yadayada

In various write ups and in Cheniere's investor presentation it states that about 2.6-2.8bcf/day will come online in 2016 and 2017. And between now and 2020, you can possibly expect 10+bcf/day in Canada and the US. Hoping for a demand shock with a sharp price increase on the short term. Even if average prices are 4.5$ for a year, you will do very well.

thanks Wilson, does that 3bcf/day include LNG exports? Currently at least 10bcf/d is under construction that is suposed to come online in the next 6 years. Add 3bcf/d in demand growth from industrial and coal plant shut downs, that is an extra 28bcf/day needed in 2021. Then factor in supply reductions and I easily see how another 30bcf/d need to be added by Utica and Marcellus. They would need to almost tripple in production. About 17bcf of pipeline capacity is planned over the next 3-4 years. With a lot of debt heavy balance sheets, I dont see how taht is sustainable below 4$?

Oil is irrelevant here. And currency moves account for about 20% in costs. But most of US gas is consumed by US. And the supply/demand gap will simply be way too big. That is the thing that really matters here. The fact that the only fields that can provide production growth, stopped growing, the moment gas went below 4$. So you need almost 7bcf/d in extra production in 2 years time vs 91bcf/day now, but actual growth in the US will be closer to zero if prices stay here. So that means there is an extremely large chance prices will correct by a large % within 1-2 years. Because at some point production will have to increase, and that only happens at higher prices. So that means betting on the more levered gas plays that have fallen a lot becomes a less risky proposition. Also Canada produced a total of 15.5 bcf per day in 2014. Exports were 7.7bcf/day. Consumption was 10bcf/day. So in order to fill this 7bcf/day gap in the US they would need to increase production by almost 50% within 2 years. And then double their export output. Highly unlikely that will happen. edit: Also 25-50 GW of coal will come offline. it takes 10 cf of gas to provide 1 KWH of energy in a gas plant. so you would need another 10 * 24 * 25 million . That is 6-12bcf/day in demand growth alone. http://www.eia.gov/tools/faqs/faq.cfm?id=667&t=2

What gas names are you in currently packer? You just bought the low cost Marcellus players?

