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What is Up with Natural Gas? |
HenryTo
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 Posted: Tue Dec 26, 2006 11:00 am Post subject: What is Up with Natural Gas? |
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Since our December 17th commentary was published ("What is Up with Natural Gas?"), natural gas prices (basis the January 2007 contract) are already down by more than $1/MMBtu.
The contract is way oversold but a solid bottom is still nowhere in sight. For now, I prefer to sit and wait on the sidelines before buying anything natural-gas related (regulated pipelines notwithstanding). Watch out for Canadian producers especially since I believe the Canadian dollar is still way overvalued.
Best,
Henry
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rffrydr
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rffrydr
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| Posted: Mon Jun 27, 2011 1:08 pm Post subject: |
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The Madman smells a rat:
Nat Gas' Critics Are Reaching Pretty Far
By Jim Cramer
| Quote: | | The lengths that you have to go to slam the natural gas industry for making up its numbers -- the backbone behind this iteration of attacks by "critics" of natural gas as brought to light by Ian Urbina in The New York Times -- are pretty hilarious when you think about it. In fact, let's puzzle through the idea that the industry is puffing up its numbers by hyping the productivity of shale wells. First question, Why would they do it? First, it is hard for me to grasp. It is suggested by Urbina -- OK, Urbina's unnamed sources -- that it is in the interests of the oil companies to boost reserves to make them more attractive to Wall Streeters. That's cool, except that the biggest buyers have been state-owned companies. The Chinese have done several huge deals with U.S. shale gas companies, including a... |
Should have a vid out later. I'm not gonna count chinese state investment as any standard at this point.
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rffrydr
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| Posted: Sun Jun 26, 2011 2:27 pm Post subject: |
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...And bearish MLPs:
| Quote: | The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.
Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted. |
Luv that free market boosterism. 
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HenryTo
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rffrydr
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rffrydr
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| Posted: Wed Jun 01, 2011 4:12 pm Post subject: |
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What's up is Germany is taking nuke down. $4.75 really snuck up there.
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HenryTo
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| Posted: Thu May 05, 2011 1:58 am Post subject: |
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Morningstar on CHK's 1Q earnings:
| Quote: | | Chesapeake Energy CHK reported first-quarter results Monday. Production came in at 3,107 million cubic feet equivalent per day, up 20% year over year and 6% sequentially. Removing the 415 MMcfe/d attributable to the Fayetteville assets (which were sold to BHP Billiton BHP effective March 31), production came in at 2,692 MMcfe/d, also up 20% year over year. Growth was driven by a 56% increase in liquids production, with natural gas up 16%. Liquids accounted for 13% of quarterly volumes, up from 12% in the fourth quarter and 10% in the first quarter of 2010. Despite a $725 million unrealized loss on its hedge book (in our opinion, the result of a hedge program that at times veers into the t erritory of speculation, as it came from the firm's written oil call options), overall Chesapeake posted a solid quarter, with production and cash flow generally in line with our expectations. The firm announced its ninth volumetric production payment transaction, with proceeds of $850 million for 180 Bcfe of proved reserves (or $4.72 per Mcfe) in the Mid-Continent region. Chesapeake also disclosed that it will seek joint venture partners on its million-acre positions in the Utica shale and Mississippian carbonate plays sometime this year as the firm looks to recover a portion of the $1.3 billion it has spent on acreage year to date. At this point, despite all the moving pieces during the quarter, Chesapeake remains committed to its earlier production outlook of 2,992-3,140 MMcfe/d for the year, although we note that the company has modestly increased its drilling and completion costs for 2011 and 2012 while lowering its operating cash flow guidance for 2012. While we will tweak our model to reflect the most recent quarter's results, at this point we don't anticipate any meaningful change in our fair value estimate. |
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rffrydr
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| Posted: Fri Apr 29, 2011 7:00 am Post subject: |
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Breakout? Last Trading Day.....defeat of Picken's bill.
