Seeking Alpha: Range Resources Another Growth-Oriented Marcellus Play

Within the world of natural gas-weighted E&P companies, Cabot Oil & Gas (COG), Southwestern Energy (SWN), and Range Resources (RRC) often seem to get grouped together in coverage and analysis. Along with other names like Chesapeake Energy (CHK), Ultra Petroleum (UPL), and EQT (EQT) these are some of the more interesting names leveraged to the expansion on shale gas production from the United States.

Even moreso than for Southwestern, Cabot, and Ultra Petroleum, Range Resources' value seems skewed toward ongoing drilling and production/reserve growth. With over 10,000 drilling locations in the Marcellus alone and a very interesting position in Oklahoma and Kansas, that forward-looking skew to the valuation doesn't seem unreasonable. I am concerned about the returns on capital here, though, as well as the balance sheet-adjusted production growth and while the valuation is interesting, I wouldn't recommend ignoring those concerns.

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Range Resources Another Growth-Oriented Marcellus Play

Seeking Alpha: Differentials All The Difference For Cabot Oil And Gas

There are a lot of numbers supporting an argument that Cabot Oil & Gas (COG) is one of, if not the, best dry gas producers in the country. The company has shown exceptional capital productivity, as well as low lifting and finding & development costs. Add that to some top-notch acreage in the Marcellus, and Cabot has delivered top-notch adjusted production growth and returns on employed capital.

That's not what is driving the shares right now, though. All of the positives at Cabot seem to be taking a back seat to worries that production growth in the Marcellus will overwhelm takeaway capacity and force Cabot to accept weak differentials. This is most definitely a risk, as every $0.25/mmbtu has a roughly $5 to $6 impact on NAV, but I believe growth-hungry midstream and pipeline companies will address these infrastructure challenges, leaving Cabot meaningfully undervalued today.

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Differentials All The Difference For Cabot Oil And Gas 

Seeking Alpha: The Market Seems To Be In Tune With Southwestern Energy

Southwestern Energy (SWN) has emerged as one of the top natural gas E&P companies in the U.S., with large positions in both the Fayetteville and Marcellus regions. Southwestern has managed to lower its costs through significant integration, including company-owned rigs and midstream assets, but the company is looking at a significant slowdown in balance sheet-adjusted production growth (a major driver of value). Today's valuation looks pretty fair and reasonable, suggesting that upside is not surprisingly tied to better natural gas prices and/or positive exploration results in New Ventures acreage.

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The Market Seems To Be In Tune With Southwestern Energy

Investopedia: The Wait For $5 Gas Could Be A Long One At Ultra Petroleum

Reputations, good and bad, can be surprisingly sticky. Ultra Petroleum (NYSE:UPL) has long been lauded for its high-quality operations, its cost leadership, and the quality of its properties/reserves. While the first part is absolutely still true, I have bigger questions about the quality of Ultra's properties and how the company will generate value over the long-term. While I will certainly acknowledge that higher gas prices will be the rising tide that lifts all boats in the natural gas space, I'm increasingly concerned that Ultra Petroleum is a high-quality operator with medium-quality assets and, as such, maybe not the horse to ride for the long term.

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Investopedia: A Familiar Refrain For Range Resources

In many respects, investors are going to find a lot similarities between companies like Ultra Petroleum (NYSE:UPL), Cabot Oil & Gas (NYSE:COG) and Range Resources (NYSE:RRC). Namely, that these are high-quality natural gas-oriented energy companies with attractive acreage and drilling prospects, as well as low operating costs. However, what is also similar between them all is the relatively low price of natural gas and the extent to which share price appreciation is going to be tied to improving natural gas realizations.

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Investopedia: Cabot Oil And Gas Looks Like A Reasonable "Buy And Wait" Story

Everybody knows the deal these days on natural gas. E&P companies like Cabot Oil & Gas (NYSE:COG) have been incredibly successful at finding and exploiting new sources of natural gas, but the U.S. energy infrastructure has not shifted as radically. Consequently, inventories are high and prices are low, which has kept a lid on many of the stocks. Although Cabot's near-term valuation wouldn't suggest that it's a compelling buy, I think a longer-term perspective suggests a different answer.

