It was a very rough day for our portfolio yesterday, but the one bright spot was that we have been right and continue to be right in regards to natural gas and coal. Having waited to move into those two was the correct call and has saved us some further pain. Oil remains strong, while some oil E&P plays have begun to reflect market fears rather than the reality of the situation. So this morning we look to initiate a trade in that area with a tight stop. We feel that this is now a stock picker's market, and that we must now pick our spots rather than entire industries at a time.
Oil & Natural Gas
Chesapeake (CHK) had a very rough day yesterday, and although it started off poorly it seemed to get worse as the conference call proceeded during trading. Shares closed at $16.74 falling by $2.86 (14.59%) to close at the lows for the day. Volume was over 146 million shares and it is fair to say the computers got a hold of this one playing the penny game. The call was not all that bad, but some questions were raised. Going forward it is apparent that the company is going to really focus on the Eagleford, Utica and Mississippi shale plays. That should be good as those three shales have great economics, but being unhedged on the natural gas side is really going to hurt moving forward. It will be interesting to see how the company plays that moving forward, but the story behind the hedges coming off was interesting.
SandRidge Energy (SD) took a beating yesterday, and it was a guilty by association type of day. Shares fell $0.77/share (9.60%) to close at $7.25 which was, on the bright side, off of the day's lows. The shares fell as low as $7/share and then had a very strong bounce at the close. Volume was up many times over, and finished at 47 million. Ward being involved with the hedge fund may be one thing, however we think that the shares have been hit without much merit and would initiate a position here, if only for trading purposes. It is not a great market to do so in, but the value appears to be there.
Regarding Cheniere Energy (LNG) this morning, earnings apparently were not yesterday. Two of the sites we use, as well as others, had the date listed as we reported but the company stated that they will have earnings out by week's end. This is the way it is when company's do not have real earnings to report, but just wanted to alert anyone who may have been wondering what was going on in regards to this topic.
Coal
Arch Coal (ACI) reported yesterday and got whacked. They still had positive earnings, but analysts came out afterwards and guided down for the year and adjusted to a loss. The shares hit a new 52-week low on 26 million shares traded. Both Moody's and Fitch downgraded debt ratings due to the future outlook provided by the company. One big issue is that the company reported that there is severe weakness in the US thermal coal markets. You can read the entire earnings call transcript here.
Uranium
Cameco (CCJ) was up about 3% yesterday with 4.5 million shares traded which these days is a lot for the uranium miner. Far fewer shares than used to be traded, but interest will pick up here as 2012 winds down and investors become aware of the outlook for uranium and uranium producers. Prices will rise and the supply/demand gap will be reversed. There will be more demand than supply in the next few years and that is a fact - so long as the Russians follow through with the game plan. The transcript can be found here for the earnings they reported on May 1st.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SD over the next 72 hours.
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