When I wrote convincingly last July about the coming turnaround in Nat gas prices I did a great job in recognizing the trajectory of storage and the slow but steady drop of surplus in Nat gas that would lead to a 3rd and 4th quarter rally.
Unfortunately, instead of just recommending the commodity itself, I tried to find stocks that I felt were so closely levered to the price of natty that they would respond to what has been a big move from around $3.40/mcf to today above $4.10/mcf. Again, unfortunately, the stocks I gave including EnCana (ECA), Ultra Petroleum (UPL) and Devon (DVN) have refused to respond to the move as I had expected and the reason has been clear: While Nat gas has rallied, the production where these companies are levered has been drying up.
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That’s been a function of both the shut-ins, and massive rush to liquids drilling that any company capable has been frantically attempting to accomplish in the last two years (Devon being a good example) and the needed drop in production that has been forced upon over-leveraged companies dealing with a depressed price (see Exco and Ultra).
It has been instead in the Marcellus with continuing production increases where the price rise in Nat gas has translated to booming stocks: Cabot Oil and Gas (COG), Range Resources (RRC), Southwestern (SWN) and EQT Corp. (EQT) being four companies…