Less Drilling Might Equal More Profit $CHK $QEP $RRC $SWN $UPL $WPX
With drilling rigs dropping much faster than expected things are looking good for natural gas producers. Those that have been able to hold steady during this low have enjoyed a large increase as of late and are expected to gain more if this trend continues. Here are some of the companies that might see to profit most from the possible large increase in price.
The Baker Hughes (BHI) rig report on Friday showed an interesting divergence with the commodity markets. While natural gas has jumped some 60% in the past few months, the amount of rigs drilling for natural gas has plunged to lows not seen since 1999. In the last week, the natural gas rig count dropped another 15 to only 422. Last year, the count was 936.
Recently Forbes released an article describing the depletion curve in the Eagle Ford as higher than expected. Not only does this change the investment thesis on some of the shale plays, but it also dramatically changes the production rates and hence future inventory levels. In fact, Forbes is forecasting $8 gas this winter due to these factors.
Natural Gas Producers
Natural gas producers stand to benefit from the higher gas prices due to reduced drilling. In a recent investor presentation, Chesapeake Energy provided this recent chart of the top natural gas producers in the U.S.
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