Zacks Analyst Blog Highlights: Anadarko Petroleum, Chesapeake, EnCana, Patterson-UTI Energy and Helmerich & Payne

Mar 14, 2011, 10:00 ET from Zacks Investment Research, Inc.

CHICAGO, March 14, 2011 /PRNewswire/ -- Analyst Blog features: Anadarko Petroleum Corp. (NYSE: APC), Chesapeake Energy (NYSE: CHK), EnCana Corp. (NYSE: ECA), Patterson-UTI Energy (Nasdaq: PTEN) and  Helmerich & Payne (NYSE: HP).


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Here are highlights from Friday's Analyst Blog:

Nat Gas Draw Short of Consensus

The U.S. Energy Department's weekly inventory release showed a smaller-than-expected drop in natural gas supplies, attributable to mild weather and increasing production.

The Weekly Natural Gas Storage Report brought out by the Energy Information Administration (EIA) every Thursday since 2002 – includes updates on natural gas market prices, latest storage level estimates, recent weather data and other market activity or events.

The report provides an overview of the level of reserves and their movements, thereby helping investors to understand the demand/supply dynamics of natural gas.

It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays like Anadarko Petroleum Corp. (NYSE: APC), Chesapeake Energy (NYSE: CHK), EnCana Corp. (NYSE: ECA), Patterson-UTI Energy (Nasdaq: PTEN) and  Helmerich & Payne (NYSE: HP).

Stockpiles held in underground storage in the lower 48 states fell by 71 billion cubic feet (Bcf) for the week ended March 4, 2011, below expectations (of 78–82 Bcf withdrawal) by analysts surveyed by Platts.

The latest decline – the 17th in as many weeks – compares with last year's draw of 112 Bcf and the 5-year (2006–2010) average draw of 107 Bcf for the reported week. The current storage level, at 1.674 trillion cubic feet (Tcf), is up 32 Bcf (1.9%) from last year's level and 21 Bcf (1.3%) above the five-year average.

A supply glut had pressured natural gas futures for much of 2010, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remain robust, thereby overwhelming demand.

Storage amounts hit a record high of 3.840 Tcf in November, while gas prices during the year fell 21%. As a matter of fact, natural gas prices have dropped approximately 70% from a peak of about $13.60 per million Btu (MMBtu) to the current level of around $4.00, in between sinking to a low of $2.50 in September 2009.

However, the recent surge in the commodity's demand (on account of low temperatures) continues to cut into the U.S. supply overhang, thereby bringing down the hefty surplus over last year's inventory level and the five-year average level. In fact, inventories dipped to almost 7% below average during mid-February and last week's smaller-than-consensus draw has moved it above average levels for only the first time since late January.

But even with the improved demand/supply dynamics, natural gas prices continue to be under pressure, as winter's peak heating demand period comes to an end. With winter subsiding, requirement of natural gas for heating and power-plant fuel will reduce against the backdrop of strong production expectations.

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