Alcatel-Lucent SA (NYSE: ALU) Cut to Neutral at JPMorgan.
ARM Holdings PLC (NASDAQ: ARMH) Started as Hold at Canaccord Genuity.
Avon Products Inc. (NYSE: AVP) Cut to Hold at Jefferies.
Barclays PLC (NYSE: BCS) Cut to Neutral at UBS.
Cisco Systems, Inc. (NASDAQ: CSCO) Started as Buy at MKM Partners.
Citigroup, Inc. (NYSE: C) Raised to Outperform with $48 target at Credit Suisse.
Human Genome Sciences Inc. (NASDAQ: HGSI) Cut to Underperform as Bear of the Day at Zacks.
Lithia Motors, Inc. (NYSE: LAD) named as value stock of the day at Zacks.
Logitech International SA (NASDAQ: LOGI) Cut to Strong Sell at S&P (late-Monday call).
NVIDIA Corporation (NASDAQ: NVDA) Cut to Hold at Canaccord Genuity.
Questar Corporation (NYSE: STR) Raised to Outperform as Bull of the Day at Zacks.

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JON C. OGG

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

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

The list of corporations for 2010 is major and includes companies such as American International Group Inc. (NYSE: AIG), Prudential plc (NYSE: PUK), AMR Corp. (NYSE: AMR), Bank of America Corporation (NYSE: BAC), Barclays plc (NYSE: BCS), BP plc (NYSE: BP), General Electric Co. (NYSE: GE), Genzyme Corporation (NASDAQ: GENZ), HSBC Holdings (NYSE: HBC), Lockheed Martin Corporation (NYSE: LMT), McDermott International Inc. (NYSE: MDR), Motorola Inc. (NYSE: MOT), Questar Corporation (NYSE: STR), Sunoco Inc. (NYSE: SUN), Verizon Communications Inc. (NYSE: VZ) (NASDAQ: VZ), Frontier Communications Corporation (NYSE: FTR), and Vishay Intertechnology Inc. (NYSE: VSH).

This comes to about 15 deals in the spin-off and disposition category that is part of special situation and value investing.  This is also key for dividend investors.  We have outlined the units up for grabs or pending in each company.  We have also tried to look for relative value comparisons and financial comparisons on each where applicable and when possible.

American International Group Inc. (NYSE: AIG) lost out on its $35.5 billion sale of the its main Asian unit and crown jewel, AIA Group.  If you read reports, it looks as though the secondary bidders behind Prudential plc (NYSE: PUK) were lower than what AIG would accept.  The company has toyed with  spinning assets off, and that looks to be one of the biggest issues today.  If AIG was getting a cash sale of $35.5 billion, who knows where this would come of it was parceled off in an IPO.  It could get a few strong minority shareholders and secure many more today for that growing unit.  What the price tag will be, that is another question and one that is dependent upon the DJIA and the world markets.  The company has little choice to spin the company off and CEO Benmosche is at the point that he’d probably like to offer some proof to taxpayers that he’s ready to start paying back that huge debt owed.  This is not the first sale or divestiture inside AIG, and it won’t be the last.

AMR Corp. (NYSE: AMR) may be an unlikely spin-off company considering that the industry is consolidating.  The parent of American Airlines said recently that it may revive plans to jettison its regional air-carrier arm of American Eagle.  This is partly in response to criticism over its long-term strategy.  The company has gone as far as putting one of its more senior and well-respected executives in charge of American Eagle.  AMR tried this before and the two companies were not solid enough.  It is also a safe bet that the two may be more intertwined than they would believe just on the surface.  After going through the spin-off candidates out there, this is one to watch.

Bank of America Corporation (NYSE: BAC) is not going to be a game-changer, but it is expected to bring in around $4 billion by selling off its stake in Brazilian bank preferred shares and common stock in Itau Unibanco Holding SA.  This is part of the company’s effort to raise additional capital by June 30 and helps BofA meet a capital requirement to lift its common equity level by about $3 billion, via asset sales and holdings sales, as part of a regulatory agreement from when it paid back $45 billion for its bailout.

Barclays plc (NYSE: BCS) has a spin-off or sale coming, maybe.  Barclays Private Equity is expected to be spun out of the bank as soon as this summer.  That will allow its management to raise between €1.5 billion and €2 billion for their next fund, something that is going to be hard to do under the coming financial regulatory changes coming in the U.K. and in the U.S.  Talks have been ongoing and it seems that a management buyout is the likely end game.

BP plc (NYSE: BP) is in the pending-pending category.  Telling you about the Gulf of Mexico woes is not even needed, but the talk over the weekend is that now BP may look to raise as much as $50 billion.  This would be from bank loans, bond sales, and even from asset sales.  BP solar would be one of the world’s largest independent solar companies, and you know that employees now at this unit aren’t feeling as proud of their name as they were about 60 days ago.  BP has toiled with consolidating before, and BP solar is one of the operations some feel could make the grade.  It is still too soon to know if even could get anything sold off.  It is not as if there are not creative enough of attorneys in the United States that know how to try to enjoin assets even after a disposition of those assets.

General Electric Co. (NYSE: GE) is probably not a huge shock that it is on the list of spin-offs and unit divestitures.  Recent reports put GE as shopping around its Latin American bank and credit card business called BAC-Credomatic GECF.  Reuters noted that the proposed sale is part of a plan already outlined in April aimed at trimming down financial services as a percentage of the company.  Reuters also sourced about $1.5 billion as a price tag in today’s markets versus about $500 million paid for the near-half stake in BAC-Credomatic in 2005 before then raising the stake to 75%.  Is this one a done deal for sure?  Probably not.  The $170 billion market cap makes this one of a gesture of goodwill on the surface.

Genzyme Corporation (NASDAQ:GENZ) used to have tracking stocks for the Genzyme Biosurgery and Genzyme Molecular Oncology units, and it ended that by acquiring the units in 2003.  But the new recent shareholder value plan shows Genzyme is now considering strategic options for its Genetic testing, Diagnostic products, and for its pharmaceutical intermediates operations.  The company said the consideration involves a sale, a spin-off or even a management buyout. The company said that it has already selected some possible partners for the units and that it has even received some initial inquiries.  The company also contacted Goldman Sachs and Credit Suisse for assistance.  With a $14 billion market cap, and a $2 billion share buyback plan ($1 billion just accelerated now), this could greatly change the focus of Genzyme in a more narrow manner.

HSBC Holdings (NYSE: HBC) has announced that it was in talks in recent weeks to sell off its private equity fund management businesses in England, Hong Kong, the United States, Canada and elsewhere. This sale appears to be similar to Barclays as being management buyouts.  After looking around for figures, the private-equity businesses under consideration have close to $8.8 billion in funds under management, but the kicker is that about 20% of the assets are HSBC’s.  Predicting a sale price here at this juncture may be far too soon, but there is now way it could be sold for under 1% of assets under management and probably not more than 10% of assets under management.

Lockheed Martin Corporation (NYSE: LMT) has already begun to brace for different forms of military spending in the future.  The company has begun to reshape its portfolio to  drive its longer-term performance.  Up for grabs are most of the Enterprise Integration Group and also Pacific Architects and Engineers, which are both under its Information Systems & Global Services operations today.  EIG provides independent systems engineering and integration products and services and the PAE unit is in mission readiness, global infrastructure support, and in disaster relief activities; the two units are said to comprise only about 3% total revenue and less than 3% of operating profits.  With close to a $30 billion market cap, straight-line accounting would put this being close to $1 billion on the market at current prices.

McDermott International Inc. (NYSE: MDR) has been given a tax-free spin-off status under IRS ruling for its Babcock & Wilcox Company, its power generations systems unit and government operations.  McDermott and B&W are continuing to work to satisfy all the conditions to the spin-off transaction, including obtaining applicable governmental approvals, and the company expects the spin-off to be completed in the third quarter of this calendar.  The engineering and construction company said in May that spin-off costs ended up taking a bite out of earnings, but a 21% revenue decline worked its magic too.  The company is also set to spin out the J. Ray McDermott S.A. unit into another independent and publicly traded company.  Due to sector issues and due to a $5.6 billion market cap, McDermott is probably not one to ignore.

