Natural gas

[fareastwarriors]

U.S. (Natural) Gas Prices May Stay Below $6 for a Decade, Trade Group Says

 

http://www.bloomberg.com/news/2013-04-16/u-s-gas-prices-may-stay-below-6-for-a-decade-trade-group-says.html

[muscleman]

U.S. (Natural) Gas Prices May Stay Below $6 for a Decade, Trade Group Says

 

http://www.bloomberg.com/news/2013-04-16/u-s-gas-prices-may-stay-below-6-for-a-decade-trade-group-says.html

 

These guys are not futures traders. Their incentive is to help the gas producers. By saying that the gas price will stay low, they can convince the government more easily to approve LNG export, which will benefit gas producers.

 

Export or not, I think gas price will unlikely stay this low. There are only a few producers with all in cost around $4. Most producer's all in costs are around $6. A proof is that even the gas price has increased to over $4 now, the dig counts are still dropping.

[Parsad]

U.S. (Natural) Gas Prices May Stay Below $6 for a Decade, Trade Group Says

 

http://www.bloomberg.com/news/2013-04-16/u-s-gas-prices-may-stay-below-6-for-a-decade-trade-group-says.html

 

These guys are not futures traders. Their incentive is to help the gas producers. By saying that the gas price will stay low, they can convince the government more easily to approve LNG export, which will benefit gas producers.

 

Export or not, I think gas price will unlikely stay this low. There are only a few producers with all in cost around $4. Most producer's all in costs are around $6. A proof is that even the gas price has increased to over $4 now, the dig counts are still dropping.

 

Yes, you are correct here.  I think you will see $5-5.50 natural gas by the end of this year.  I don't see it staying below $6 for a decade...darn near impossible as conversions ramp up, large exports begin...even if you have rigs increase again, the pendulum has already started to swing the other way.  I think I said a couple of years ago on here that natural gas will turn in a couple of years...we are pretty much there!  Cheers! 

[Guest hellsten]

Coal to Gas Switching: Are We Done Yet?

http://research-ca.bmocapitalmarkets.com/documents/5E9BFD19-E598-4090-AFA7-1AF6AA4F9B61.PDF

 

United States Crude Oil/Natural Gas Split:

http://www.firstenercastfinancial.com/pdfs/101470.pdf

[Parsad]

Continues to go up!  Cheers!

 

http://finance.yahoo.com/news/natural-gas-surges-fresh-2013-162642127.html;_ylt=AjMP0Ni2Vbn0b_DmG4hXWraiuYdG;_ylu=X3oDMTQ4MjFiZ3VnBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwM0OGY3NGU3OS1iNTY3LTM4M2EtYjEzZC1iMTNhOTE1NDZlMTEEcG9zAzIEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgNmY2ExNGNmMy1hODQ3LTExZTItYmZlZS0xZDFiNTgxMzUzOGQ-;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3

[fareastwarriors]

http://www.cnbc.com/id/100669644

 

 

Pressure Mounts on US to Export Natural Gas

 

[Grenville]

I haven't really followed this thread, but I noticed this quote while reading the LUK letters and thought it might apply here:

 

from the 2009 AR, written in reference to Keen Energy, the contract drilling sub:

Contract drilling is competitive and natural gas exploration and production are cyclical and volatile. When it’s good it’s very, very good and when it’s bad it’s terrible. Our experienced executive team, led by Ed Jacob and Mardi de Verges, are wisely squeezing out costs. We have lived long enough to know that the natural gas market will eventually turn. At that point, Keen will rise again and generate significant cash flow, but for now we hunker down. Recessions are not kind to Keen.

[ItsAValueTrap]

Is it possible for natural gas prices to go even lower in the future?

 

It seems to me that shale technology continues to improve.  Looking at Southwestern Energy's presentations, they have indicated that their cost per well has been dropping even though they have been drilling wells with longer laterals.  That they have been drilling longer laterals suggests that technology is improving.  Part of the drop in costs can be explained by things like lower rig count.  But it seems to me that technology may continue to improve and drive costs down.

(*I don't really understand shale technology.)

