The $64,000 question for natural gas E&P stock investors is the point at which the E&P companies "call it a day" and stop drilling, doing their part to help bridge the gap between supply and demand.
For this read, the upcoming fourth-quarter earnings commentary from E&P companies will be key. Natural gas E&P CEOs have recently commented that at sub-$4 gas they would significantly lower gas-related spending. At sub-$3 gas, where the market is now, it would definitely have these companies re-thinking gas capex. That would bring down spending but also, as a result, bring down cash flow. It may be a wash in terms of any given stock, with the reduction in spending offsetting the market disappointment of less cash flow -- at least for less-indebted companies. However, even with the production shutdowns, it's not likely to do enough in the short-term to bail out natural gas spot market pricing.
"Supply in the end has to scale back. There has to be a cut back in production to really show improvement in price, but I don't know how to answer the question of when it turns, when companies take down production and spending enough," said McNamara.
Indeed, natural gas has become known by market professionals as "the widow maker" for good reason.-- Written by Eric Rosenbaum from New York.
Eric Rosenbaum. >To follow the writer on Twitter, go to Eric Rosenbaum.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV