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Because it's the holiday season, it's time to make a list and check it twice.

In the case of energy investors, December is always a good time to think about what will shape the energy markets into the end of the year and as we jump-start the New Year. December can be an important month for energy: Winter begins, exploration companies begin to set their 2007 plans and all companies wrap up the budgeting process for the coming 12 months.

So, as has become the custom, let's look at a couple of drivers that could be in play during the last month of 2006.

Watch the Weather

One of the more important variables in predicting energy-commodity prices in the month of December is weather. Winter officially begins the middle of the month, and bone-chilling cold is bullish for the energy markets. In fact, last year's historically warm winter was the primary cause of the swoon in natural gas prices this past summer.

Hence, all energy investors have at least one eye on the forecasts, especially the longer-range forecasts for January and February. So I decided to check in with Chesapeake Energy ( CHK - Get Report), the large natural gas producer, which has its own uncannily accurate meteorologists. Cheapeake's meteorologists were some of the few who accurately predicted last winter's warmth.

The accuracy continues. My sources suggest Chesapeake's forecasters were spot-on in predicting last week's cold-and-snow snap through the upper Midwest. The Chesapeake gang's forecast for the coming week suggests slightly warmer-than-normal temperatures, followed by a holiday cold snap that, if it happens, could help rally energy prices.

More important, the Chesapeake weather team sees a more normal winter season come 2007, compared with the past 30 years. That means that, when compared with the last 10 years (which have been consistently warmer than longer-term norms), winter weather should be colder than normal, a positive for energy investors.

Colder weather means more demand for natural gas and heating oil, supporting stronger natural gas and distillate prices. In turn, that should be constructive for the energy equity markets.

It should be noted that not all meteorologists share the bullishness of Chesapeake's forecasters. In fact, popular consensus suggests that the El Nino conditions should actually create another moderate winter. However, the El Nino impact looks like it will be too late and too weak to really have a meaningful effect.

If correct, the Chesapeake forecast should bode well for natural-gas drilling activity, mitigating concerns that exploration and development activity will slow and put pressure on rig utilization, rates and driller profits. While data this week from Patterson-UTI Energy ( PTEN - Get Report) provide some anecdotal evidence that drilling activity may be moderating, it's far too early to suggest any trends from the data. That said, I'll watch carefully in December and January to measure activity in the beginning of 2007.

Capital Budgets

Another key barometer of future activity is exploration companies' announcements of spending plans into the New Year. While budget announcements are only beginning, the first big announcement appears pretty bullish.

Chevron ( CVX - Get Report) announced that its 2007 capital budget will increase more than 20% compared with current-year levels. The major indicated that it has a number of capital-intensive projects on the books and that it intends to step up exploration efforts in the coming year.

While Chevron also announced an acceleration in its stock-buyback plan, the company's decision to boost its capital budget is an early sign that the majors may be ramping up their quest to grow both reserves and longer-term production.

Not all majors are bullish. In its announcement late Thursday, ConocoPhillips ( COP - Get Report) announced a decrease in its 2007 capital spending, partly a result of a big investment in Russia's Lukoil last year. However, Conoco management admits the proposed 2007 budget is not enough to sustain its current level of production growth, something many investors may find disappointing.

It will be important to watch for further clues from the majors like ExxonMobil ( XOM - Get Report) and Royal Dutch ( RDSA) as they provide guidance for 2007 spending.

In addition, Anadarko's ( APC) meeting with analysts next week should provide insight into the thinking of large independents when it comes to 2007 spending. That should be a key data point for exploration-and-production investors. Anadarko is also likely to talk about its need for additional drilling services, which could provide early insight into the demand for energy services through year-end.

December is indeed an important month for energy investors. Watching early signs of the future will allow investors to build a wish list for early investing presents for the New Year.

At time of publication, Edmonds was long ConocoPhillips, although holdings can change at any time.

Christopher S. Edmonds is partner and managing director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.