 

If improvements in technology continue to lower costs, then this could be a bad thing for natural gas producers.  Here's what Munger has to say about technology and commodity prices:

 

The great lesson in microeconomics is to discriminate between when technology is going to help you and when it's going to kill you. And most people do not get this straight in their heads. But a fellow like Buffett does.

 

For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles—which are a real commodity product. And one day, the people came to Warren and said, "They've invented a new loom that we think will do twice as much work as our old ones."

 

And Warren said, "Gee, I hope this doesn't work because if it does, I'm going to close the mill." And he meant it.

 

What was he thinking? He was thinking, "It's a lousy business. We're earning substandard returns and keeping it open just to be nice to the elderly workers. But we're not going to put huge amounts of new capital into a lousy business."

 

And he knew that the huge productivity increases that would come from a better machine introduced into the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners.

 

That's such an obvious concept—that there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that's still going to be lousy. The money still won't come to you. All of the advantages from great improvements are going to flow through to the customers.

 

Conversely, if you own the only newspaper in Oshkosh and they were to invent more efficient ways of composing the whole newspaper, then when you got rid of the old technology and got new fancy computers and so forth, all of the savings would come right through to the bottom line.

 

In all cases, the people who sell the machinery—and, by and large, even the internal bureaucrats urging you to buy the equipment—show you projections with the amount you'll save at current prices with the new technology. However, they don't do the second step of the analysis which is to determine how much is going stay home and how much is just going to flow through to the customer. I've never seen a single projection incorporating that second step in my life. And I see them all the time. Rather, they always read: "This capital outlay will save you so much money that it will pay for itself in three years."

 

So you keep buying things that will pay for themselves in three years. And after 20 years of doing it, somehow you've earned a return of only about 4% per annum. That's the textile business.

 

And it isn't that the machines weren't better. It's just that the savings didn't go to you. The cost reductions came through all right. But the benefit of the cost reductions didn't go to the guy who bought the equipment. It's such a simple idea. It's so basic. And yet it's so often forgotten.

http://ycombinator.com/munger.html

 

Production has gone up slightly & definitely hasn't dropped.

http://www.eia.gov/naturalgas/weekly/

[Palantir]

Canadian sites are Kitimat and Douglas Island, should add up to just shy of 1 bcfd.

 

US sites that should be operational by 2017 would be Cheniere/Sabine Pass and potentially the Freeport LNG terminal. That's 4.4 bcfd.

 

To give context, US nat gas production is around 70 bcfd right now.

 

Trucks could be pretty helpful, I estimate they can do around 11 bcfd in additional demand but there's no really time horizon set for that, I doubt it will happen by 2017.

 

Keep in mind that there's plenty of really cheap gas out there. Only about 33% of current production comes from dry gas wells. The rest is coming from wells where you get NGLs or oil, where the economics can be much friendlier.

 

When you look strictly at dry gas wells, it's really tough to beat the Marcellus, that can really ramp up and add -A LOT- to supply while being economical at $3.50-$4.

 

What are the best ways to play this major trend? We can buy gas producers with the lowest cost, like XCO and UPL. We can also buy oil producers with a lot of gas in production, like SD.

What other options do we have? Pipeline construction companies? Auto companies that will launch nat gas trucks?

 

Thanks! WEB plays the oil boom via rail shipments. I recall reading many years ago that the people who got rich during the gold rush were those selling shovels....we need to find our "shovel"  ;D 

 

 

cheers

Zorro

 

Either find shovels, or find existing undervalued gold mines. But never buy junior companies that has nothing except a promise to find gold mines.

I think the pipeline companies could be interesting. Also LNG exporters.

 

 

This is a "shovels" idea - HCLP. I have not done much DD on it myself though, just putting it out there.

[SharperDingaan]

More "shovels"

 

PD. Horizontal wells require specialized knowledge & equipment. Gatekeepers you have to talk to.

MTL. Not as good, but if you need a big move,set-up/take-down you will be talking to them. 

 

Re disclosure. We hold & long-time & concentrated position in PD.

