Why Isn’t Natural Gas Discounting the Dollar?
Between September 21 and September 28, 2016, natural gas November futures fell ~4.2%. The US dollar (UUP) fell ~0.2% over this period.
Over the past ten years, whenever natural gas inventories have been higher than their five-year average, natural gas prices have fallen.
On September 23, the natural gas rig count was 92—three more than the previous week. The number of active natural gas rigs fell by 105 over the past year.
The demand for natural gas in gas-fired power plants could fall because of cooler weather. It led to the fall in natural gas prices on September 28.
FirstEnergy has a price target of $36.13, as compared to its current market price of $33.67. This implies an estimated upside of 7.3% during the next year.
Institutional investors’ holdings in FirstEnergy has risen for two months. The percentage of float held had risen from 77.3% to 81.5% on September 26.
The expected rise in US interest rates later this year may dent the profitability of utilities, given their higher outflows toward debt servicing.
FirstEnergy is trading at an EV-to-EBITDA multiple of 8x. The average ratio of peer unregulated utilities is 8.8x, and FE’s five-year ratio is 10.6x.
FirstEnergy is trading at a dividend yield of 4.3%. Its dividend growth in the past three years is -13%, while its five-year rate is -2.7%.
Competitive utility stocks had a rough ride this year, given low wholesale power prices. But FirstEnergy has gained in the past few trading sessions.
As of September 27, 2016, Denbury Resources (DNR) had an implied volatility of ~77.16%, which is ~44.11% below its 260-trading day historical price volatility of ~138.08%.
As of September 27, 2016, Denbury Resources’ (DNR) total shares shorted (or short interest) stood at ~73.6 million, whereas its average daily volume is ~10.6 million.
As of December 31, 2015, Denbury Resources’ (DNR) proved reserves totaled ~289 MMboe (million barrels of oil equivalent).
Excluding hedges, in 2Q16, Denbury Resources (DNR) reported a positive cash margin but a negative total margin (Chart 1).
In 2Q16, Denbury Resources’ (DNR) reported an operating netback of ~$30.52 per boe (barrel of oil equivalent), which is ~37% lower when compared to 2Q15.
Denbury Resources’ Lifting Costs In 2Q16, Denbury Resources (DNR) reported lifting costs of ~$20.36 per boe (barrel of oil equivalent), which is ~18% lower compared to 2Q15. Lifting costs (also…
Per Denbury Resources’ (DNR) form 10Q for 2Q16, DNR reported a total (non-cash and cash) loss of about -$98 million on commodity derivative settlements.
For 2Q16, crude oil hedging activities increased Denbury Resources’ (DNR) average realized crude oil price by $9.23 per barrel.
Realized price effectiveness tells us that, for 2Q16, Denbury Resources’ (DNR) realized price, without hedging benefits, was ~29% above its production cash cost.
Excluding the effect of hedges, Denbury Resources’ (DNR) average realized crude oil price in 2Q16 was $43.38 per barrel.