RJ's Natural Gas price forecast

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Raymond James Natural Gas Industry Update 4/11/2019

This week’s injection of 25 Bcf was below the consensus estimate of a 32 Bcf injection (bullish). This implies that the market was 7.3 Bcf /d looser (bearish) than last year on a
weather-adjusted basis, and it has averaged 4.5 Bcf /d looser over the past four weeks. Total gas in storage now stands at 1,155 Bcf , and the y/y storage deficit of 224 Bcf decreased by 44 for a year-over-year storage deficit of 180 Bcf.

Longer term, with associated gas production remaining robust, the market needs only
modest supply growth from Appalachia (and likely declines in most other gas plays) to
balance. We expect 2019 should prove to be a positive year for natural gas demand as both
exports to Mexico and outbound LNG tanker activity ramp up. On the supply side, more
associated gas supply is expected. However, we believe an increasing domestic gas supply
and growth in renewab les that are increasingly becoming more cost competitive with gas
are putting further pressure on Henry Hub gas prices.

RJ's natural gas prices forecasts (Henry Hub)
2019
Q1 = $3.10
Q2 = $2.70
Q3 = $2.60
Q4 = $2.80
2020
Q1 = $2.50
Q2 = $2.25
Q3 = $2.15
Q4 = $2.30

All four "gassers" in the Sweet 16 (AR, GPOR, RRC and SWN) have a high percentage of their future gas production hedged at good prices. They should all be reporting big non-cash mark-to-market gains on those hedges in Q1. All four will be profitable and generate strong cash flow from operations if RJ's 2019 gas price forecasts come to pass. Most important, none of them have Permian Basin gas, where natural gas prices are terrible. Remember, all gas prices are "regional", so it is extremely important that you know the market prices of the regions where your gassers are selling their gas.