[txlaw]

Wilbur Ross on nat gas, among other things:

 

http://www.bloomberg.com/video/ross-says-shale-gas-game-changer-for-u-s-world-JUYjbvo0RCqHGlPAW1spWQ.html

[fareastwarriors]

Natural gas really ought to be doing better.

 

The front-month futures price is down around 10% so far this month and 16% off April's high point. Yet this week, President Obama re-emphasized plans to cut U.S. carbon emissions that, despite some ambiguities, clearly favor burning more gas over coal. Hotter weather this month should be boosting demand for air conditioning, and thereby electricity, where 37% of gas usage occurs. And the ratio between oil and gas prices has widened this month from under 23 times to almost 26 times, giving drillers even less reason to invest in new gas wells over new oil wells.

 

 

Natural gas should be doing better, but the front-month futures price is down around 10% so far this month and 16% off April's high point. Last week, a Wisconsin Frito-Lay employee uses a natural-gas fueling station.

.Take these in turn. First, while the president's comments are helpful, his proposals are essentially long-dated. For example, he effectively told environmental regulators to go back and reconsider emissions limits for power plants, which will take time. In addition, it is unclear how far coal plants will be replaced with gas or renewable sources.

 

Regarding electricity consumption, while June has heated up, the forecast is less supportive. The Department of Energy expects power demand this summer to be almost 5% lower than last year on expectations that the season will be cooler overall. And the increase in gas prices since the start of the year—up 8% despite recent falls—has pushed generators to switch back to cheaper coal.

 

As for supply, well, it just won't be kept down. Jon Wolff at ISI Group estimates dry gas production in May was almost 65 billion cubic feet a day, up about 1.5 BCF from a year earlier. Although drilling is down, extra supply is coming on partly because new infrastructure is getting more gas to market and low ethane prices are pushing more of that fuel into the gas stream.

 

What's more, Barclays BARC.LN +2.03%reckons that drilling efficiencies mean that despite the spread between oil and gas prices, new gas wells in the best areas such as the Marcellus Shale are competitive with new oil wells in the Bakken shale based on current futures.

 

That last point may be the most ominous of all for gas bulls. While near-month futures have fallen, they are also down all the way through mid-2019. Gas-weighted exploration and production stocks such as Chesapeake Energy CHK +3.74%and Devon Energy, DVN -0.21%valued on longer-term price assumptions, have also lagged behind the broader sector this month.

 

In all likelihood, gas prices probably made their cyclical lows last year and investors have made money in the meantime. Moreover, the long-term future for the fuel, as alluded to in the president's speech, looks assured. But in the here and now, gas prices remain stranded by a simple truth: There is too much around and we aren't using enough of it to change that.

 

 

 

 

http://online.wsj.com/article/SB10001424127887323689204578569480333721390.html?mod=WSJ_HOS_LeadStory

[muscleman]

Wilbur Ross on nat gas, among other things:

 

http://www.bloomberg.com/video/ross-says-shale-gas-game-changer-for-u-s-world-JUYjbvo0RCqHGlPAW1spWQ.html

 

Thank you! I like his idea of liquified petro-gas as well. Which stock is he talking about? Is it Navigator Holdings? It seems to have very illiquid trading in the OTC market.

 

[txlaw]

Wilbur Ross on nat gas, among other things:

 

http://www.bloomberg.com/video/ross-says-shale-gas-game-changer-for-u-s-world-JUYjbvo0RCqHGlPAW1spWQ.html

 

Thank you! I like his idea of liquified petro-gas as well. Which stock is he talking about? Is it Navigator Holdings? It seems to have very illiquid trading in the OTC market.

 

I believe there are two shipping ventures he's involved in.  One is Navigator Holdings, and the other is Diamond Shipping, which FFH is invested in.

[fareastwarriors]

http://www.nytimes.com/aponline/2013/07/03/business/ap-us-natural-gas-inventories.html?src=busln&_r=0

 

US Natural Gas Supplies Grew Last Week

[fareastwarriors]

So What's the Matter With Shale Gas, Anyway?

 

 

Sometimes it seems as if the environmental movement has been left behind by the sheer speed of America's shale energy revolution. That may be because a resource—natural gas—that environmental groups once saw as part of the solution has become part of the problem, at least as they see it.

