I recently wrote a note on NatGas (ng) in response to a Barron's article that highlighted analyst calls for $3 ng in 2023 (from current $6-ish) levels. In sum, I took the view that supply/demand fundamentals lean the other way, and while current supplies of NG are ample largely due to impediments to exporting due to the explosion at an LNG export facility coupled with a relatively mild start to the US winter, it wouldn't take too much in terms of an arctic blast or two to draw down those ng inventories and to see the price soar.
Coterra (CTRA) is an ng play. The stock had peaked earlier in the year, coincident with the time when analysts were calling for $10 ng (and some even $20!). It's traded off since then and sits, as you can see in the chart, at a key support level. Recent earnings were also a catalyst for selling pressure as the company indicated a smaller number of proven reserves inground in the Lower Marcellus, something which seemed to surprise the market even though well before the earnings release some analysts were already opining on the relatively limited runway left in the CTRA's Lower Marcellus wells and noting their move to expand their activities in the Upper Marcellus area. Admittedly, well-productivity in the Upper falls short of well-productivity in the Lower, but again, the numbers didn't appear to reflect a game-changer for CTRA.
So what else has pressured the stock? Perhaps it's their relatively novel dividend structure. CTRA was one of the pioneers in providing a fixed/variable dividend to shareholders...part of the dividend if a fixed amount per share, and part varies based on a percentage of free cashflow. With ng prices having come off so much, it's not unlikely that dividend seekers are looking elsewhere, thinking that CTRA's recent 9+% total payout might vaporize.
Given what I wrote in my previous piece on ng and what I've indicated here specifically re CTRA, it shouldn't be a surprise that I am bullish on the stock. This current $25-ish level, an historic 'swing zone', will be a key test of support. I initiated a small position slightly above here and am considering adding soon. Today's early 5% pop in ng futures faded, and so in turn, did CTRA. But at around these levels, and for me, certainly lower, I see CTRA as yet another way to position for my bullish ng view.
Again, nothing written here whether explicitly or implied is meant to be advice in any way! It's merely food for thought and discussion.
Comments welcome.
Coterra (CTRA) is an ng play. The stock had peaked earlier in the year, coincident with the time when analysts were calling for $10 ng (and some even $20!). It's traded off since then and sits, as you can see in the chart, at a key support level. Recent earnings were also a catalyst for selling pressure as the company indicated a smaller number of proven reserves inground in the Lower Marcellus, something which seemed to surprise the market even though well before the earnings release some analysts were already opining on the relatively limited runway left in the CTRA's Lower Marcellus wells and noting their move to expand their activities in the Upper Marcellus area. Admittedly, well-productivity in the Upper falls short of well-productivity in the Lower, but again, the numbers didn't appear to reflect a game-changer for CTRA.
So what else has pressured the stock? Perhaps it's their relatively novel dividend structure. CTRA was one of the pioneers in providing a fixed/variable dividend to shareholders...part of the dividend if a fixed amount per share, and part varies based on a percentage of free cashflow. With ng prices having come off so much, it's not unlikely that dividend seekers are looking elsewhere, thinking that CTRA's recent 9+% total payout might vaporize.
Given what I wrote in my previous piece on ng and what I've indicated here specifically re CTRA, it shouldn't be a surprise that I am bullish on the stock. This current $25-ish level, an historic 'swing zone', will be a key test of support. I initiated a small position slightly above here and am considering adding soon. Today's early 5% pop in ng futures faded, and so in turn, did CTRA. But at around these levels, and for me, certainly lower, I see CTRA as yet another way to position for my bullish ng view.
Again, nothing written here whether explicitly or implied is meant to be advice in any way! It's merely food for thought and discussion.
Comments welcome.