Natural Gas Executives Cash In Their Chips

A few months ago, I urged readers to weigh natural gas company CEOs' public comments on 2010 versus their actions. Before the year closes, I would like to reiterate that point.

Last time, I pointed to XTO Energy's (NYSE: XTO  ) hedging at the sub-$6 level as a sign that the company wasn't all that bullish, despite Chairman Bob Simpson's stated confidence in a "stronger natural gas environment" in 2010. Simpson has since agreed to sell the company to ExxonMobil (NYSE: XOM  ) at a modest 25% premium.

Exxon's excitement about natural gas is long term in nature. See, for example, the company's energy outlook to 2030. It predicts "natural gas will be the fastest growing major fuel," with demand 55% higher in 2030 than it was in 2005.

Granted, Simpson gets shares of Exxon in this all-stock transaction, so he keeps exposure to natural gas, but Exxon's portfolio is far more balanced with oil production. That's a quick way to achieve the hydrocarbon balance that EOG Resources (NYSE: EOG  ) is busily seeking.

I would expect a move in natural gas prices to, say, the $7 level to translate to a much greater than 25% rise in XTO's market value. How credible can Chesapeake Energy's (NYSE: CHK  ) calls for $6 to $9 gas in 2010 be, given XTO's actions?

I was also interested to see Floyd Wilson, the chairman and CEO of Petrohawk Energy (NYSE: HK  ) , start a trading plan this month "for financial planning and estate planning purposes." Given the company's full-throttle approach to shale exploitation, you'd think that management would want to maximize its exposure to these efforts.

I realize that Wilson is older than 60 and has a good reason to begin making retirement resolutions. If all insider sales signaled a lack of conviction, I certainly couldn't have recommended ATP Oil & Gas (Nasdaq: ATPG  ) yesterday as my top stock for 2010. The chief financial officer there just let go of a fair-sized chunk of his holdings.

The timing of Wilson's initiation of a trading plan relative to fellow shale-slayer Simpson's big sale admittedly makes the move look more significant than it otherwise would. I recognize that both actions may be meaningless with regard to the near-term natural gas outlook, but I'm nevertheless keeping them in the back of my mind.

Motley Fool CAPS players rank Petrohawk a middle-of-the-road three stars. Share your thoughts on the stock with your fellow Fools right here.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. Chesapeake Energy is an Inside Value pick. The Motley Fool owns shares of Chesapeake Energy and XTO, and has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (11)

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  • Report this Comment On December 31, 2009, at 3:23 PM, grungeboater wrote:

    You are not mentioning Simpsons purchase over the last several months of one million shares of Hugoton Gas Trust (HGT). The mans guns are still fully loaded.

  • Report this Comment On December 31, 2009, at 4:04 PM, karlwmiller wrote:

    Let's Try This Again: Why is Natural Gas Critical to the United States and the Producers of Natural Gas Producers a legitimate Asset Class?

    Senior energy industry executive and institutional investor Karl W Miller re-affirms that Chesapeake Energy (NYSE: CHK) remains unvervalued on a Bcf (gas in the ground) basis, net of debt. This is true of many other U.S. Natural Gas producers.

    Do you believe that Natural Gas is a clean and sustainable "bridge fuel" for the United States to use in achieving energy independence?

    Go to following link and take the poll: http://karlwmiller.blogspot.com/

    To see Mr. Miller's initial analysis see link below:

    http://seekingalpha.com/instablog/522236-karl-w-miller/41......

    Disclosure: Long American Energy Companies

    Related Stocks: CHK, DVN, APA, XOM, MRO, CVX, BP, APC

  • Report this Comment On December 31, 2009, at 8:17 PM, NOTvuffett wrote:

    karlwmiller,

    I am curious how you think the debate over fracking will turn out.

  • Report this Comment On January 01, 2010, at 11:28 AM, carl257 wrote:

    i've always found insiders buys more helpful than their sales. they can sell stock for a variety of reasons. unless they're propping their stock up, there is only one reason for a buy

    disclosure :Long

    CHK DVN XOM XTO MRO CVX EPD

  • Report this Comment On January 04, 2010, at 1:19 PM, XMFSmashy wrote:

    grungeboater, I'd missed those HGT purchases. That's an important point, but you have to put that purchase in the context of Simpson's XTO holdings. The dollar value of 1 million shares of HGT is equal to what, 5% of Simpson's 6.5 million share stake in XTO?

    TS

  • Report this Comment On January 06, 2010, at 10:34 AM, mapboys wrote:

    For the folks worrying about the 'fracturing debate/difficulty'. The industry has been injecting materials underground for quite a long time, literally hundreds of thousands of wells have been fractured without ground water problems. For me this debate over fracturing is without merit for the most part. I live in East Texas, drink well water and have horizontally drilled and fractured wells within 1/2 mile of my house. And my water is not affected.

    As to the price of Natural Gas forward, look at www.ino.com NG futures prices out through 2014 and I don't see anything like $8/mcf. Until the NG Storage number has been drawn down close to 1.8 TCF there is not much room for price increases. Our industry continues to find new sources of Natural Gas.

    I'm long XTO, HK, XOM, DNR, SWN, DVN, CVX, RRC

    Bob

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