At the same time that it released earnings, Chesapeake said that it was in the process of selling about $3.4 billion in assets. There are two pieces to the sales. First, an unnamed major international energy company is expected to pay $2.14 billion for a 25% interest in 650,000 net acres Chesapeake controls in the Utica shale play. The company also plans to sell preferred shares worth $500 million in a new subsidiary to a privately held energy company and another $750 million in preferred shares of the same subsidiary to other investors. Chesapeake, as is its common practice, will use proceeds from the sale to support its drilling operations in the Utica shale play.

There are several interesting tidbits in the company’s report. Liquids, including oil and natural gas liquids, now accounts for 17% of total production, up from 10% in the same period a year ago. As a percentage of realized revenue, liquids account for 31% of total revenue, and as a percentage of revenue, liquids contribute 40% of unhedged revenue. The average realized price for barrel of liquids was $63.03 in the third quarter, up from $59.81 a year ago.

Natural gas accounts for 83% of production, down from 90% a year ago; 69% of total revenue; and 60% of unhedged revenue. The company’s average realized price for a thousand cubic feet of natural gas was $4.82, compared with $5.20 a year ago, and $5.19 in the second quarter of this year. Natural gas production was essentially flat, at 254 billion cubic feet in the quarter, compared with 253 billion cubic feet in the same period last year. Sequentially, natural gas production rose by 20 billion cubic feet.

Like every other natural gas producer, Chesapeake relies on its liquids production to maintain revenues and profits with natural gas prices below $5/thousand  cubic feet. And greater volumes of natural gas coming into production are not likely to boost the price.

Chesapeake’s business depends on being the first to stake a claim in new shale play, to buy up as many acres as it can, and then to parcel off the assets for cash and a stake in production. CEO Aubrey McClendon calls this the “asset harvest.” As long as the company can keep discovering new deposits it doesn’t have to worry too much about low natural gas prices because it collects a decent sized portion of its original investment up front and leaves its partners to worry about the rise and fall in commodity prices.

If or when the going gets tough, the company can dump its all its assets in a particular play and go hunting and gathering elsewhere, as it did when it sold all its remaining stake in the Fayetteville shale to BHP Billiton plc (NYSE: BHP) for about $4.75 billion. The company had sold a 25% stake in the Fayetteville to BP plc (NYSE: BP) for $1.9 billion in 2008.

In January, the company announced a plan to reduce its long-term debt by 25% and increase production by 25% by the end of 2012. At the time, long-term debt stood at $12.64 billion. At the end of the third quarter, long-term debt stood at $11.8 billion. That’s about a 7% reduction so far, with five quarters still to go.

Following a burst of enthusiasm in after-hours trading last night and pre-market trading this morning, Chesapeake shares are down more than -7% in the first hour of trading this morning, at $26.90, in a 52-week range of $21.11-$35.95.

Paul Ausick

TransCanada stands to lose the most if the project is denied. The entire Keystone pipeline system is nearly fully contracted for a total of 900,000 barrels/day for an average term of 18 years. That is a big loss if the pipeline isn’t built. The largest producer in the oil sands is Syncrude, a joint venture that includes Imperial Oil Resources (wholly owned by Exxon Mobil Corp. (NYSE: XOM)), Suncor Energy Inc. (NYSE: SU), and China Petroleum & Chemical Corp. (NYSE: SNP) — Sinopec — among others. Other producers include ConocoPhillips Corp. (NYSE: COP), Chevron Corp. (NYSE: CVX), Murphy Oil Corp. (NYSE: MUR), Total SA (NYSE: TOT), Royal Dutch Shell plc (NYSE: RDS-A), BP plc. (NYSE: BP), and Devon Energy Corp. (NYSE: DVN).

These companies won’t lose everything because the bitumen from the oil sands will go somewhere, somehow. Unless, of course, the Canadian government decides to shut down every project in Alberta, and that simply will not happen. One of the big problems facing the producers now is that they’re crude is landlocked and sells at a substantial discount to WTI. For the week ending September 23rd, Heavy Hardesty grade crude sold for $78.28/barrel, while WTI sold for $80.29 and Brent sold for $109.17. Getting crude from Alberta to a coast, any coast, is critical for producers.

If the Keystone XL pipeline is killed, an expansion to an existing pipeline system to the US/Canadian west coast could take up some of the slack. Kinder Morgan Energy Partners LP (NYSE: KMP) is investigating an expansion to its Trans Mountain system and Enbridge Inc. (NYSE: ENB) has already begun the permitting process for a similar pipeline to the west.