 

 

Shale gas and oil are widely viewed as one of the biggest forces to hit the U.S. economy in modern history. Total U.S. gas production has rocketed 33% since 2008 and oil 46%, driving down energy costs. The expanding shale industry supported 1.7 million jobs in 2012 and produced $62 billion in state and federal tax revenue, according to IHS/CERA, the energy consultancy.

 

 

"The new narrative about shale gas is about jobs, economic growth, global competitiveness, and a U.S. manufacturing renaissance," says Dan Yergin, the energy expert and author of "The Quest."

 

The public gets the narrative. A Pew Research poll found 48% of respondents favor increased use of hydraulic fracking of shale; 38% are opposed.

 

Where does this leave the environmental movement? Trying to change the conversation about shale gas.

 

For years, environmental groups saw gas as something of an ally in the cause. Gas has half the carbon footprint of coal. It was the ideal substitute for coal and a "bridge" to greater use of renewable energy such as wind and solar.

 

But as shale gas production soared, the price of natural gas plummeted. Environmental groups now worry that gas is moving in to stay, taking the momentum out of the shift to nonpolluting renewables, slowing conservation, and creating new environmental problems.

 

"To the extent that we're locking in new gas power plants, it's not the best way to build a cleaner society," says Fred Krupp, president of the Environmental Defense Fund.

 

"The pace of development caught everyone by surprise, and environmental groups and our laws and regulators are playing catch-up," says Dan Lashof of the Natural Resources Defense Council. "In a lot of cases, the gas industry has run roughshod over local communities."

 

Gas, adds Michael Brune, head of the Sierra Club, "should be used as little as possible for as short a time as possible." Renewables are the answer.

 

The broader environmental argument now goes like this: There's an under-appreciation of how much methane leaks into the atmosphere when natural gas is fracked, piped and stored.

 

Methane, the chief component of natural gas, is many times more damaging to the environment than carbon. Sloppy production can erase the advantage gas has over coal. (The Environmental Protection Agency, however, recently found that industry pollution controls have reduced production-related gas leaks by 20% from previous estimates, even though more gas is being drilled.)

 

Meanwhile, the cost of energy produced from renewables is falling. States such as California and Colorado are expanding their targets for energy generated by renewable sources, and policy makers should do more to encourage this trend nationally, environmental groups say. Communities, they add, are increasingly bristling over pollution at drilling sites and the chemicals pumped underground to extract the gas.

 

And there's the matter of climate change. Global limits on emissions, environmentalists contend, will inevitably crimp use of fossil fuels. Best to constrain the expanding use of gas now.

 

"The fundamentals of the industry are bad," says the Sierra Club's Mr. Brune. "You have a resource that's becoming less competitive and more controversial over time."

 

That said, "The reality now is that, for better or worse, gas is here," says Mr. Krupp of the EDF. "It's hard to imagine that Texas, Oklahoma, or Pennsylvania is going to stop pumping gas."

 

So his organization has joined with Chevron, CVX +0.54%Shell, Consol Energy, CNX -1.46%and other environmental groups to construct voluntary best practices for shale development.

 

"There is a big opportunity now for more of the companies to step up and lead," he says.

 

Narratives do change. It may not be wishful thinking for environmental groups to contend that a comprehensive shift to renewable energy is not only necessary but inevitable.

 

But for the moment at least, it's also tough to argue with the transformative power of price. Dow Chemical DOW -0.12%and other big manufacturers are adding to operations in the U.S. to take advantage of the new low cost of gas energy.

 

That trend is speeding up, not slowing.

 

 

 

http://online.wsj.com/article/SB10001424127887324263404578614122954685146.html?mod=WSJ_hpsMIDDLENexttoWhatsNewsSecond

 

 

 

[MrB]

Also, merchant power generators have been killed because margins are tied to the price of nat gas. 

 

Might be able to find some value there that is not directly related to nat gas production and distribution.

 

Interesting. I was also thinking CLD Cloud Peak Energy that is the lowest cost thermal coal miner. It is not like coal is going to disappear, there are huge legacy costs.

 

How much thinking? Had a quick look recently and looks interesting compared to ANR, BTU and ACI.