Blind to the Facts
By Glenn Williams
| Quote: | | The Annual Energy Conference was hosted this week by the U.S. Energy Information Administration (EIA), and the big topic was oil. All the while, Washington was on defense when it came to the inflated price of the commodity. Leading some of the discussions on oil prices were the National Economic Council's Gene Sperling, EIA's Richard Newell, Deutsche Bank's Adam Sieminski, the Federal Reserve's Robert Vigfusson and Southern Methodist University's James Smith: five economists who presented five similar views. And, therein lies the problem. The U.S. Department of Energy (DOE) silos its analysis. As a matter of policy, the DOE keeps major fuels separate and will not compare or contrast choices. EIA is a part of DOE and apparently maintains similar policies. Silos can be good for subject matter experts. They can surround themselves with like-minded analysts and remain focused on their topic. The problem is that these cocooned analysts... |
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HenryTo
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| Posted: Fri Apr 15, 2011 9:08 pm Post subject: |
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FYI. Morningstar on CHK's aggressive drilling program:
| Quote: | | Chesapeake Energy CHK announced Friday the signing of a definitive agreement to acquire Bronco Drilling BRNC for $315 million in total proceeds, or $11 a share. Bronco owns 22 rigs operating primarily in the Williston and Anadarko basins, including three that are under contract with Chesapeake. The deal is part of Chesapeake's ongoing effort to secure horsepower needed to advance its aggressive drilling program over the next few years. Given the steep price Chesapeake is paying--more than 16 times trailing EBITDA and $14 million per rig (versus $15 million-$20 million for a new rig)--we think the deal speaks to the difficulty that even large operators like Chesapeake are having (or antici pate having) with rig tightness in emerging plays; the firm recently announced it will begin drilling in the Williston Basin next month. The addition of Bronco's rigs will bring Chesapeake's total owned rig count to almost 120. As the deal has been approved by the boards of both companies and has the blessing of Bronco's two largest shareholders, an anticipated close sometime this quarter seems doable. At this time, we are not changing our fair value estimate. |
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rffrydr
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| Posted: Wed Apr 13, 2011 6:58 am Post subject: |
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Look who's on his way back to Washington:
http://video.cnbc.com/gallery/?video=3000016451
Picken's plan hanging on by its fingernails.
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rffrydr
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| Posted: Mon Apr 04, 2011 11:14 am Post subject: |
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Back in the limelight:
Keep Your Ear to the Ground
By Jim Cramer
| Quote: | | Nat gas has gone mainstream as one of the solutions for our domestic energy problem. You can tell: both Time magazine and The Wall Street Journal weekend section this very week gave the fuel huge support. The Time piece simply stated that we have to use it and that it is more abundant than we thought. The Journal piece was by Dan Yergin, perhaps the foremost writer opining today on energy. Yergin point-blank endorsed the fuel while exploring its limitations given its unimpressive record for autos, although he acknowledged potential displacement of foreign oil used for trucks. Which brings me to Westport Innovations and Clean Energy . We have a lot of nat gas plays, but they are all, at times, self-defeating because of the full-out production of the fuel, a remnant of the days when it was in short supply and we figured we... |
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rffrydr
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| Posted: Wed Mar 30, 2011 8:59 am Post subject: |
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NatGas at long last finding its place in Energy Policy set to be outlined tonight. Should be interesting as we have never seemed more trapped in the energy structures that are.
That said, just came in from Dodge City, KN where the last thing I expected to see was a prairie wind farm. Seems like a pretty good buildout for a first stage.
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rffrydr
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| Posted: Wed Mar 16, 2011 6:46 am Post subject: |
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Japan’s thirst for LNG
Published: March 15 2011 19:22 | Last updated: March 15 2011 19:22
| Code: | There are few subjects as delicate as the economic boon of a human tragedy, but business is business. Chevron’s bosses, who were by all accounts deeply respectful in discussing the Japanese nuclear disaster’s impact during a previously-scheduled strategic analyst meeting, could not help but point to their ability to fill what promises to be a large and prolonged gap in the stricken nation’s power supply. For them and for the global liquefied natural gas industry, the outlook is improving after a rough patch.