Another interesting development are proposals from both of Canada’s major railroads to construct a pipeline-by-rail from Alberta to west coast. And while nothing officially like a pipeline-by-rail has been proposed for the run to the US Gulf Coast, rail traffic has already increased substantially from North Dakota south to Cushing and, eventually producers hope, to the Gulf.

In July weekly US rail carloads of petroleum and petroleum products hit a four-year high, and the August total of about 7,400 carloads is even higher. A rail tanker holds about 1,500 barrels, so every day about 1.6 million barrels of petroleum is moving around on the US rail network. Add to that another half a million barrels a day from the oil sands and that puts about another 2,500 tanker cars on the rails every day.

There were 750 reported rail accidents involving hazardous materials in 2010. The odds of a significant oil spill rise if we add more oil transport by rail.

The same is true if the Canadian crude is moved by truck. Truck transportation by surface road is even more expensive and prone to accidents. There were nearly 12,000 road accidents involving hazardous materials in 2010. Besides being much more expensive, more tanker trucks carrying up to 300 barrels of oil each raises again the odds on an environmentally significant spill.

So while pipeline spills are a concern, rail and truck accidents are far more common. The Keystone XL pipeline should be held to a very high safety standard, but it is probably the safest way to move the most Canadian crude.

The argument that Canada should stop development and extraction in the oil sands may make more environmental sense, but until a large-scale alternative transportation fuel is available at a reasonable price, oil sands development will very likely continue. And moving that oil by pipeline is really the only sensible option.

Paul Ausick

China, in particular, stirs a lot of interest because its technically recoverable shale gas deposits are estimated to be about 1,275 trillion cubic feet (Tcf). That’s about 50% more than the estimated 862 Tcf of technically recoverable shale gas in the US. And US companies like Baker Hughes Inc. (NYSE: BHI), Halliburton Co. (NYSE: HAL), Schlumberger Ltd. (NYSE: SLB), and National Oilwell Varco, Inc. (NYSE: NOV) with both deep pockets and experience in shale gas exploration and production could get a crack at developing China’s vast shale gas deposits. US producers like Chesapeake Energy Corp. (NYSE: CHK) and Devon Energy Corp. (NYSE: DVN) are less likely partners, but such a deal is not impossible.

To date, no development of China’s shale gas resources has begun. The government is mulling plans both to offer subsidies to domestic E&P companies and to permit foreign company participation in extracting the gas. China’s approach to allowing its domestic companies to develop shale gas is something of a balance between granting licenses only to big players like Sinopec, formally China Petroleum & Chemical Corp. (NYSE: SNP), Cnooc Ltd. (NYSE: CEO), and China National Petroleum Co.’s Petrochina Ltd. (NYSE: PTR) and permitting smaller players to get into the hunt.

The government wants to avoid the development of hundreds of independent companies, as happened with the coal mining industry. The unlicensed coal mines were extraordinarily lethal to miners and riddled with corruption. The central government has fought hard to bring the miners under control in the last two years or so.

The Chinese have no experience or technology to develop their shale gas resources. Royal Dutch Shell plc (NYSE: RDS-A) has already been signed on by one of the two small Chinese companies to win a lease and the company has also formed a partnership with Petrochina.  Chevron Corp. (NYSE: CVX) and BP plc (NYSE: BP) are in discussions with Sinopec to form a partnership as well. Cnooc paid Chesapeake more than $2 billion for rights to participate in developing some Eagle Ford shale leases.

As China’s government continues to explore its options regarding shale gas development, one thing does seem clear. The government is leaning towards a less restrictive approach than it has taken with other hydrocarbon development. The country is also likely to adopt some sort of subsidy policy that would encourage shale gas development. That would be enough to really get foreign companies lined up to go to work.

Paul Ausick

The acquisition should boost Apache’s position among all US oil and gas companies. The company is currently about the same size as Anadarko Petroleum Corp. (NYSE: APC), and trails only Exxon, Chevron Corp. (NYSE: CVX), ConocoPhillips Corp. (NYSE: COP), and Occidental Petroleum Corp. (NYSE: OXY) when measured by market cap.

Apache has spent more than $12 billion since April 2010 on acquisitions. The company has acquired the shallow water Gulf of Mexico fields of Devon Energy Corp. (NYSE: DVN), the deepwater Gulf fields of Mariner Energy, and a big portion of the North American assets of BP plc (NYSE: BP). The company has boosted production from 647,000 barrels/day to 749,000 barrels/day.

