Europe has just won the first part of the Winter War, warmer than expected weather Help the continent avoid a full-blown energy and gas crisis. This area has just passed the midpoint of the heating quarter. Even if winter conditions return to the continent after this year’s record warm start, there should be enough gas stored to avoid the worst-case scenario. of gas during the winter.
In fact, Gas Infrastructure Europe (GIE) says that gas storage in Europe is just below 80%, which is above the five-year seasonal average of 70%. EU gas inventories stood at 89.17 billion cubic meters (bcm) on 22 January, according to GIE. Although w/w he decreased by 4.22bcm, he is still 23.4bcm higher than the five-year average in 2018-22 and 40.6bcm higher year-over-year.
Unfortunately for the natural gas bulls, traders see these developments as a green light to sell. European natural gas wholesale prices have fallen to a 17-month low of $60 per MWh, down more than 80% from a peak near $382. Around MWh in late August. Meanwhile, the regional benchmark German wholesale one-year futures electricity prices plummeted to €150 from his peak of nearly €1,000 six months ago.
Even more alarming, the outlook for natural gas is not exactly exhilarating.energy analyst bespoke investment group I made an interesting observation in an article titled bad gas. They are”…If natural gas recovers 100% in 100 days, it’s probably best to avoid it. ”
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“In the previous eight periods when commodities rose 100% in 100 days, the median performance in the following year was down 30.1%, with a 75% chance of falling. Natural gas’s performance has been less consistent: In the previous five periods that fit that criteria, natural gas rose a median of just 1.4%, three out of five,” the report said. I am continuing.
The current sell-off comes just eight months after the second strongest 100 trading day rally (+147%) in futures contract history, and odds look clearly in favor of the bears. increase.
cheap gas stocks
Unsurprisingly, it’s more profitable to short the natural gas stocks than to bet on them. ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) Year-to-date returns of 82.6% ProShares Ultra Bloomberg Natural Gas ETF (BOIL)KOLD is an inverse ETF that provides -2x daily exposure to an index that tracks natural gas by holding a one-month futures contract at a time, and BOIL is a publicly reflected index of natural gas. Offers 2x daily returns of indices that measure price performance. Traded natural gas futures contracts.
That said, contrarian investors will be happy to know that there is no shortage of natural gas bargains in this space. Here are some.
Market cap: $33.3B
PER (Forward): 6.24
YTD return: 14.9%
diamondback energy (NASDAQ: FANG) is an independent Midland, Texas-based oil and gas company that specializes in drilling for unconventional and onshore oil and gas reserves in the Permian Basin of West Texas. .
Two weeks ago, analysts at Mizuho Securities advised investors to maintain confidence in the energy sector, but warned them to be picky. The analyst started his coverage of FANG with a Buy rating and a target price of $195. Experts point out that Diamondback’s focus from the beginning on low-cost operations has enabled it to become a successful consolidator in the basin. TheyThe low-cost advantage should continue to shineh.
Diamondback Energy, Inc. will report earnings for the fourth quarter of 2022 after the market closes on February 21, 2023. According to Zacks Investment Research, based on forecasts from 12 analysts, the consensus EPS forecast for the quarter is $5.54, good for his Y/Y growth of 52.6%.
- Pioneer Natural Resources Company
Market Cap: $55.7B
PER (forward): 7.59
YTD return: 6.4%
Pioneer Natural Resources Company (NYSE: PXD) is an independent oil and gas exploration company located in Irving, Texas that produces oil, natural gas liquids (NGL) and natural gas.
The company recently revealed in a new article that 8K filing Winter storm Elliott knocked out about 4.5 thousand barrels of oil per day and 8.5 thousand barrels per day from expected fourth quarter production in the Permian Basin. The company now expects to report average production in the fourth quarter of 351,000 barrels per day and 662,000 baud per day, adding that production had fully recovered by the end of December.
Forty-nine hedge funds are still long Pioneer Natural Resources, according to Insider Monkey’s third-quarter database. A big reason they love his PXD: The company is committed to returning the majority of its free cash flow to its shareholders through dividends and share buybacks. It has also terminated its hedging program to give shareholders more earnings and potential dividends should oil and gas prices rise in the future.
Pioneer Natural Resources Company will report fourth quarter 2022 earnings after the market close on February 22, 2023. According to Zacks Investment Research, based on 11 analyst forecasts, the consensus EPS forecast for the quarter is $5.94, good for his Y/Y growth of 29.7%.
Market cap: $12.1 billion
PER (forward): 9.42
YTD return: 3.5%
Based in Pittsburgh, Pennsylvania EQT Corporation (NYSE: EQT) is the largest producer of natural gas in the United States, with 25.0 trillion cubic feet of proven natural gas, natural gas liquids and crude oil reserves on approximately 2 million acres.
Rather than resting on its laurels as a struggling gas giant, EQT continues to expand through acquisitions. $5.2 billion purchase of natural gas productsr THQ Appalachia I LLC As well as related pipeline assets XcL Midstream It was the largest M&A deal of the quarter.THQ Appalachia Owned by Undisclosed Gas Producer tag hill operatingAccording to EQT, the acquired property includes approximately 90,000 core net acres offsetting existing core lease rights in West Virginia, producing 800 million cfe per day and growing to approximately Expected to generate free cash flow with average natural gas price above $1.35/MMBtu. The company also said it would double its share buyback program to his $2 billion and raise its debt reduction target by the end of 2023 from his $2.5 billion to his $4 billion.
last year, EQT has announced a plan focused on producing more liquefied natural gas by dramatically increasing the capacity of its natural gas drilling, pipeline and export terminals around Appalachia and the U.S. Shale Basin. bottom. This not only strengthens America’s energy security, but cuts global dependence on coal, Russia, Iran, and others. So the latest acquisition will help the company reach its goals. EQT’s share will almost double in 2022.
EQT Corporation plans to report earnings for the fourth quarter of 2022 after the market close on February 15, 2023. The consensus EPS forecast for the quarter is $0.88, representing a solid 115% year-over-year increase, according to Zacks Investment Research, based on estimates from 13 analysts.
Alex Kimani of Oilprice.com
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