The U.S. Energy Department's weekly inventory release showed
an in-line decrease in natural gas supplies. Despite this
drawdown, gas stocks continue to remain bloated, reflecting low
demand amid robust onshore output.
About the Weekly Natural Gas Storage Report
The Weekly Natural Gas Storage Report - brought out by the Energy
Information Administration (EIA) every Thursday since 2002 -
includes updates on natural gas market prices, the latest storage
level estimates, recent weather data and other market activities
The report provides an overview of the level of reserves and
their movements, thereby helping investors understand the
demand/supply dynamics of natural gas.
It is an indicator of current gas prices and volatility that
affect businesses of natural gas-weighted companies and related
support plays like
Anadarko Petroleum Corp.
Devon Energy Corp.
Helmerich & Payne
Analysis of the Data
Stockpiles held in underground storage in the lower 48 states
fell by 135 billion cubic feet (Bcf) for the week ended December
28, 2012, within the guided range (of 133-137 Bcf drawdown) as
per the analysts surveyed by Platts, the energy information arm
McGraw-Hill Companies Inc.
The decrease represents the sixth withdrawal of the 2012-2013
winter heating season after stocks hit an all-time high in early
November. Moreover, the draw was higher than both last year's
withdrawal of 77 Bcf and the five-year (2007-2011) average
reduction of 111 Bcf for the reported week.
However, in spite of the 'better-than-expected' draw during the
past week, the current storage level - at 3.517 trillion cubic
feet (Tcf) - is up 23 Bcf (0.7%) from the last year and 389 Bcf
(12.4%) over the five-year average.
In fact, natural gas inventories in underground storage have
persistently exceeded the five-year average since late September
2011 and ended the usual summer stock-building season of April
through October at a record 3.923 Tcf (as of October 31, 2012).
A supply glut kept the natural gas prices under pressure during
the couple of years or so, as production from dense rock
formations (shale) - through novel techniques of horizontal
drilling and hydraulic fracturing - remain robust, thereby
However, with the U.S. winter set to be colder than the unusually
warm last one and domestic output likely to drop in 2013 versus
2012 on the back of natural gas players announcing
drilling/volume curtailments, we might expect some balancing of
the commodity's supply/demand disparity.
This, in turn, could improve the prices and buoy natural gas
Ultra Petroleum Corp.
Talisman Energy Inc.
), Encana and Chesapeake.
Among the natural gas-associated companies mentioned above,
Anadarko Petroleum, Chesapeake Energy, Ultra Petroleum, Devon
Energy, Patterson-UTI Energy and Halliburton are all Zacks #3
Rank (Hold) stocks, implying that these are expected to perform
in line with the broader U.S. equity market over the next one to
However, Talisman retains a Zacks #4 Rank, which translates into
a short-term Sell rating, while Helmerich & Payne and
Encana's Zacks #2 Rank implies that the companies are likely to
outperform the broader U.S. equity market over the next one to
three months. On the other hand, Nabors Industries' Zacks #5 Rank
indicates a short-term Strong Sell rating.
ANADARKO PETROL (APC): Free Stock Analysis
CHESAPEAKE ENGY (CHK): Free Stock Analysis
DEVON ENERGY (DVN): Free Stock Analysis
ENCANA CORP (ECA): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis
HELMERICH&PAYNE (HP): Free Stock Analysis
MCGRAW-HILL COS (MHP): Free Stock Analysis
NABORS IND (NBR): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis
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