Today’s purchase of the Beryl field and related properties adds 68 million barrels of oil equivalent to Apache’s reserves and about 19,000 barrels/day of production plus 58 million cubic feet of daily natural gas production. The acquisition increases the company’s North Sea production by 54% and its North Sea reserves by 44%.

There are two noteworthy aspects of the deal. First, since Apache bought the North Sea’s famous Forties field in 2003, the company has produced more oil from the field than was estimated to be present at the time of acquisition. And the company has booked reserves above that production that are greater than the reserve barrels it purchased at the time. In other words, the company has more than doubled the reserves in the Forties field while nearly doubling production. These guys apparently know what they’re doing.

Second, the 68 million barrels of reserves are premium-priced Brent crude. Brent crude trades today at a premium of about $25/barrel to WTI, making every barrel of Brent worth nearly 30% more than a barrel of WTI. And because WTI is essentially landlocked within US borders and is rarely traded, Brent is replacing WTI as the global benchmark for crude pricing. That virtually guarantees Apache premium pricing on its Brent barrels for a long time to come.

In 2010, the Forties field yielded about 9% of Apache’s world-wide production and about 13% of the company’s world-wide production revenue. In 2011, Apache is selling all its North Sea production under a term contract with a per-barrel premium to the price of Brent. The addition of the Beryl field only improves Apache’s profits.

Apache’s shares are trading up just less than 0.2%, at $94.68 in late morning trading. The stock’s 52-week range is $91.97-$134.13.

Paul Ausick

Alon USA Energy, Inc. (NYSE: ALJ) is the value stock of the day at Zacks.
Apache Corp. (NYSE: APA) Started as Buy at Deutsche Bank.
Carbonite, Inc. (NASDAQ: CARB) Started as Buy at Canaccord Genuity; Started as Outperform at Oppenheimer; Started as Outperform at William Blair; Started as Buy at BofA/ML.
Chesapeake Energy Corporation (NYSE: CHK) Started as Hold at Deutsche Bank.
Devon Energy Corporation (NYSE: DVN) Started as Hold at Deutsche Bank.
JinkoSolar Holding Co., Ltd. (NYSE: JKS) Cut to Neutral at Credit Suisse.
Logitech International SA (NASDAQ: LOGI) Cut to Sell at Goldman Sachs.
Marvell Technology Group Ltd. (NASDAQ: MRVL) Cut to Market Perform at JMP Securities.
MGM Resorts International (NYSE: MGM) Raised to Overweight at Morgan Stanley.
Molycorp, Inc. (NYSE: MCP) Cut to Neutral at JPMorgan.
Mosaic Co. (NYSE: MOS) Raised to Sector Outperform at CIBC.
PulteGroup, Inc. (NYSE: PHM) Raised to Buy at UBS.
SandRidge Permian Trust (NYSE: PER) Started as Outperform at Oppenheimer; Started as Market Weight at Wells Fargo; Started as Outperform at Baird.
SAP AG (NYSE: SAP) Raised to Outperform at Wells Fargo.
SM Energy Co. (NYSE: SM) named Bull of the Day at Zacks.
The Travelers Companies, Inc. (NYSE: TRV) Raised to Buy at Goldman Sachs.
VMware, Inc. (NYSE: VMW) Started as Buy at Merriman (Monday night).

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In our continuing hunt for value stocks, we looked at the largest producers of natural gas in the US and screened for the seven with market caps larger than $20 billion. These are Exxon Mobil Corp. (NYSE: XOM), BP plc (NYSE: BP), ConocoPhillips Corp. (NYSE: COP), Anadarko Petroleum Corp. (NYSE: APC, Devon Energy Corp. (NYSE: DVN), EOG Resources Inc. (NYSE: EOG), and Chesapeake Energy Corp. (NYSE: CHK). Production and reserves figures are based on information from the US Energy Information Administration and reflects 2009 totals. The agency has not yet released data for 2010.

Many of these companies are primarily crude oil producers, but all produce some amount of liquids and it is that liquids production that is keeping profits up at companies like EOG and Chesapeake which are primarily natural gas producers. The seven companies are listed below in market cap order.

Looking for value can be very tricky, particularly in commodity-related stocks and particularly when a sector is in a state of flux.  As we are still preparing for herder times, 24/7 Wall St. is searching for individual companies where their valuation already reflects much of the uncertainty in the markets even if the broader market cannot factor in forward events.  Having the term “value” does not imply immediate gains, but value investors invest ahead of, during, and after recessions.  They even invest when there are no obvious catalysts.

