A Bright Spot in Canada Energy: Some Natural Gas Stocks Up 100%

(Bloomberg) -- The glut of crude oil has a silver lining for shares of Canada’s natural gas drillers.

A number of gas companies including ARC Resources Ltd., Birchcliff Energy Ltd. and Advantage Oil & Gas Ltd. have posted gains of more than 100% in one month. All three stocks are still down more than 20% this year, however.

The outlook for gas prices is firming up because of reduced drilling activity for oil, which means lower production of gas that comes as a byproduct. Spot natural gas traded at Alberta’s AECO hub has gained 7.2% over the past month to close at $1.48 per million British thermal units on Wednesday.

“Structurally, there seems to be some optimism across the natural gas landscape, helped by the expectation for declining associated gas,” National Bank’s energy team said in a note this week.

A Bright Spot in Canada Energy: Some Natural Gas Stocks Up 100%

“While gas has been a relative outperformer, largely on views that lower oil production will lead to lower associated gas, we do believe there are limits to this trend,” AltaCorp Capital analyst Patrick O’Rourke said in a note. “Higher pricing eventually induces more dry gas production.”

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.