Rover will help all of our "gassers" get better pricing for their Marcellus/Utica gas and NGLs.
Rover Pipeline nears completion. Columbus Dispatch.
“The benefits of natural gas cannot be realized without pipelines,” said Mike Chadsey, Ohio Oil and Gas Association spokesman. “An extensive pipeline network has been operated safely and efficiently throughout the nation since their initial use over 150 years ago.” Rover is just one of several pipelines set to open next year in the region. And Ohio’s natural gas production is poised to continue its dramatic climb, according to a December report from the U.S. Energy Information Administration. “We’re still really early, in terms of where we have to go in the Appalachian basin,” said Jackie Stewart, state director for Energy in Depth. “I don’t think people realize how big of a resource we have here. We’re going to be able to compete in a big way with the Gulf Coast.” In particular, construction in Ohio and Michigan has begun on NEXUS Gas Transmission’s $2.1 billion natural gas pipeline, despite ongoing legal battles.
AR, GPOR and RRC
AR, GPOR and RRC
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: AR, GPOR and RRC
AR recommended here: https://www.investopedia.com/investing/ ... yptr=yahoo
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: AR, GPOR and RRC
Dan,
Good to see these gassers getting a better product prices.
I have read that increased pipeline capacity will substantially reduce the impact of cold weather/consumption on even short term supply. Some apparently believe even if large amounts of gas are consumed because of very cold weather, unlike in the past, the increased pipeline capacity will enable transport of sufficient quantities such as would prevent any significant price spikes and in fact keep the price of ngas low.
What is you opinion on these points?
Thanks
Good to see these gassers getting a better product prices.
I have read that increased pipeline capacity will substantially reduce the impact of cold weather/consumption on even short term supply. Some apparently believe even if large amounts of gas are consumed because of very cold weather, unlike in the past, the increased pipeline capacity will enable transport of sufficient quantities such as would prevent any significant price spikes and in fact keep the price of ngas low.
What is you opinion on these points?
Thanks
Re: AR, GPOR and RRC
That is definitely a theory to explain today's gas price. Marcellus/Utica gas is close to the major U.S. cities that burn the most natural gas for space heating. There is more pipeline capacity, but we still need a lot of gas in storage near the major cities. When significant cold waves move through the Great Lakes Regions there is not enough deliverability to meet demand.
The Rover Pipeline is the big one, but a total of 6.7 Bcf of total takeway capacity has been added in the Appalachian Basin during 2017. Keep in mind that power generation and industrial demand has also increased and a lot more LNG demand is coming online (~7 Bcfpd) over the next two years.
By year-end, there will be over 200 Bcf less gas in storage than there was at 12/31/2016. In January, 2017 natural gas spiked to over $3.70/MMBtu.
Lots of the new takeaway capacity is heading to the Gulf Coast markets, so we still need lots of storage to handle the impact of a "Polar Vortex".
The Rover Pipeline is a 713-mile pipeline designed to transport 3.25 billion cubic feet per day of domestically produced natural gas from the rapidly expanding Marcellus and Utica Shale production areas to markets across the U.S. as well as into the Union Gas Dawn Storage Hub in Ontario, Canada, for redistribution back into the U.S. or into the Canadian market.
To learn more about Rover go here: http://www.roverpipelinefacts.com/
If you really want to educate yourself on the U.S. gas market, go the Range Resources website.
One of our new members sent me an article on the HUGE amount of export capacity coming online for U.S. gas. Send me an e-mail (dmsteffens@comcast.net) and I will forward it to you.
The long-term gas price that I am using in all of my forecast/valuation models is $3.00/MMBtu.
The Rover Pipeline is the big one, but a total of 6.7 Bcf of total takeway capacity has been added in the Appalachian Basin during 2017. Keep in mind that power generation and industrial demand has also increased and a lot more LNG demand is coming online (~7 Bcfpd) over the next two years.
By year-end, there will be over 200 Bcf less gas in storage than there was at 12/31/2016. In January, 2017 natural gas spiked to over $3.70/MMBtu.
Lots of the new takeaway capacity is heading to the Gulf Coast markets, so we still need lots of storage to handle the impact of a "Polar Vortex".