Exxon Mobil Corp. (NYSE: XOM) moved to the top of the list of natural gas producers with its purchase of XTO Energy. The company’s reserves total about 24 trillion cubic feet (Tcf) of natural gas. Combined production in 2009 totaled about 1.5Tcf. Exxon shares recently traded at $71.84 and its market cap is $349 billion. The stock’s 52-week trading range is $58.95-$87.16. The current value is trading at a price-to-book ratio of about 2.25 to 1. Its forward price earnings multiple is 8.05. The company currently pays a dividend yield of 2.62% to investors. Thomson Reuters has a consensus price target of $92.38, implying roughly 29% upside to the most recent price.

BP plc (NYSE: BP) reserves now total about 13.5Tcf and the company produced about 1Tcf in 2009. The company is still recovering from its Gulf of Mexico disaster in April 2010, and its 3 billion barrels of crude reserves are the largest among the seven companies in this list. BP’s shares recently traded at $36.43 and its market cap is $115 billion. The stock’s 52-week trading range is $35.15-$48.16. The current value is trading at a price-to-book ratio of about 1.07 to 1. Its forward price earnings multiple is 5.30. The company currently pays a dividend yield of 4.61% to investors. Thomson Reuters has a consensus price target of $55.76, implying roughly 53% upside to the most recent price.

The price of natural gas was decoupled from crude prices in 2007 and has never recovered. For a time in 2006, natural gas flirted with prices around $14/tcf, but that didn’t last long. The difference is due almost entirely to scarcity. Will natural gas recover even a little during 2011 or 2012? And how high will natural gas prices go?

The US Energy Information Administration projects an average price for natural gas of $4.24/tcf by the end of 2011, which is $0.15 lower than the average price in 2010. In 2012, the EIA expects a natural gas price of $4.41/tcf. In order to make a profit on natural gas, the industry needs a price in the range of $6-$8/tcf. That’s certainly not going to happen in the next 16 months unless some event of Biblical proportions should occur.

The 10 largest producers of natural gas in 2009 (the last year for which figures are currently available) were, in order, Exxon Mobil Corp. (NYSE: XOM), BP plc (NYSE: BP), Chesapeake Energy Corp. (NYSE: CHK), EnCana Corp. (NYSE: ECA), ConocoPhillips Corp. (NYSE: COP), Devon Energy Corp. (NYSE: DVN), EOG Resources, Inc. (NYSE: EOG), Anadarko Petroleum Corp. (NYSE: APC), Ultra Petroleum Corp. (NYSE: UPL), and Questar Corp. (NYSE: STR). Exxon’s top ranking includes its acquisition of XTO Energy, which had not officially been completed in 2009.

US natural gas production has changed dramatically since the adoption of horizontal drilling and hydraulic fracturing (fracking) of gas deposits trapped in nearly impermeable rocks generically called shale. Fracking makes much more gas recoverable and at a faster rate than conventional drilling. That’s one of the industry’s problems.

Leaseholders must drill within a specified period — usually three years — or lose their lease rights. Perhaps equally important is the nature of the hottest drilling areas themselves — shale gas fields, unlike their conventional counterparts, ordinarily ramp to full production much more quickly, hitting a peak quickly and producing an estimated 50% of lifetime production in the first year of operation.

The irony is that as shale gas production ramps up, conventional production is falling. The EIA estimates that natural gas production between now and 2035 will rise by an annual average of just 0.8%. But that’s a medium-to-long-term average. In the short run, production is rising quickly and depressing prices.

Over the longer term, natural gas prices are poised to rise. Gas-fired power plant construction is increasing as older and more polluting coal-fired plants are being taken out of service. The Daiichi Fukushima disaster in Japan has chilled nuclear power plant development and new US nuclear plants may never be built. Neither of these is having an immediate effect on natural gas prices, but both are medium-term boosters to gas prices.

A more significant impact could come in the somewhat longer term in global demand for liquefied natural gas (LNG). The bounty of US natural gas made available by horizontal drilling and fracking could be converted to LNG and shipped overseas. One US company, Cheniere Energy, Inc. (AMEX: LNG) that was planning to import LNG has been granted authorization to export LNG and expects to begin shipments in 2015.

None of this will affect natural gas prices for the rest of this year or into 2012. As summer’s heat gives way to cooler temperatures, demand for air conditioning will drop, reducing demand for natural gas. Demand will pick up again as the heating season begins, but summer is now the bigger demand period for natural gas and heating season supplies are likely to be plentiful.

