Natural Gas’s Uphill Battle: Which Gas-Weighted Stocks to Bet On?
On March 27, 2017, natural gas futures contracts for May 2017 delivery closed at $3.13 per MMBtu (million British thermal units), ~0.6% below their previous closing price.
Between March 20, 2017, and March 27, 2017, natural gas futures contracts for May 2017 rose 1%. The commodity saw the small gain due to slightly bullish inventory data.
In this part of the series, we’ll look at the returns of an equally-weighted basket of oil stocks that operate with production mixes of at least 60.0% in crude oil (DBO) (OIIL).
On March 27, 2017, WTI (West Texas Intermediate) crude oil May futures closed at $47.73 per barrel, ~0.5% lower than their previous closing price.
As of March 15, 2017, Marathon Oil’s (MRO) short interest stood at ~46.02 million, while its average daily volume is ~14.8 million.
Marathon Oil stock is expected to close between $15.44 and $13.78 after seven calendar days. Marathon Oil stock will stay in this range ~68% of the time.
Since news of the bolt-on Permian acquisition on March 21, 2017, Marathon Oil (MRO) saw its stock price underperform crude oil (USO) prices.
On March 9, 2017, Marathon Oil acquired ~70,000 Permian net acres from BC Operating. On a pro forma basis, its Permian acreage will be ~91,000.
Marathon Oil announced a bolt-on acquisition in the Permian Basin. It acquired 21,000 net surface acres from Black Mountain Oil & Gas and other sellers.
The EIA reported that US gasoline inventories fell by 2.8 MMbbls to 243.5 MMbbls from March 10–17, 2017. Inventories are 6% below their all-time high.
The EIA reported that US crude oil imports rose by 902,000 bpd to 8,307,000 bpd from March 10–17. Imports rose 12.2% week-over-week, but fell 0.9% YoY.
The EIA reported that US crude oil production rose by 20,000 bpd (barrels per day) to 9,129,000 bpd from March 10–17, 2017.
For the week ending March 17, 2017, the EIA reported that US crude oil inventories rose by 5 MMbbls to 533.1 MMbbls—the highest level ever.
US crude oil prices are near a four-month low due to the expectation of a rise in US crude oil production and record US crude oil inventories.
Chesapeake Energy’s (CHK) short interest ratio on March 24, 2017, was ~15.02%. But its short interest ratio at the start of the year was ~11.6%.
About 68.5% of analysts have rated Chesapeake stock a “hold.” The average broker target price of $7.3 implies a ~33.5% return over the next 12 months.
Chesapeake Energy’s implied volatility is ~50.9%, as compared to Cabot Oil & Gas’s and Noble Energy’s implied volatilities of ~34.27% and ~29.36%.
Chesapeake Energy (CHK) stock seems to be making its way upward, mirroring natural gas prices.
Currently, Whiting Petroleum has an implied volatility of ~56.8%. Whiting Petroleum’s peers Oasis Petroleum and Continental Resources have implied volatilities of ~49.5% and ~34%.
Approximately 39.5% of analysts have rated Whiting Petroleum (WLL) as a “buy,” while ~58% have rated it as a “hold.”