So gas E&P stocks have dropped by a huge amount. Thought I would provide some analysis with actual numbers why it is exciting to invest there now, what the market looks like. To start off, since 2010, gas production has increased by about 500 billion CF a month. http://www.eia.gov/dnav/ng/hist/n9050us2m.htm And the Marcellus field has added in that period about 420 billion CF a month. This is all average production per day. And they are now levelling off. So Marcellus is a huge % in this. Some other traditional fields have been in decline. See following link to verify this: http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf I googled for a bit on the Marcellus field a bit and found the following articles: https://oilandgas-investments.com/2015/natural-gas/the-marcellus-is-close-to-peak-production-and-why-this-is-so-important/ http://www.naturalgasintel.com/articles/99892-as-marcellus-shale-costs-fall-and-volumes-rise-operators-want-more So Cabot oil has some of the highest quality assets in Marcellus, and they are break even full cycle at about 1.4$ realized prices (currently closer to 1$): http://www.naturalgasintel.com/data/data_products/weekly?location_id=NEATENN4MAR&region_id=northeast http://phx.corporate-ir.net/phoenix.zhtml?c=116492&p=irol-calendar (presentation of Cabot oil). What would other gas producers look like? Note that operating costs have not fallen by much, and they are 2/3 of production costs. So for the lowest cost player in this field to make money you need at least gas prices of about 3-3.5$ elsewhere (. My guess is , a lot of marginal players need at least 4$ gas to make a full cycle profit. You can see this in the total collapse in rigs as soon as gas prices dropped in a lot of regions. So if the field that basically provided all the growth in NA gas levelled off the moment gas reached 3$ end 2014, and Utica also levelled off the moment gas prices fell (with rig count falling from 30 to 5 very quickly), then it is clear to me that with other fields declining or even, total production will decline. You can actually see this so far in 2015 (you can google that link for yourself). If you check the above link, you will see that the other fields have declined by about 2 Bcf/ day in 2015. With demand to grow and Cheniere having export capacity of 4 Bcf/d, of which 2.8 Bcf/d coming online in 2016 and 2017 (that is over 17% of marcellus field). So production is down in the US, up 1bcf/day in Canada I think (judging by exports) and possibly another bcf/d will fall off at these prices if declines continue, and 2.8bcf/day will be added in export demand. Then there is a steady rise in gas consumption in north america that increased 2.5% in 2014 (or about 2 Bcf/day total, so not 2bcf added each day). So if consumption rises another 4bcf/day in next 2 years, exports increase 2.8bcf/d, that is 6.8bcf/d. And so far production is actually falling. So at 16 bCF/day right now (possibly lower already), the Marcellus field has provided almost all the growth in US gas. They stopped growing right away when gas hit 3$. And to keep up with demand you will need 6.8 million CF/day coming online in the next 2 years. That is half of the Marcellus field! And the only two fields that were growing rapidly, and have provided almost all of US gas production growth levelled off right away when gas started falling (unlike oil for example). If you add in some additional LNG terminals down the line here, I think the future for gas producers look very bright. FWIW total north american consumption of gas was about 91 bcf/d in 2014. This includes mexico. And Canada production has been flat in the past 7 years, while their reserves are dwindling (US reserves growing). So together will LNG exports from Cheniere and regular growth, that is a 7.4% increase in demand in the next 2 years alone. And it doesnt really look like production is catching up with that right now. http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2015/bp-statistical-review-of-world-energy-2015-full-report.pdf Page 22 and 23. Note that you ahve to convert to cubic feet, the unit I used. So multiply by 35, and divided by 365 to get BCF/day. So with that in mind, if you bet on cheap gas producers that make a small profit at around 3$ gas you will do very well. Especially since some of those are priced like they will never make money again. And the F&D costs are actually pretty low right now, they don't have that much room to fall % wise vs total full cycle development costs. Finally time to drill has been cut by 60-75% in the past 6-7 years. But rig count has actually fallen from 1400 to 200 now! With gas consumption up quite a bit. Even if they are more efficient, that is just too few rigs. A few names I had in mind are Bellatrix, perpetual, Tourmaline, Chesapeake, Trilogy. All of these have fallen a lot, will likely survive the next 2 years, and are very very cheap if gas goes to 4$+ . Thoughts? edit: here some more on Cheniere: http://marketrealist.com/2014/10/must-know-overview-cheniere-energy/ So potentially more then 5bcf. Add in 4bcf production growth in next 2 years, and that is 9bcf in demand growth. Which would be huge.

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1005321471&source_id=em&extdocid=1005321471_1_ENG_pdf&serialid=0sD72ky5PVE69YdSxRIsei9L5gnDVssxzgAuLedlEiQ%3d Page 47 and 48. Fwiw current rig count is, 674 http://www.wtrg.com/rotaryrigs.html ANd from the article: Convential it takes about 20-40 days, unconventional it takes about 10 days (8 for the newer ones, and 14 for older ones). A lot of rigs being cut are unconventional. So let's assume about 25 days to drill a well? That is about 8-10k wells per year. Crazy that global oil rigs have fallen by 30% as well. You would think that is not sustainable. And no signs of slowing down either. What is more crazy is the fall in gas rigs: It is at 211 actually right now. It has not been that low since that entire graph! But it takes a bit longer to empty those wells for natural gas. But you would say that if this keeps up, we will see a supply crunch at some point. If even Peyto, THE low cost provider barely makes a profit at 3$ gas, my guess is we will see 4-5$ gas within the next 2 years. Another interesting graph: Production in most of these fields is declining. Interesting that the largest gas field, Marcellus, is profitable at around 4$ gas in most parts https://oilandgas-investments.com/2015/natural-gas/the-marcellus-is-close-to-peak-production-and-why-this-is-so-important/ I can see why a lot of gas company CEO's are buying stock.