An average price of no more than $4.10 is likely where natural gas will finish the year. For 2012 that could rise to $4.25, but anything higher seems unlikely. At least that’s the view from here.

Paul Ausick

The US Energy Information Administration estimates the China sits on top of about 1,275 trillion cubic feet of shale gas, which is about 50% more than the agency’s estimate for US deposits. The Chinese companies are looking for partners to develop the shale gas resources, and the expertise is in the foreign major integrated oil companies, the oil field services companies, and the drillers.

Royal Dutch Shell plc (NYSE: RDS-A) has signed a deal with a small Chinese gas company to explore, making it the first of the major integrated companies to get a toehold in exploration for shale gas in China. PetroChina has also formed a partnership with Shell and both Chevron Corp. (NYSE: CVX) and BP plc (NYSE: BP) are reportedly talking with Sinopec to create exploration joint ventures, and Norway’s Statoil ASA (NYSE: STO) is also seeking shale-gas assets in China.

The start of a boom in exploration for shale gas inevitably begins with the majors because that is their basic business. But it’s difficult to imagine that these companies will get any sort of participatory deal in the production of the gas. More likely is a fee-based deal where the companies are paid their expenses plus a defined amount for every cubic foot produced.

More likely to see bigger profits are the services companies like Halliburton Co. (NYSE: HAL) and Schlumberger Ltd. (NYSE: SLB) and the drillers like Baker Hughes Inc. (NYSE: BHI) and National Oilwell Varco, Inc. (NYSE: NOV) with extensive onshore experience. It is unlikely that US producers like Devon Energy Corp. (NYSE: DEV) or Chesapeake Energy Corp. (NYSE: CHK) will derive much benefit from the Chinese push into shale gas development, but if one of the producers does some creative thinking it’s possible.

The good news is likely to last a relatively short time however. Sinopec’s chairman has said that he expects unconventional gas like shale gas and coal-bed methane to drive growth for the company in the future. And getting Sinopec and the others to the point where they are self-sufficient could take up to four years.

And the Chinese certainly intend only to rent the technology they need now and to demand a transfer of technology from its partners so that the partners can be cut loose eventually. This pattern has been played out in solar PV development, wind turbine development, and virtually every sort of information technology development in China.

It’s still very early days in the Chinese shale gas industry. But the broad outline is well-established and well-rehearsed. There’s no reason to expect shale gas development to follow a different script.

Paul Ausick

The International Energy Agency and OPEC agree that forecast demand growth in 2011 is 1.2 million barrels/day. The US Energy Information Administration has pegged demand growth in 2011 at 1.4 million barrels/day. The difference is that the EIA estimates US GDP growth of 2.4% in 2011, whereas OPEC believes US GDP will grow by a scant 1.8%. The IEA GDP growth estimate for North America is 2.7%.

The lowered demand estimates should moderate pump prices in the US and the rest of the world, but will certainly hit profits at major oil producers like Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), ConocoPhillips Corp. (NYSE: COP), and BP plc (NYSE: BP). The largest contributor to big profits at these companies has been high prices for crude and for gasoline. They will still earn profits at $80-$85/barrel, just not as much. A drop to $75/barrel would be closer to the bone, and anything below that for an extended period of time could spell trouble.

The integrated oil companies’ refining operations will make up some of the difference, as their input costs will fall with the price of crude. Pure downstream outfits like Valero Energy Corp. (NYSE: VLO), Tesoro Corp. (NYSE: TSO), and Western Refining Inc. (NYSE: WNR) should also see a rise in profits, but the increase will be more modest, especially if the near $20/barrel differential between WTI and Brent closes.

As for service companies and drillers like Schlumberger Ltd. (NYSE: SLB), Halliburton Co. (NYSE: HAL), Noble Corp. (NYSE: NE), and others, their prospects are still solid, due in large part to development of shale oil and gas. An oil and gas industry group projects that up to 200,000 new jobs will be created in the oil & gas patch in 2011.

For several years now the industry has been concerned about a burst of petroleum engineers reaching retirement age with no replacements available. The situation has grown even tighter now, as companies like Apache Corp. (NYSE: APA), Devon Energy Corp. (NYSE: DVN), and Chesapeake Energy Corp. (NYSE: CHK) continue to troll for new engineering talent.

Both the IEA and the EIA are looking at the world’s economy through glasses that if not rose-colored are surely tinted by government projections and policy. OPEC’s US GDP growth estimate of 1.8% seems clearly more in-line with recent economic performance.

