I’ve been talking almost exclusively about oil in the past dozen columns I’ve written for you – but what about natural gas? Many people continue to inquire about my thoughts on the long-term trajectory of Nat gas and whether they mirror my thoughts on oil. Is there value to be found in ‘survivor’ natural gas stocks, like Devon (DVN) or EQT Corp (EQT), as I maintain there is value in the ‘survivor’ oil stocks?
In short, the scenario for ‘natty’ remains bleak.
The long-term market for natural gas shares similarities to oil – there is a known glut in both which needs to clear either through a decline in production, an overwhelming (and unexpected) increase in demand, or both. US natural gas prices labor under the added burden that they are not in the least affected by global pricing – where possible shortages from Middle East suppliers can mean a lot for crude prices, they are almost meaningless for the “local” US natural gas markets.
Much like in oil, we’ve been waiting for those “time bombs” I keep talking about of major restructurings and outright bankruptcies to emerge in the natural gas space to whittle away some of the production – and I have been equally astounded at the resilience of gas producers to avoid the ultimate axe. Insanely leveraged Chesapeake (CHK), for example, has been a bellwether stock that I’ve been following to signal to me the…