Floyd - I'm with you!
The stock is still floundering due to the imminent stock offering and because the O&G sector in general is selling off a little (I don't think people were expecting the "recovery" to take so long and they've been disappointed by all these poor earnings reports - Doh!). However, I see these as short term issues.
It's amazing how many of the analysts interviewed on CNBC say that energy is a good sector to invest in. Most aren't that bullish on the oil stocks (which seems short-sighted), but they usually have great hopes for the NG stocks.
The AGA figures yesterday showed the NG in storage is now below the levels of one year ago! It has taken a while to get here, but I think this is a key milestone, and I am quite hopeful that AGA levels will now decline far more quickly than people are anticipating. The high relative price of Oil suggests to me that NG will be substituted once all the Oil contracts established three or four months ago unwind. In addition, the prospect of another period of hot weather in the next week or so is starting to drive expectations up. Another small plus is that a 235MW coal plant had a fire and is now shut down. The electricity supply/demand arrangements are so finely balanced that this all bodes well for NG utilisation over the next few weeks.
People were disappointed a few weeks back when SFY announced lower than anticipated NG production for the quarter. However, I don't think this is specific to SFY. The drilling cut-backs of last year are beginning to hit output. This is an industry-wide problem and will help to drive NG prices higher. I am encouraged that SFY seems to be hurrying to get the cash in - if they can drill like crazy, they might benefit from the higher prices in 6 months time. We all worried about the fast fall-off in the Austin output, but it now gives SFY a major advantage - if they strike a few big wells, output will rise rapidly, just at the time when they can benefit the most. Furthermore, they'll be drilling at relatively low prices. It should all help the bottom line.
Mark |
