Canaccord Genuity Portfolio Strategist Martin Roberge believes that a bottom may be forming. Why? First, natgas is much cheaper than it was in 2009 vs. other sources of energy. Second, producers are finally showing some discipline with U.S. gas rig counts falling from 936 to 865 over the past six weeks. Third, injections have been much below consensus in recent weeks. Fourth, December exhibits a positive seasonality for natural gas prices. And fifth, natgas has been shorted against most commodities in 2011 and short-covering rallies to protect gains are likely before year-end. Longer-term, Canaccord Genuity believes the gas contribution from dramatic growth in U.S. oil development, the shale-driven uplift in gas well productivity and incremental leasehold capture/joint venture activity suggest the likelihood of a meaningfully over-supplied gas market for several years ($4-5 gas prices). Accordingly, the Energy Team generally prefer companies that are transitioning to liquids over pure gas-weighted E&Ps. Carrizo, Comstock and Goodrich are among their top picks as they believe the economic impact of the companies’ shift to liquids development is underappreciated.
Stocks of Note: Comstock Resources (NYSE: CRK), Carrizo Oil & Gas (Nasdaq: CRZO), and Goodrich Petroleum (NYSE: GDP)
"For the week ended December 2, the EIA reported a 20 Bcf storage withdrawal, above the Street’s 11 Bcf expectation and Canaccord Genuity Energy Team’s 6 Bcf estimate. Storage stands at 3,831 Bcf, 3% above last year and 9% above the five-year average. The data implies a slight week-over-week loosening in the supply/demand balance and suggests the market has been 3+ Bcfpd oversupplied on a four-week moving average basis. However, this marks the fourthconsecutive week that injections/withdrawals have been bullish relative to consensus expectations. That said, over that period, inventories have gone from 5% to 9% above the five-year average and from slightly below to 3% above last year’s levels. So while the surprises relative to consensus are likely enough to keep a modest bid beneath January gas, the Energy Team believes absolute inventory levels will preclude a material rise in prices over the near term. While the may not be a material rise, Canaccord Genuity Portfolio Strategist Martin Roberge believes that a bottom may be forming. Why? First, natgas is much cheaper than it was in 2009 vs. other sources of energy. Second, producers are finally showing some discipline with U.S. gas rig counts falling from 936 to 865 over the past six weeks. Third, injections have been much below consensus in recent weeks. Fourth, December exhibits a positive seasonality for natural gas prices. And fifth, natgas has been shorted against most commodities in 2011 and short-covering rallies to protect gains are likely before year-end. Longer-term, Canaccord Genuity believes the gas contribution from dramatic growth in U.S. oil development, the shale-driven uplift in gas well productivity and incremental leasehold capture/joint venture activity suggest the likelihood of a meaningfully over-supplied gas market for several years ($4-5 gas prices). Accordingly, the Energy Team generally prefer companies that are transitioning to liquids over pure gas-weighted E&Ps. Carrizo, Comstock and Goodrich are among their top picks as they believe the economic impact of the companies’ shift to liquids development is underappreciated.
Stocks of Note: Comstock Resources (NYSE: CRK), Carrizo Oil & Gas (Nasdaq: CRZO), and Goodrich Petroleum (NYSE: GDP)
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