Two ways to play the 107% march in natural gas

The oil sector has recently been gaining momentum after being made one of the most successful sectors this year. However, since 2014, the natural gas business, which has dominated the oil and many other commodities markets, has been dominated by natural gas bulls.

On Friday, natural gas futures traded up 0.6% of millions of British BTUs since February 2014. . Gas gauge, United States Natural Gas ETF, LP (NYSEARCA: UNG) The deadline has increased by 90.1%.

Natural gas bulls have a growing demand for gas and supply problems to compliment their amazing gas discoveries.

Unusually cold winters in Europe and the return of VV-19 have created strong demand and weakened natural gas reserves. Meanwhile, the hurricane destroyed large amounts of gas, and 77% of oil and gas production is still offline in the Gulf of Mexico. According to US government statistics, natural gas reserves are currently down 17% compared to 7% a year ago and an average of five years.

Here are 2 more ways to play a natural gas boom.

Natural Gas (Henry Hub) Dollar / Mmbitu

Source – Business Insider

# 1. Buy Chesapeake

Commodity prices are a popular marketing strategy used by oil and gas producers as well as energy consumers such as airlines to protect themselves from market fluctuations. When oil prices fall, oil and gas producers usually use short fences to lock in oil prices if they believe prices can go down. According to Tudor Pickering Holt and Co. Barron, most of the power companies they cover have lost significant quarterly cash flow (about 85% in the United States).

Unfortunately, shielding means that these companies will not be able to reap the benefits of rising gas prices and could actually lead to bankruptcy.

However, some courageous producers do not play at all.

Tudor Picking Rates Chesapeake Energy (NYSE: CHK) Buy says the company is one of the few companies that remains relatively untouched.

Given the history of Chesapeake, this may seem like an unusual choice, but it does make sense.

Chesapeck Energy, widely regarded as a pioneer and unconventional excavation king, has fallen into serious trouble after borrowing heavily and expanding. For years, Chesapeck has borrowed money for the expansion of Shale projects. The company managed to survive only through asset sales (opposed by management), debt restructuring, and MAA, but could not prevent the inevitable: Chesapeck entered Chapter 11 in January 2020, becoming the largest U.S. oil and gas producer to explore. Bankruptcy protection in recent years.

Thankfully, Chesapeck has successfully emerged from a loss this year by providing a major lifeline to the company.

The new Chesapeake Energy has a strong balance with a low consumption and much more disciplined CAPEX strategy.

The company is focused on <1x long-term targets to maintain sheet strength, with target production of 400+ thousand barrels per day, and CAPEX with limited annual capital expenditures of 700 to 750 million US dollars and positive FCF. CHK says it expects to generate $ 2 billion in FFC over the next five years, which is enough to significantly improve its financial position.

CHK shares have increased by 35% since their return in March Energy Sector Sector SPDR Fund (NYSEARCA: XLE).

# 2. Buy Cimarex Energy

Mizuho, ​​meanwhile, has chosen Cimarex Energy (NYSE: XEC) As another collection for playing natural gas boom.

Mizuho cited the company’s “now-attractive free cash product” following a recent weakness and merger, and upgraded XEC to $ 95. Cabbage oil and gas (NYSE: COG).

Mizuho has been following the merger since its merger with its oil peers and its “small premium” and gas peers.

»Balance papers greatly improved the YTD by enabling the group to make attractive money not only at 65 / bb but also on the cycle, and as a result we will be very constructive, with an average of 46% of our oil coverage., ”Wrote Mizuho Vincent Lovaglio.

Even after natural gas has already been mixed with carbon dioxide, most of the cement products must go up. Gas producer.

Can the gas line continue?

The question of millions of dollars is whether this march still has legs to run after this year’s victories.

We think the procession may not have much steam in the short term. According to the latest data from the Energy Information Administration, natural gas reserves rose last week +52 BCC The +40 bcf agreement, and +20 bcf last week, indicate that supply congestion is decreasing or demand is declining. Future markets also look bleak, with gas futures trading at more than $ 5 a barrel, with expiration a year later to $ 3.70, and traders believe the current high prices will not last.

Anyway, long time Nati. During the transition to renewable energy, new LNG growth and new natural gas will remain as bright as a bridge.

By Alex Kimani to Oilprice.com

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