Chevron (CVX) announced its purchase of natural gas producer Atlas Energy (ATLS) in a deal worth $4.3 billion, which includes cash, stock and debt. Natural gas has been in a bear market for some time, and has been abysmal compared to the run-up in other commodities. So I was surprised that Chevron would bother making such a purchase. I thought I’d chart Atlas Energy against Natural Gas. Much to my surprise, since 2009 Atlas has rocked its underlying economics. Although it traded in lock-step with Natural Gas prices on the way down in 2008, it broke that pattern in early 2009, and has just kept going.
I would never even think it was a Natural Gas producer. In fact, it looked more like oil charts I’d seen. It turned out to be an even better trade than oil over the past two years. The Chevron mergers and acquisitions team definitely saw these charts, and realized this gem trades more with Oil than with Natural Gas.
Most people on Wall Street will think Chevron is scooping up a Nat Gas play while prices are languishing. But the charts tell you why they bought it, because Atlas has done well despite those languishing prices. Can you imagine how well Atlas will do if Nat Gas prices climb? Well played Chevron.
Atlas vs Nat Gas
Atlas vs Oil