Morningstar Predictions: Crude Max $64/Barrel and NatGas $4/Mcf
Investment research service Morningstar is out with their latest “Quarter-End Insights” on energy. The highly regarded service says (a) the price of crude oil won’t rebound anytime soon, and their long-term price projection is for oil to be priced around $64/barrel here in the U.S., (b) even though natural gas production is slowing in the U.S., there’s plenty more ready to go online and therefore prices will remain low for a while–they project a “midcycle” price for natural gas of $4/Mcf; and (c) one of their top three picks for stocks in the energy space is Marcellus driller Cabot Oil & Gas…
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Cabot Oil & Gas is one of the stellar success stories of the Marcellus Shale. They drill in a single northeastern Pennsylvania county–Susquehanna County (near where MDN is located). From that single county Cabot produces 1.7-1.8 billion cubic feet (Bcf) per day of natural gas. If you want to know how to “do it right” with shale drilling in the Marcellus–you watch Cabot. The company participated in the Barclays CEO Energy/Power Conference 2015 last week in New York City. We grabbed a copy of their PowerPoint presentation from that event and include it below, along with some of the insights we glean from reviewing the presentation…
There is no doubt the current stock market crash (what else can you call it?) has affected everyone and everything–including the Marcellus/Utica industry. Yesterday the price of West Texas Intermediate (WTI) crude oil closed the trading day at $38.24 per barrel–the lowest price since 2009 during the dark days of “the Great Recession”. Natural gas trading at the benchmark Henry Hub in southern Louisiana, often used as a proxy for all natural gas, closed at $2.64 per thousand cubic feet (Mcf). The Dow Jones Industrial average sunk another 588 points to close down more than 1,000 points in two trading sessions–last Friday and yesterday. At the beginning of trading yesterday, the DJIA experienced its biggest intraday (within a single day) loss ever–plunging more than 1,000 points as trading began. Thankfully it regained nearly half of that–but still, it was scary on many levels. All of that fear has affected all stocks, including the stock price for some of the biggest Marcellus/Utica drillers, who saw losses averaging 7-10% in a single day–yesterday…
Last Friday during the Cabot Oil & Gas quarterly earnings call update with analysts, Cabot’s CEO Dan Dinges provided an important update on the Constitution Pipeline, a 125-mile pipeline that will stretch from the gas fields of Susquehanna County, PA into New York, to Schoharie County. It is a critically needed pipeline to get Cabot’s natural gas in Susquehanna County to markets throughout the northeast and New England. Although Williams is the lead company building the pipeline, Cabot is the other primary partner in the project. Currently the Constitution is 100% FERC authorized and they have 100% of the rights of way leases signed for the project. The only hold-up is the New York State Dept. of Environmental Conservation in granting 401 Water Quality Certificates that allows the Constitution to lay pipe through and under swamps, creeks and other bodies of water. According to Dinges, they expect NY to issue those permits any day now…
With all of this talk about CONSOL Energy and Noble Energy and mergers/acquisitions and workforce reductions, we came across an interesting story and analysis by SNL Financial summarizing a Goldman Sachs Global Investment Research report issued last Friday. The Goldman report evaluates 38 exploration and production (E&P) companies on their suitability and desirability as mergers and acquisitions candidates based on asset quality, potential upside returns to the buyer as oil and gas prices improve, and low break-even operations. That is, of all the E&Ps out there, which ones are most likely to be targeted for a takeover, and by whom? The surprising answer is that Cabot Oil & Gas and Range Resources, both huge Marcellus drillers, are among the takeover targets. And the super majors interested in doing the taking over? Exxon Mobil and Statoil…
Who were the top 5 natural gas producers in Pennsylvania for all of 2014? The names of the companies won’t surprise you if you’ve read MDN for any length of time. But the order of the list may surprise you, and the number of active wells for some of them likely will surprise you…
Investment firm Topeka Capital Markets recently issued a report (for their clients) of the “most likely” companies in the oil and gas space that will be takeover targets, presumably this year. Unfortunately we don’t have a copy of the report, but we do have a list of the names they say are likely targets. The list has seven companies on it–three of which are focused on the Marcellus/Utica. Two of them are some of the biggest in the Marcellus/Utica. One of them has our eyes popping out, frankly with disbelief…