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Investopedia: Talisman Energy Has More Charm Than The Market Thinks

Institutional investors seem to approach energy stocks with the same sort of discipline and dedication that teenaged girls show towards boy bands and pop stars. Whatever was popular last year isn't going to be hot this year, but there's not always a lot of logic in the process. Talisman Energy (NYSE:TLM) does have real challenges that merit a discount, but it seems as though the Street has gone a little overboard here and patient investors may want to consider the name.

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http://stocks.investopedia.com/stock-analysis/2012/Talisman-Energy-Has-More-Charm-Than-The-Market-Thinks-TLM-APA-STO-COG0629.aspx

Can Sasol Liven Up North American Gas?

For years now, natural gas bulls have sputtered and fumed over the expanding gap between the price of oil and natural gas. From an energy-content point of view, natural gas is extremely cheap and oil is relatively quite expensive. Typically those gaps do not persist, but there is a problem in this case - natural gas just is not as useful; it does not go into car gas tanks, it does not make diesel or jet fuel, nor any of the other follow-on products that come out of a barrel of oil. 

If Sasol (NYSE:SSL) has its way, though, the road to change may be in sight. 

A Tie-Up with Talisman   

Sasol, the large South African synfuel specialist, announced an agreement on Monday whereby it was acquiring a 50% operating interest in one of Talisman's (NYSE:TLM) shale gas assets. Sasol is paying a bit more than $1 billion for 50% of the Farrell Creek development in the Montney Shale. The way the deal is structured is a little unusual, though. Sasol will pay $263 million in cash upfront, and then fund three-quarters of Talisman's development costs up to the announced purchase price.

 
The Asset 
Montney is a bit like Canada's Barnett, Haynesville or Marcellus - a geological formation that contains huge amounts of hydrocarbon resources (natural gas, mostly), but requires advanced exploitation technologies to access. According to reports, this development may contain upwards of 9.6 trillion cubic feet of natural gas - clearly a sizable reserve base. An important part of the asset, though, is the fact that it is also relatively close to established pipeline infrastructure - given the problems that companies like Ultra Petroleum (NYSE:UPL) used to have in getting full value for its gas (due to a lack of infrastructure), that is not a trivial factor.
 

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Ultra Petroleum - Low-Cost, High-Quality

Sometimes the best you can hope for is to own a good house in a tough neighborhood. In what has been a tough market for natural gas, shareholders of Ultra Petroleum (NYSE:UPL) have done relatively better than most. 

And why not? Ultra is a low-cost producer in the field, and couples that with significant production growth. The real question is whether or not the market will continue to value Ultra when the inevitable rally comes in natural gas prices. 


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http://stocks.investopedia.com/stock-analysis/2010/Ultra-Petroleum---Low-Cost-High-Quality-UPL-CHK-ECA-SWN-APA-DVN-COG0803.aspx

Of course it figures ... less than an hour after I post my "sorry, possibly no posts today", an Investopedia piece goes up!

Will The EPA Crack Down On Fracking

With everyone's attention focused on the Gulf oil spill clean-up efforts, there is another environmental controversy brewing in the energy sector. While hydraulic fracturing and pressure pumping have been hailed for their ability to open up new reservoirs of oil and gas in the United States, there is growing concern about the environmental impact of these activities. Although I do not think these worries are ever going to shut down operations in areas like the Marcellus Shale, energy investors need to keep an eye on this issue. 

What the Frack? 
In simple terms, hydraulic fracturing, or "fracking", is a process by which drilling companies force fluids down a bore hole and use that pressure to crack the rock. Those cracks are then kept open with additional additives called proppants (sometimes sand, but increasingly purpose-built ceramic particles). Oil and gas that was previously trapped within the pores of that rock can then migrate out through those cracks and up the well.  
 

To read the full piece, please go to: 
http://stocks.investopedia.com/stock-analysis/2010/Will-The-EPA-Crack-Down-On-Fracking-HAL-APC-NBL-COG-EOG-CHK-UPL-XOM0712.aspx

A quick note on spelling conventions ... I realize a lot of industry insiders spell it as "fracing" or "fraccing", but there are just as many sources out there that use "fracking". I have no dog in the hunt.