Natural Gas Price Forecast by RJ - Sept 26

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Natural Gas Price Forecast by RJ - Sept 26

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Note from Raymond James

Energy Stat: Defending a Bullish Stance on '23 U.S. Natural Gas Prices After the Recent Sell-off, $7 Still in Play

As the summer season winds down in the Northern Hemisphere, what is going on in the U.S.
natural gas markets is completely a matter of perspective. On one hand, prices are much
higher than historical norms in the >$7/MMBtu range today and European natural gas is
trading at >3x Brent crude oil. On the other hand, the past week or two has seen more than a
~10% correction in the front month. We’re defending our bullish stance amid the selloff and
taking the "over" on 2023 U.S. prices.

Today's Stat addresses:
1. Updated views surrounding gas-to-coal switching;
2. Updated views on U.S. supply, including takeaway constraints in major producing
regions (a few of these constraints are dissipating);
3. The outlook for LNG exports, including the recent delay of the Freeport LNG restart; and
4. Our updated aggregate supply/demand and price forecasts, including a scenario
analysis around the perennial “WWW” – winter weather wildcard. We finish with stocks
to play the natural gas theme.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Natural Gas Price Forecast by RJ - Sept 26

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Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Natural Gas Price Forecast by RJ - Sept 26

Post by dan_s »

RJ's forecast is that HH gas will average $7.00 in 2023
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Natural Gas Price Forecast by RJ - Sept 26

Post by dan_s »

Top Picks
"On the E&P front, Strong-Buy rated Antero Resources (AR) remains the best way to play our bullish natural gas outlook. AR sports minimal hedges in FY23 (just ~2% of total nat gas volumes), offering investors peer-leading exposure to strip. Having kicked off an aggressive stock buyback program earlier this year (~50% of FY22 FCF dedicated towards repurchases), we expect AR to materially increase this number in FY23 (~14% of outstanding shares), possibly adding a sizable (2%-4%) base dividend as well. In terms of comps, AR screens tops amongst RJ large caps on a forward FCF yield basis (~26%). Additionally, AR’s substantial LNG firm access capacity (~2.3 Bcf/d; only 1.0 Bcf/d committed) further separates the firm from peers. On the minerals side, Strong-Buy rated Black Stone Minerals (BSM) provides investors exposure to several gassy resource plays. Nearly 75% of BSM’s production is gas, with FY23 hedges encompassing just ~25% of total gas production (down from ~60% in FY22). All-in, we’re forecasting a FY23 distribution yield of ~13%, highest amongst our minerals names."
Dan Steffens
Energy Prospectus Group
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