SOURCE: Paragon Report

Paragon Report

December 03, 2012 08:20 ET

Natural Gas Stocks in a Slump as Prices for the Commodity Fall Sharply on Lower Heating Demand

The Paragon Report Provides Stock Research on Chesapeake Energy and SandRidge

NEW YORK, NY--(Marketwire - Dec 3, 2012) - Natural gas has been in a slump recently as forecasts for warmer temperatures and weaker demand for gas-fired heating have caused prices for the commodity to fall sharply. The United States Natural Gas Fund (UNG), which is designed to track the changes in the price of natural gas, has fallen over 11 percent in the past week. The Paragon Report examines investing opportunities in the Natural Gas Industry and provides equity research on Chesapeake Energy Corporation (NYSE: CHK) and SandRidge Energy Inc. (NYSE: SD).

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Weather forecasts have called for above average temperatures in the coming weeks. Approximately 50 percent of households in the United States are heated with natural gas. Recent data from Weather Derivatives show that heating demand will be 34 percent below average for the 48 contiguous states from Dec. 4 through Dec. 8. The forecast for lower demand has seen prices for natural gas fall 5.2 percent in the past week.

"The earlier seasonal rally clearly expressed overly optimistic expectations for initial heating demand. Good demand may still materialize, but the enthusiastic aspirations of participants need to be worked off," wrote Mike Fitzpatrick, editor of the Energy OverView newsletter.

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Chesapeake Energy has announced that it is collaborating with General Electric and Whirlpool to create a $500 appliance which will allow vehicle owners to refuel their CNG cars at home. The current supply glut of natural gas has caused companies to increase their focus on the transportation sector as an alternative market for the commodity.

Hedge fund TPG-Axon, who owns a 6.5 percent stake of SandRidge, has recently sent a letter to SandRidge requesting a shareholder vote to replace the company's current directors. Shares of the company have fallen 27 percent year-to-date. "An outright sale of the company is the most realistic path to restoring the shareholder value that has been destroyed," wrote TPG founder Dinakar Singh.

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