It is the best of industries; it is the worst of industries.

And I think the energy position in your portfolio ought to reflect that U.S. oil stocks and natural gas stocks are headed in opposing directions. The underlying fundamentals of liquid hydrocarbons are so different from those of gaseous hydrocarbons in the U.S. market that the odds are that 2012 will bring higher share prices for U.S.-oriented oil producers and stagnant prices for U.S. natural gas producers.

And unfortunately for bottom fishers, I think the trends that have put natural gas in an energy deep freeze are set to last for a while.

This all has repercussions that extend well beyond the stocks of oil and gas producers because the conditions in these two energy sub-industries will have a huge effect on drilling and service companies and on chemical producers.

Here are two deals from Monday, January 23, that sum it all up. Read more

And the winners among oil stocks from the Egyptian crisis are…

Interesting pattern in today’s big winners on the New York Stock Exchange: the list is dominated by the names of relatively small, predominantly domestic energy producers.

As of the end of trading in New York today you would have found these stocks among the big percentage winners: Oasis Petroleum (OAS) up 5.9%, Brigham Exploration (BEXP) up 3.4%, Ultra Petroleum (UPL) 4.6%, Swift Energy (SFY) up 3.22%, Chesapeake Energy (CHK) 8.1%, and Berry Petroleum (BRY) up 4.9%.

These energy companies don’t have a whole lot in common—some natural gas producers (Ultra Petroleum and Chesapeake Energy); some produce oil from oil shales (Oasis and Brigham); some work in traditional fields in California (Berry).

But they do have in common a lack of exposure not just to Egypt but also to the Middle East. They’re up as a bet that we’re seeing the beginning of a wave of instability in the region that will make oil from “safe” sources increasingly valuable.

I don’t think I’d chase these here—although I don’t think this trend is over or a flash-in-the-pan, I just don’t want to buy after 10% gains in just two days.

If you like the logic of these stocks, however, I’d suggest that you take a look at oil producers from Canada’s oil sands. Read more

ExxonMobil buys U.S. natural gas for $31 billion–I told you this was a big trend

ExxonMobil (XOM) will buy XTO Energy (XTO) for $31 billion in stock. (ExxonMobil will also assume $10 billion in XTO Energy debt.)

This acquisition is just the latest example of a shift among the international energy majors from exploration and development for oil in risky new geologies and tough climates to a concentration on predictable, low-production cost assets such as onshore U.S. reserves of natural gas locked up in shale formations such as the Barnett shale formation of Texas.

I flagged that trend for you in two posts earlier this month. You’ll find links to those columns later in this post. Read more

The natural gas glut in the U.S. shows no signs of slowing production

Doesn’t anybody know that there’s a natural gas glut in the United States?

In a glut low prices are supposed to force producers to shut wells and reduce production so that demand has a chance to catch up with supply and prices can start to rise.

It just doesn’t seem to be happening that way right now, however. Read more

Natural gas pains: What’s a value investor to buy?

Some company will eventually make a killing from today’s collapse in natural gas prices.

But when? And which company?

Value investors usually only need to identify a bargain and then hang on until the rest of the stock market catches up with their thinking. But the plunge in natural gas prices has been so severe and could last so long that some of the companies with the best natural gas assets may not survive the shakeout.

Balance sheets are at this moment more important than geology.

Prices are the beginning of the problem. Benchmark Henry Hub natural gas for September delivery closed at $3.163 per million BTUs (British thermal units) on August 17,

That’s a 44% decline in price since the beginning of 2009 and the lowest price since September 2002.

And traders fear that this isn’t the end of the worst. Read more