AR and RRC

[dan_s]

Article I wrote for OilPrice.com: https://oilprice.com/Energy/Natural-Gas ... -2018.html

Note that ngas is trading today for about $0.20/MMBtu above the price assumed in my forecast/valuation models.

[jb2257]

I am looking at those two and was curious which one looks like it has the most upside from today's prices? Thank you for all your great research which is finally starting to pay off after years of losing money in this sector.

[dan_s]

First, let me remind all of you that "gassers" are out-of-favor with the Wall Street Gang these days. However, I do believe the stage is set for a short-term bounce in natural gas prices in the 3rd quarter. I think this because I can't see how gas in storage will get back to where it was last year before the next winter heating season begins. As I highlight in the article for OilPrice.com, if we have a hot summer in Texas and the South (99.9% chance IMHO), natural gas demand will spike this summer because so many areas depend on gas fired power plants.

Again, this is a SHORT-TERM forecast.

My valuations are $29.00 for AR and $27.00 for RRC. AR has less risk because over 100% of their gas for 2018 and 2019 is hedged at $3.50. If we get a short-term bounce to over $3.50, then RRC has the most upside.

For all of my forecast/valuation models I am now assuming $65/bbl for WTI for all future periods, adjusted for regional differences and each company's hedges.

For natural gas, I am assuming HH gas price of $2.75/MMBtu for 2018 and $2.50/MMBtu for 2019. < AR, GPOR and RRC are all profitable at these prices.