Motorola Inc. (NYSE: MOT) has restructured literally for almost the entire time I have covered equities.  The mobile communications technology giant is about to be much different after its cell phone spin-off comes.  Unfortunately, that is not expected until 2011.  As disappointment as lingered here forever, it is probably safe to assume that Hello-Moto could always yell “Do-Over!” and change its mind.  Motorola recruited Sanjay Jha in 2008 as the turnaround man by making him co-CEO and the head of mobile phone and cable set-top box operations.  If this sounds familiar, it should.  The first spin-off (or sale) was expected in 2008 but things in the markets caused that spin-off to get delayed.

Questar Corporation (NYSE: STR) recently announced that its board of directors approved and set the record and distribution dates for its tax-free spin-off of its natural gas and oil exploration and production and midstream field services businesses to shareholders on June 30, 2010 to Questar shareholders of record as of the close of business on June 18, 2010. Questar’s shareholders will receive one share of QEP common stock for each share of Questar common stock held as of the record date, and this includes fractional shares. With an $8.7 billion market cap, the Questar deal is oe to watch.  In the spin-off are:

• QEP Energy Company, formerly Questar Exploration and Production, a diversified natural gas and oil-exploration, development and production company;
• QEP Field Services Company, formerly Questar Gas Management, a midstream field services company that gathers and processes natural gas in the Rocky Mountain region and northwest Louisiana;
• and QEP Marketing Company, formerly Questar Energy Trading, which markets natural gas and oil on behalf of QEP Energy Company and others and operates a natural gas storage facility in western Wyoming.

Sunoco Inc. (NYSE: SUN) is going to separate its coke business to unlock shareholder value. The company also said it anticipates its refining segment to report a profit for the quarter ending June 30, so things at the core business may be improving.  With the woes of refining margins seen at competitors like Valero, a focus here may not be such a surprise.  The $4 billion market cap might not be changed drastically here, but a recent upgrade to “Overweight” by Barclays with a $45 per share price target make it less surprising that Sunoco is close to 52-week highs while refining stocks are generally lower.

Verizon Communications Inc. (NYSE: VZ) (NASDAQ: VZ) has established a record date of June 7, 2010 for the proposed spin-off of shares of subsidiary New Communications Holdings Inc. to Verizon stock holders.  This spin-off and the merger of New Communications with Frontier Communications Corporation (NYSE: FTR) is expected to occur on July 1, 2010, at last look and is subject to closing conditions in the merger agreement(s) among Verizon, Frontier and New Communications.  Immediately after the completion of the merger, Verizon holders will own between about 66% and 71% of the shares of Frontier common stock; and Frontier’s common holders will collectively own 29% to 34% before accounting for the elimination of fractional shares.  Verizon common holders will not be required to pay for any shares of Frontier common stock that they receive and will also retain all of their shares of Verizon common stock.  Verizon has spun-off Idearc and the biggest change that could ever come down the road is that Vodafone plc (NYSE: VOD) relationship over Verizon Wireless.

Vishay Intertechnology Inc. (NYSE: VSH) has six major business lines: Automotive, Computer, Consumer, Industrial, Medical, and Telecom.  Last week the company said it has set tentative spin-off dates for Vishay Precision Group Inc., its measurements and foil resistor business, of July 6, 2010.  This is subject to satisfaction of all conditions and will give stockholders one share of the new company for every 14 of Vishay Intertechnology shares owned.  Vishay Precision shares will trade under the stock ticker “VPG” on the NYSE.  As it stands today it seems that Vishay has over 22,000 employees, and Vishay has a market cap of only $1.64 billion as of Friday.

Asset sales, spin-offs, divestitures, distributions and more are all part of corporate strategies.  This also becomes the “special situation” category of investing.  If units can enhance shareholder value more by being sold or by being put on their own, hen that is the job of management to decide.  But these also are brought up often after pressure from activist shareholders.  These also often create many more shareholder opportunities in either the old parent company or in the spin-co.  Stay tuned.

