I haven't done any detailed post about the Marcellus region, and I do plan on doing that at some point. Yesterday RRC reported pretty much inline earnings (although concensus had decreased over the past few months, as ussual). Their 15x EBITDA valuation is still far to rich for me, although I think they are an outstanding company with a premier acreage position in the SW Marcellus.
Yesterday CHK put out a news release with several unrelated pieces of information.
1) they are doing an acreage exchange with a small private company involving swapping Powder River Basin oil acreage.
2) They are buying back preffered shares in their Utica subsidiary worth $1.26 B - anything that simplifies their incredibly complex balance sheet is a step in the right direction.
3) They prereported that their realizations for the trailing quarter in the Northern Marcellus, where 29% of their gas is produced, is expected to average $2.47 per MCF below NYMEX.
WHAT??? How is this even possible. NYMEX is at $3.75 right now. We must be getting into severe take-away capacity constraint situation right now. Its hard to believe that they wouldn't just start shutting in wells with these prices. This isn't a momentary differential, it is for an entire quarter, and we still have another quarter plus before the draw season starts. Any temptation to buy Cabot or other Northern Marcellus producers is totally gone for me. It doesn't matter how cheaply you can take it out of the ground if there's no where to put it. Company wide differentials for the quarter are likely to be over $1 below NYMEX according to the release.
I'm not usually inclined to react to short term news like this, but the fact that the market hasn't reacted more to this news makes me nervous for a big fall when they report.
Yesterday CHK put out a news release with several unrelated pieces of information.
1) they are doing an acreage exchange with a small private company involving swapping Powder River Basin oil acreage.
2) They are buying back preffered shares in their Utica subsidiary worth $1.26 B - anything that simplifies their incredibly complex balance sheet is a step in the right direction.
3) They prereported that their realizations for the trailing quarter in the Northern Marcellus, where 29% of their gas is produced, is expected to average $2.47 per MCF below NYMEX.
WHAT??? How is this even possible. NYMEX is at $3.75 right now. We must be getting into severe take-away capacity constraint situation right now. Its hard to believe that they wouldn't just start shutting in wells with these prices. This isn't a momentary differential, it is for an entire quarter, and we still have another quarter plus before the draw season starts. Any temptation to buy Cabot or other Northern Marcellus producers is totally gone for me. It doesn't matter how cheaply you can take it out of the ground if there's no where to put it. Company wide differentials for the quarter are likely to be over $1 below NYMEX according to the release.
I'm not usually inclined to react to short term news like this, but the fact that the market hasn't reacted more to this news makes me nervous for a big fall when they report.
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