Pupil he goes into how often these forward prices are correct a few minutes in: http://www.bnn.ca/Video/player.aspx?vid=684653

FWIW i mentioned Tourmaline earlier, this is Peyto's Don Gray's comment on Mike rose: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/an-oil-patch-pitching-ace/article4327845/?page=all And Rose is actually married to the CEO of perpetual energy, Clay Riddell daughter. It seems the three safe ones to bet on are probably Gray, Rose and Riddell in that order.

His returns were ridicilous too, like something north of 60% per year? He started with a very small amount.

market cap = $100m value of 6.75m TOU = $200m value of debt = $393m this is what is going to happen to your TOU shares. Perpetual intends to retain the TOU Shares and systematically manage its debt obligations over time, including redemption of $35 million in outstanding convertible debentures (PMT.DB.E) which mature on December 31, 2015 as well as other debt obligations. The TOU Shares may also be utilized to fund the Company's development plans at East Edson as appropriate and will provide greater financial flexibility to capture and evaluate other new high impact opportunities and pursue strategic initiatives. Relative investment merits will be considered along with other leverage and risk management considerations. not a good way to own TOU. my suggestion to anyone who wants to own TOU. buy TOU. http://i.imgur.com/QgrFv.gif

They generated several 100m in the last few years in FCF (net cash after net capex spend). It is a liquidation play of their assets. They have a huge amount of land, and their potential resources are absolutely massive. It seems they develop their resources and then sell it to other companies who can operate them at lower costs. So the upside on their other assets will come from asset sales. For example the size of their land is several million acres. And the debt matures only in about 3-4 years. And costs will come down next year due to the 30m$ gas plant that will increase netbacks. Only reason im in is because of the massive discount really. And because of Riddell. They estimate NAV of their current resources to be 600m-1b. That is probably somewhat optimistic, but even at like 1/8 of that you will be fine. Then their undeveloped land is probably worth 160m$ (this assumes a really low $ per acre value).

Mike rose from Tourmaline. Costs have come down quite a bit as well. Like Pey not too cheap, but huge reserves and they will have a similar cost structure as PEY going forward with the new facilities. A cheap way to buy TOU is through buying PMT shares, they own almost 3x their market cap worth of TOU shares.

Anything Dalio has to say. That guy usually nails it. His logic is crystal clear and he puts his money where his mouth is (and usually wins). Most economists dont bet on their idea's, and that is why their opinions don't mean much.

YES! ;D As long as you don't let it affect your investing too much I dont see how it can hurt.

I dont think markets will crash. Only if China show really really bad figures. But their central bank still has a lot more room then our central banks. And wages have a lot of room to still grow over there in the longer run. Reason it won't crash? There is no where to put your money. That will keep markets propped up. Too many people who have no idea what to do with their money. If it goes down a bit, it will be propped up again. If yields would rise, it could get ugly though. Honestly this is such a shitty environment. Government debt spending is ridiculous. At some point that will have to stop? They will run out of borrowers to fund their deficits? If something cannot go on forever, it won't. At some point the US will have to make close to a trillion $ budget cut, because there are no more people left to borrow from, and you will see a sharp up turn in yields. At some point Japan and Italy and France and GB will run out of borrowers. With the multiplier effect it seems you could see large drops of 5-10% in GDP then? The only question is when. So no reason to not invest. The scary thing is, the longer it lasts, the more ugly it will become. If US debt grows another 5 trillion, Europe gets more out of control, and Japan is already fucked, the situation will become a lot more ugly. You could see a wave of government defaults and bond haircuts in the developed world. That would be the first time in history. If you spend twice as much as comes in and interest is half your government budget, no amount of money printing gets you out of that without doing serious damage to your economy.