JON C. OGG

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Chinese solar stock, in particular, have performed well.  Chinese companies are better equipped to withstand a more competitive market for solar power in Germany due to their low cost of production.  Today Jefferies & Co. analysts Paul Clegg upgraded the entire Chinese solar industry.  Yingli Green Energy Hold. Co. (NYSE: YGE) rose the most out of the group, gaining over 6.7% today.

Garrett W. McIntyre

• ALPHA NATURAL RESOURCES (NYSE: ANR) 230,000 shares worth $4.083 million.
• ANADARKO PETEROLEUM (NYSE: APC) 50,000 shares worth $1.945 million.
• CABOT OIL & GAS (NYSE: COG) 200,000 shares worth $4.714  million.
• CHESAPEAKE ENERGY CORP. (NYSE: CHK) 200,000 shares worth $3.412 million; higher stake than before.
• CONSOL ENERGY INC. (NYSE: CNX) 150,000 shares worth $3.786 million.
• DEVON ENERGY CORP. (NYSE: DVN) 250,000 shares worth $11.173 million; higher stake than before.
• FLUOR CORP. (NYSE: FLR) 59,000 shares worth $2.038 million.
• FOSTER WHEELER AG (NASDAQ: FWLT) 132,000 shares worth $2.306 million.
• HALLIBURTON COMPNAY (NYSE: HAL) 200,000 shares worth $3.094  million.
• MASSEY ENERGY CO. (NYSE: MEE) 325,000 shares worth $3.289 million.
• MCMORAN EXPLORATION (NYSE: MMR) 200,000 shares worth $0.940 million.
• OCCIDENTAL PETE CORP. (NYSE: OXY) 200,000 shares worth $11.130 million.
• QUESTAR CORP. (NYSE: STR) 160,000 shares worth $4.709 million.
• SCHLUMBERGER LTD. (NYSE: SLB) 75,000 shares worth $3.047 million.
• SUNCOR ENERGY INC. (NYSE: SU) 300,000 shares worth $6.663 million; higher stake than before.
• TRANSOCEAN LTD. (NYSE: RIG) 450,000 shares worth $26.478  million; higher than before,
• WEATHERFORD INTERNATIONAL (NYSE: WFT) 100,000 shares worth $1.107 million.

There may be other holdings in different entities, but these were the positions seen in the TBP Investments Management, LLC unit.

Jon C. Ogg

• Devon Energy (DVN) Raised to Buy at Jefferies.
• EnCana (ECA) Raised to Neutral at Goldman Sachs.
• Questar (STR) Raised to Buy at Goldman Sachs.
• Republic Services (RSG) Raised to Outperform at FBR.
• Anadarko Petroleum (APC) Cut to Sell from Buy at Goldman Sachs.
• Apartment Investment (AIV) Cut to Market Perform at KBW.
• AvalonBay (AVB) Cut to Underperform at KBW.
• BRE Properties (BRE) Cut to Underperform at KBW.
• Cubist (CBST) Cut to Underperform at Leerink Swann.
• Dollar Tree (DLTR) Cut to Market Perform at FBR.
• Methanex (MEOH) Cut to Sector Perform at CIBC.
• Solution (SOA) Cut to Neutral at Goldman Sachs.
• Suncor Energy (SU) Cut to Sell at Goldman Sachs.
• UDR (UDR) Cut to Market Perform at KBW.

Jon C. Ogg
December 8, 2008

Jon C. Ogg
June 19, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

TODAY (June 19, 2007)
(CPKI) California Pizza Kitchen trades ex-split today to reflect a 3-2 stock Split.
(MRO) Marathon Oil trades ex-split today to reflect a 2-1 stock split.
(STR) Questar trades ex-split to reflect a 2-1 stock split.

THIS WEEK
(PVA) Penn Viginia will trade ex-split on June 20 to reflect a 2-1 stock split.

NEXT WEEK
Allergan (AGN), Express Scripts (ESRX) and Gilead (GILD) all trade ex-split to reflect their pending 2-1 stock splits on June 25. 
Omnicom (OMC) will trade ex-split on on June 26 to reflect its pending 2-1 stock split. 
YUM! Brands (YUM) trades ex-split on June 27 to reflect its pending 2-1 stock split.

Jon C. Ogg
June 19, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.