Cloud-Peak-Energy.pdf

[fareastwarriors]

http://online.wsj.com/article/SB10001424127887323477604578654070088855686.html?mod=WSJ_hp_LEFTWhatsNewsCollection

 

 

LNG Project in Louisiana Wins Export Approval

 

 

 

...

The approval, granted Wednesday by the U.S. Energy Department, is the third by the Obama administration. The three projects combined are allowed to ship out 5.6 billion cubic feet of liquefied natural gas, or LNG, a day.

 

....

 

The Energy Department says it is allowing Lake Charles Exports to ship up to 2 billion cubic feet of natural gas a day to countries lacking a free trade agreement with the U.S. The approval lasts for 20 years.

 

 

[fareastwarriors]

Foreseeing Trouble in Exporting Natural Gas

 

http://www.nytimes.com/2013/08/16/business/energy-environment/foreseeing-trouble-in-exporting-natural-gas.html?ref=business&_r=0

[fareastwarriors]

http://ftalphaville.ft.com/2013/08/21/1594492/is-the-shale-forecast-curve-hyperbolic-or-exponential/

 

 

Is the shale forecast curve hyperbolic, or exponential?

[fareastwarriors]

U.S. Natural-Gas Production at Multiyear High in November

 

U.S. natural-gas production hit its highest level since at least 2009 in November, according to a government report released Tuesday, and domestic production is expected to grow in 2014.

 

The rise in output is expected to be met by a decline in imports, leading to a leveling out of U.S. natural-gas supplies next year, the Energy Information Administration said in its short-term energy outlook.

 

Total marketed production in the U.S. hit 72 billion cubic feet per day in November, up from 71.2 bcf/d in October and 70.3 bcf/d in November 2012.

 

U.S. natural-gas production has soared as hydraulic fracturing and horizontal drilling techniques have enabled energy producers to tap into supplies trapped in shale-gas fields.

 

The EIA also expects a decline in imports, from an average of 8.6 bcf/d in 2012 to 7.84 bcf/d this year and 7.77 bcf/d in 2014. Total primary supply of natural gas in the U.S. is expected to rise this year, from 69.6 bcf/d in 2012 to 70.7 bcf/d in 2013, but fall again to 69.6 bcf/d next year.

 

The agency lowered its expectations for natural-gas inventory levels. The EIA now projects that stockpiles will fall from 3.413 trillion cubic feet in 2012 to 3.085 trillion cubic feet in 2013 and 3.313 trillion cubic feet in 2014. These estimates are down from the agency's projections last month that storage would reach 3.266 trillion cubic feet in 2013 and 3.351 trillion cubic feet in 2014.

 

The EIA projected that natural-gas spot prices at benchmark Henry Hub in Louisiana would rise from an average of $2.75 a million British thermal units in 2012 to $3.69/mmBtu this year and $3.78/mmBtu in 2014, compared with earlier forecasts for average prices of $3.68/mmBtu in 2013 and $3.84/mmBtu in 2014.

 

Spot prices fell to $3.64/mmBtu in November, down four cents from October's average, the EIA said.

 

 

http://online.wsj.com/news/articles/SB10001424052702304014504579250324102340880?mod=WSJ_hp_LEFTWhatsNewsCollection

[CorpRaider]

Nat Gas hits $4.40.  Highest close since 2011.

 

http://www.marketwatch.com/story/oil-futures-fall-further-despite-inventory-drop-2013-12-12?link=MW_home_latest_news

[fareastwarriors]

http://www.nytimes.com/2013/12/18/business/energy-environment/applying-creativity-to-a-byproduct-of-oil-drilling-in-north-dakota.html?ref=business&_r=0

 

Applying Creativity to a Byproduct of Oil Drilling in North Dakota

[rogermunibond]

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/18/the-shale-gas-boom-is-saving-americans-money-but-how-much

 

BCG study says cheap NG is saving Americans between $425 to $725 per year; with that savings estimate rising to a high of $1,217 by 2020.

[Cunninghamew]

285 BCF withdraw in Natty Gas...  storage levels are now well below year ago levels and pushing below longer-term averages