The U.S. Energy Department's weekly inventory release showed a
larger-than-expected decrease in natural gas supplies. However,
the storage withdrawal - the fourth for the winter heating season
- was lower than both last year and the five-year average,
thereby indicating continued bearishness.
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 82 billion cubic feet (Bcf) for the week ended December
14, 2012, higher than the guided range (of 74-78 Bcf drawdown) as
per the analysts surveyed by Platts, the energy information arm
McGraw-Hill Companies Inc.
The decrease represents the fourth withdrawal of the 2012-2013
winter heating season after stocks hit an all-time high in early
November. However, the draw was lower than both last year's
withdrawal of 100 Bcf and the five-year (2007-2011) average
reduction of 144 Bcf for the reported week.
Therefore, in spite of the 'better-than-expected' draw during the
past week, the current storage level - at 3.724 trillion cubic
feet (Tcf) - is up 66 Bcf (1.8%) from the last year and 345 Bcf
(10.2%) over the five-year average.
In fact, natural gas inventories in underground storage have
persistently exceeded the five-year average since late September
last year and ended the usual summer stock-building season of
April through October at a record 3.923 Tcf (as of October 31,
A supply glut kept the natural gas prices under pressure during
the past year or so, as production from dense rock formations
(shale) - through novel techniques of horizontal drilling and
hydraulic fracturing - remain robust, thereby overwhelming
However, with the upcoming 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, Encana, Devon Energy,
Nabors Industries, Patterson-UTI Energy and Talisman Energy 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 three months.
However, Halliburton retains a Zacks #4 Rank, which translates
into a short-term Sell rating, while Helmerich & Payne and
Ultra Petroleum'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.
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
TALISMAN ENERGY (TLM): Free Stock Analysis
ULTRA PETRO CP (UPL): Free Stock Analysis
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