Energy Prospectus

Opening Prices:
> WTI is down 24c to $40.95/Bbl, and Brent is down 21c to $43.13/Bbl.
> Natural gas is up 10.7c to $2.734/MMBtu.

By the end of October the DEC20 NYMEX contract will be the front month. The front month NYMEX contracts for oil and gas are what you see quoted above and by the news services each day. At the time of this post the DEC20 Henry Hub natural gas contract is trading for $3.25/MMBtu. On June 25, 2020 the front month contract (JUL 20) dipped to $1.42/MMBtu and if I told you gas was going to be trading for $3.25 in November you would have called me crazy.

If we get a colder than normal December, I think natural gas will spike to more than $4.00.

NOW is time to take a hard look at the companies that produce a lot of natural gas and NGLs.
Almost pure "gassers": AR, CRK, EQT, RRC, GDP and GPOR. Gulfport Energy (GPOR) has a lot of debt, but "leverage works both ways", so it could be the winner. CRK is my Top Pick.
Others that produce a lot of gas: XEC, OVV, EOG and DVN. < We sent out an updated profile on Devon Energy (DVN) this morning.

Comments below are from Welles Fitzpatrick at Truist Research on 10-9-2020

"Lower 48 declines of oil & gas production are underappreciated - With the pullback in L48 drilling, decline rates will begin to materialize for the Majors in 2H. Unlike the independent E&Ps, the Majors have been coy about the impact these will have on production. Further clouding the view are the shut-ins we saw at midyear; while these shut-ins are largely coming back online, it makes seeing those declines harder. That said we believe that 2H declines for the Majors are underappreciated and will come to light during 3Q earnings. The declines, which State data pegs at 8-37%, will impact 2H numbers. COP, which we continue to like, is exposed and XOM is insulated."
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MY TAKE: I believe that all of the April-May onshore shut-ins are now back online, so we should begin to see a steady decline in U.S. oil production until the active drilling rig count is back to ~600 rigs drilling for oil. Today Baker Hughes reported that 193 rigs are now drilling for oil (+3 since last week). The number of rigs drilling for gas went down 1 to 73. We need at least 150 rigs drilling for gas to stabilize U.S. natural gas production. Hurricane Delta has taken a lot of offshore production offline, so it will have an impact on the next two weekly petroleum reports from EIA.