And cuts to federal and state budgets will soon put more Americans out of work. Anyone who expects reduced spending to put some life back into the US economy has simply not been paying attention or has some other ax to grind.

The main prop to crude prices is demand from China, which is expected to grow to at least 6.5 million barrels/day in 2011. Demand from developed countries is essentially flat to down. The shortfall due to the loss of Libyan oil has been made up, mostly by increased production from OPEC.

The main driver of crude prices is the same as it has always been: growing demand for an ever-shrinking supply. Speculation is not the culprit, nor is OPEC. Weak economic growth slows demand and forces prices down. The impact on the oil & gas industry will be noticeable, but not devastating.

Paul Ausick

This poses a severe financial risk for many companies who are dependent upon the future of natural gas.  We are tracking United States Natural Gas (NYSE: UNG), Exxon Mobil Corp. (NYSE: XOM), Chesapeake Energy Corp. (NYSE: CHK), Encana Corp. (NYSE: ECA), Devon Energy Corp. (NYSE: DVN), EOG Resources Inc. (NYSE: EOG), and Questar Corp. (NYSE: STR).  Also being tracked are Cheniere Energy, Inc. (AMEX: LNG), Cheniere Energy Partners LP. (AMEX: CQP), Clean Energy Fuels Corp. (NASDAQ: CLNE) and Westport Innovations Inc. (NASDAQ: WPRT).  The losses are brutal, and the weak stock market is not helping things.

United States Natural Gas (NYSE: UNG) has to be one of the worst exchange-traded products out there because of erosion into roll-dates in the futures contracts.  Still, it is actively traded because investors can easily get exposure to natural gas on an intraday basis this way in their normal equity accounts.  This trust is down 3.6% at $9.97 and a new 52-week low of $9.94 was just hit this morning.

Exxon Mobil Corp. (NYSE: XOM) includes XTO after its huge natural gas acquisition.  Shares are down 1.3% at $76.71 and the 52-week range is $55.94 to $88.23.  Chesapeake Energy Corp. (NYSE: CHK) is the largest pure-play for natural gas and it recently even started a venture fund to drive nat-gas interests as part of the next energy policy.  Chesapeake is down a sharp 5.3% at $32.42 and the 52-week range is $19.68 to $35.95.

Encana Corp. (NYSE: ECA) is down 2.9% at $27.40 and close to 52-week lows as that range is $26.02 to $35.25.  Devon Energy Corp. (NYSE: DVN) is down 4.3% at $72.55 but its 52-week range is $59.07 to $93.56.  EOG Resources Inc. (NYSE: EOG) is down 4.1% at $93.96 versus a 52-week range of $85.42 to $121.44. Questar Corp. (NYSE: STR) is down only 1.7% at $17.95 and its 52-week range is $16.03 to $19.06.

Cheniere Energy, Inc. (AMEX: LNG), a liquefied natural gas (LNG) terminal operation, is down almost 9% at $8.89 versus a 52-week range of $2.30 to $12.81.  Its limited partnership is called Cheniere Energy Partners LP. (AMEX: CQP) and that is down ‘only 3.3%’ at $16.55 versus a 52-week range of $15.05 to $24.54.

Clean Energy Fuels Corp. (NASDAQ: CLNE) is T. Boone Pickens’ ‘gas station’ play that he wants to serve the nat-gas trucks as the refuel-stop on major trucking routes.  Shares are down more than 4% at $14.58 versus a 52-week range of $11.75 to $17.85.

Westport Innovations Inc. (NASDAQ: WPRT) is down 4.5% at $22.74 versus a 52-week range of $14.25 to $28.05.  The company specializes in alternative energy engines for trucks, particular those using compressed natural gas.

Dow Jones was calling for a build of 36 billion cubic feet, but the weekly gain reported by the Energy Information Administration was 44 billion cubic feet and U.S. inventories now sit at 2.758 trillion cubic feet.  What is interesting is that Dow Jones noted that this inventory build is still 2.4% under a 5-year average and more than 6% under year-ago levels.

Right now it feels like trying to find the bottom in selling levels is a bit like catching a falling knife.  It is just not very rewarding.  Maybe a bottom is close and maybe not in these stocks, but one thing is a sure bet: Natural gas dipping back under $4.00/tcf does pose a severe financial risk to the business viability of producing and even transporting natural gas.

Natural gas is not alone in its misery today.  Oil is back under $91.00 per barrel as well.

JON C. OGG