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The Zacks Analyst Blog Highlights: Chesapeake Energy, Comstock Resources, Southwestern Energy, Range Resources and CNX Resources

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For Immediate Release

Chicago, IL – October 16, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Chesapeake Energy Corp. (CHK - Free Report) , Comstock Resources, Inc. (CRK - Free Report) , Southwestern Energy Company (SWN - Free Report) , Range Resources Corp. (RRC - Free Report) and CNX Resources Corp. (CNX - Free Report) .

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Here are highlights from Monday’s Analyst Blog:

Natural Gas Futures Gain on Low Inventory Levels

The U.S. Energy Department's weekly inventory release showed a natural gas storage injection that fell in line with market expectations. Meanwhile, natural gas prices rallied to their highest levels since January as inventories remain significantly below their five-year average ahead of the upcoming winter.

Analysis of the Data: In-Line Rise in Storage

Stockpiles held in underground storage in the lower 48 states rose by 90 billion cubic feet (Bcf) for the week ended Oct 5, at par with the guidance as per the analysts surveyed by S&P Global Platts. The injection was also same as the five-year (2013-2017) average addition though it was above last year’s build of 81 Bcf for the reported week.

Despite past week’s relatively large supply addition, the current storage remains well below benchmarks. At 2.956 trillion cubic feet (Tcf), natural gas inventories are 607 Bcf (17%) under the five-year average and 627 Bcf (17.5%) below the year-ago figure.

Fundamentally speaking, total supply of natural gas averaged around 91.1 Bcf per day, essentially unchanged on a weekly basis. Meanwhile, daily consumption was up 0.9% to 78.2 Bcf on stronger power generation demand.

Prices Tally Another Weekly Gain

Natural gas prices edged up 0.6% last week to finish at $3.161 per MMBtu on Friday, after reaching a nine-month high settlement of $3.284 per MMBtu earlier in the week. The fossil fuel’s climb, despite skyrocketing production, could be traced to the substantial deficit in natural gas stockpiles ahead of the upcoming winter season. Following a colder-than-expected April and hot summer, natural gas inventory levels in storage are at their lowest for this time of year. Per the EIA, working natural gas inventories are expected to enter the winter heating season at 3,263 Bcf, the least since 2005. 

Positive Long-Term Thesis

The fundamentals of natural gas continue to be favorable in the long run, considering the secular shift to the cleaner burning fuel for power generation globally and in the Asia-Pacific region in particular.

The EIA predicts global demand for the commodity to grow 43% from 2015 to 2040. Countries in Asia and in the Middle East – led by China’s transition away from coal – will account for most of this increase. The replacement of coal-fired power plants and higher consumption from industrial projects have also contributed to the strength in natural gas demand.

Finally, if the upcoming (2018-2019) winter turns out to be colder-than-normal, the surge in expected demand in the face of relative deficit of natural gas inventory could trigger a large rally in the commodity's price.

Want to Own Natural Gas Stocks Now?

The secular tailwinds mentioned above could see natural gas eventually settle well above the $3.5 per MMBtu mark before the end of the winter. This augurs well for natural gas-heavy upstream companies like Chesapeake Energy Corp., Comstock Resources, Inc. and Southwestern Energy Company. However, each of these firms has a Zacks Rank #3 (Hold), which means that investors should preferably wait for a better entry point before buying shares in them.

Meanwhile, if you are looking for some near-term natural gas plays, Range Resources Corp. and CNX Resources Corp. may be good selections. Both companies carry Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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