Japan is already the world’s largest buyer of LNG and it has been bidding on additional cargoes in recent days. Although the situation is unprecedented, the 2007 shutdown of Japan’s large Kashiwazaki-Kariwa nuclear plant, when 40 per cent of the power shortfall was met with gas-fired generation, is a useful template. Analysts at Barclays Capital say applying the same ratio to reactors currently off line or damaged would result in 0.8 billion cubic feet of incremental demand, some 3 per cent of world supply. |
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rffrydr
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| Posted: Mon Mar 14, 2011 10:55 am Post subject: |
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JPM's take on world gas/japan/BG:
| Quote: | LNG market overview – Our starting position has been and remains
that global LNG markets are tightening following above demand trend
(7% pa) global capacity additions in 2009 (+18%) and 2010 (+14%) –
see Figure 1. Key to a rebalancing of the market, aside from economic
growth, is the growth in the number and scale of new demand centers –
driven partly by the flexibility attractions of LNG imports versus piped
gas. As per Figure 2, we anticipate that the number of LNG importing
countries could double from 22 in 2010 to 44 by 2014. The nuclear
safety issues now in view in Japan will likely accelerate the global shift
to LNG imports for both existing and new consuming countries.
BE
Japan’s primary energy mix in focus – In the short term, we expect
Japan’s LNG demand to surge, even if electricity is rationed. We estimate
that Japan consumed over one third (63 MT) of total world LNG
volumes (177 MT) in 2009 (Figure 3). So, even a small demand increase
from the world’s largest LNG demand center will have a notable impact
on the global supply / demand balance and regional LNG/gas pricing.
We note that Japanese LNG imports are by no means constrained by regasification
capacity which we estimate totals over 175 MT pa, 2.7x
2009 LNG imports. So, limited damage to Japan’s LNG import terminals
and associated gas-fired power plants will not constrain Japanese LNG
imports. According to BP’s Statistical Review of World Energy, in 2009
Japan’s total primary energy was 464 MT oil equivalent – ranking it fifth
after the USA, China, Russia and India. Japanese primary energy
consumption was split 43% oil products, 23% coal, 16% LNG, 13%
nuclear and 4% hydro-electricity.
BE
Potential LNG substitution – We understand that Japan may have lost
12.5 GW of nuclear-powered electricity capacity (four plants: Onagawa -
2.2 GW, Fukishima Daiichi – 4.7 GW, Fukishima Daini – 4.4 GW and
Tokai Daini – 1.1 GW). Assuming 80% operating utilization and given
that nuclear plants have double the thermal capacity of gas-fired power
plants, this equates to 175 TWh of gas-fired power capacity. If we
assume that 50% of this ‘loss’ is sourced from incremental LNG imports
(more than 3x LNG’s primary energy share in 2009), this equates to
around 6 MT LNG or the need to import 113 more standard LNG
cargoes. If we assume 2010 global demand growth of over 10%, then this
would imply incremental LNG demand in 2011 of just over 3%.
BE
How might BG Group respond – BG Group may divert more LNG
cargoes to Japan where we expect import prices to rise to a regional and
global premium. For competitive reasons, BG Group does not disclose its
portfolio level of flexible LNG supplies. In 2010, BG Group sold 215
cargoes of which 55 were sold in to the US. We do not expect any
significant overall volume increase in 2011 – we forecast 221 cargo
sales. If we assume that BG Group minimizes its supplies to the lowest
priced gas market (the USA) just to keep its re-gasification terminals
cold, then it may be able to divert c.40 more cargoes to Japan. This
represents 35% of the aforementioned 113 cargoes. Although this looks
high, it may be possible given BG Group’s pre-eminent reputation in the
LNG diversion market. We suspect that Qatar will also play a significant
role satisfying incremental demand from Japan given recent increases to
Qatar’s divertible export capacity.