The Rover Pipeline is a 713-mile pipeline designed to transport 3.25 billion cubic feet per day of domestically produced natural gas from the rapidly expanding Marcellus and Utica Shale production areas to markets across the U.S. as well as into the Union Gas Dawn Storage Hub in Ontario, Canada, for redistribution back into the U.S. or into the Canadian market.
To learn more about Rover go here: http://www.roverpipelinefacts.com/
If you really want to educate yourself on the U.S. gas market, go the Range Resources website.
One of our new members sent me an article on the HUGE amount of export capacity coming online for U.S. gas. Send me an e-mail (dmsteffens@comcast.net) and I will forward it to you.
The long-term gas price that I am using in all of my forecast/valuation models is $3.00/MMBtu.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: AR, GPOR and RRC
Coverage initiated today by Credit Suisse with Outperform and $24 target
We are initiating coverage of RRC with an Outperform rating and a $24 target
price.
■
Double-Digit per Annum Growth While Operating Within Cash Flow and
De-levering at $3.00/MMBtu:
At current 2018 futures strip prices, RRC
expects to spend at or slightly below cash flow next year and generate 10%
YoY growth while using the free cash flow (as well as asset sale proceeds) to
pay down debt. Beyond 2018, we estimate RRC can generate
low-double-digit growth with spending at or below cash flow. Moreover, while
investors shy away from RRC partly because of its high financial leverage,
we estimate targeted divestitures would reduce net debt/EBITDX below the
critical 3.0x, and its shift to living within free cash flow could potentially
delever further to <2.5x in 2019.
■
Strong Efficiency Gains Should Continue into 2018+:
Since 2012, RRC
has consistently increased its average lateral length in the Marcellus while
reducing its well costs/foot and keeping EURs/foot roughly unchanged (and
thus increasing absolute EURs). We expect this trend to continue into 2018+
as it increases its average lateral length from ~8,500 this year to >10,000’
and is able to focus on the best parts of its acreage position. (Drilling to hold
acreage is essentially complete.)
■
Risks to Our View:
Risks to our thesis include (1) a warmer-than-normal
winter, which could put downward pressure on natural gas prices, leaving
RRC particularly vulnerable given its above-average debt load, and (2)
operational/execution risk associated with its North Louisiana program.
■
Valuation:
RRC currently trades above gassy peers on EV/EBITDX but at a
discount on P/NAV. Our $24 target price is based on ~8.0x 2018E EBITDX
(below its historical average of 11.5x given the asset shift mix change
following the Memorial acquisition) and ~0.60x NAV.
We are initiating coverage of RRC with an Outperform rating and a $24 target
price.
■
Double-Digit per Annum Growth While Operating Within Cash Flow and
De-levering at $3.00/MMBtu:
At current 2018 futures strip prices, RRC
expects to spend at or slightly below cash flow next year and generate 10%
YoY growth while using the free cash flow (as well as asset sale proceeds) to
pay down debt. Beyond 2018, we estimate RRC can generate
low-double-digit growth with spending at or below cash flow. Moreover, while
investors shy away from RRC partly because of its high financial leverage,
we estimate targeted divestitures would reduce net debt/EBITDX below the
critical 3.0x, and its shift to living within free cash flow could potentially
delever further to <2.5x in 2019.
■
Strong Efficiency Gains Should Continue into 2018+:
Since 2012, RRC
has consistently increased its average lateral length in the Marcellus while
reducing its well costs/foot and keeping EURs/foot roughly unchanged (and
thus increasing absolute EURs). We expect this trend to continue into 2018+
as it increases its average lateral length from ~8,500 this year to >10,000’
and is able to focus on the best parts of its acreage position. (Drilling to hold
acreage is essentially complete.)
■
Risks to Our View:
Risks to our thesis include (1) a warmer-than-normal
winter, which could put downward pressure on natural gas prices, leaving
RRC particularly vulnerable given its above-average debt load, and (2)
operational/execution risk associated with its North Louisiana program.
■
Valuation:
RRC currently trades above gassy peers on EV/EBITDX but at a
discount on P/NAV. Our $24 target price is based on ~8.0x 2018E EBITDX
(below its historical average of 11.5x given the asset shift mix change
following the Memorial acquisition) and ~0.60x NAV.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group