Wednesday, April 13, 2011

U.S. Natural Gas Producer Stock Prices Expected to Decline 15-20%

Natural Gas Market Update: We have been warning that Natural Gas producers were substantially over-valued across the board, on P/E and Discounted Cash Flow basis, given projected long term depressed prices in the $4mmbtu price range, substantial over-supply which will persist the next 3-5 years, mounting environmental liabilities and costs, and lack of fundamental demand.

We view the most at risk producers to be Chesapeake Energy (CHK), Devon Energy (DVN), Range Resources (RRC), and Southwestern Energy (SWN). These producers could see price declines in excess of 20%, retracing non-sustainable appreciation during the past six months.

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