BE
History shows that BG Group’s management consistently ‘low-balls’
LNG segment guidance – On 4 November 2008 BG Group raised its
LNG EBIT guidance for 2008 to £1.4bn and for 2009 to £1.3bn. It
subsequently reported 2008 EBIT of £1.585bn, 13% above raised
guidance. 2009 EBIT guidance was subsequently increased (4 February
2009) from £1.3bn to a range from £1.4bn to £1.5bn. BG Group later
reported EBIT of £1.551bn, 7% above mid-point raised guidance.
Segment guidance for 2010 was set at $1.8bn to $2.0bn on 4 February
2010. The actual outcome was $2.449bn, 29% above the mid-point.
Guidance for 2011-12 was set at $1.9bn to $2.2bn on 8 February 2011. If
BG Group was to beat the high end of this range by 20% (30%), it would
add $440m ($660m) to EBIT or around 5p (7p) or 6% (9%) to 2011
consensus EPS (source IBES) of 82.4pence per share. Notwithstanding
the tragic events in Japan, we very much doubt that BG Group will be
quick to upgrade 2011 guidance. It will likely wait for the new CFO
(Fabio de Oliveira Barbosa joins the board on 31 March) to settle in and
for the medium term impacts of Japan’s nuclear outages to be more
clearly understood.
BE
BG Group is well positioned to help Japan’s sudden energy deficit –
Japan has the capacity and it now has an urgent need to import much
more LNG in 2011 and, quite likely, beyond. BG Group has the
experience, bilateral trading relationships and portfolio flexibility to
satisfy a significant tranche of Japan’s potential incremental LNG
demand, in our view. In Q1 2009, BG Group’s LNG Shipping &
Marketing segment earned a record average EBIT per cargo of £9.87m
(based on 55 cargoes). This implies peak profit cargoes in a peak profit
period above £10m per cargo. If we assume £12.5m per cargo specific
for the 40 diverted cargoes, it implies EBIT of £500m. In 2011, our LNG
forecast is based on 221 cargoes and an average EBIT per cargo of
£5.7m. If 18% (40 of 221) of BG Group’s LNG volumes achieve £12.5m
per cargo, the implied EBIT upgrade could be around £273m or $436m.
This simple arithmetic might support an LNG beat in 2011 close to 20%.
Since BG Group is quite likely to beat LNG guidance anyway (as per last
bullet), the absolute beat could exceed this tentative estimate. So, ceteris
paribus, we conclude that a consensus EPS upgrade of 5-10% could
ensue. We also expect the market to reappraise positively its value of BG
Group’s LNG Shipping & Marketing franchise. Our core NAV of around
1550 pence includes £7.7bn or 227 pence per share for this specific
business. We maintain our OVERWEIGHT recommendation on BG
Group. |
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rffrydr
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| Posted: Thu Feb 24, 2011 1:32 pm Post subject: |
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Natural Gas Will Go Begging Once Again
By Jim Cramer
| Quote: | | This time it's for real. That's what we keep hearing about the transformation of the natural-gas stocks from duds to studs. The remarkable rally in the big Marcellus plays, Range Resources in particular -- the company that says it invented Marcellus -- but also in companies like Cabot Oil & Gas and Ultra Pete, isn't just because the Chinese, Australians, Indians, Spanish and French want in. It's because the need for natural gas has become obvious with the Libyan turmoil. I have been a huge backer of natural gas, and I think the stocks are too cheap, mostly because of potential takeovers and restructurings, but also because of reserve growth in a business where many oil companies offer stagnant production increases. All you have to do is look at the wealth creation at Chesapeake and Williams and you know that. I also think that its price... |
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