CHK, XEC. I believe they'll both come back as demand strengthens.
For now and the next few months it looks to me that either supply and demand are in balance at current low demand and prices, or else that new supply coming on line is more than adequate for the demand. If gas stock prices aren't moving up now, then when - that's what is bothering me. It could be another year. Perhaps the troughs in stock prices and gas/oil prices have not even been seen yet.
If oil/gas prices stay down for a while, and a while is enough to where in '09 and '10 hedges start coming off, then these companies might be in for some difficulty.
If I presume these stocks are value stocks that might revert to mean numbers if/as oil/gas prices increase, then I'd guess these two companies and others in the sector could double or triple or more. Which would beat other value investments I might make now where I at best envision maybe a 50% or 100% rise. In this latter case, the problem might be for companies to maintain their revenue base. For the e&p's, the issue might be, can they make money from their production quantities & mix (ie. from the revenue they will generate)?
I've decided I'm not willing to hold so many positions in e&p companies which, although they have assets, might not make profits from their revenues. I have dropped my CHK and XEC positions to much smaller amounts and have sold down or out others as well. Still have a chunk of my portfolio bet on the sector though. |
