Natural Gas Storage Report - Sept 13
Posted: Thu Sep 13, 2018 10:35 am
The deficit to the 5-year average amount of gas INCREASES by another 7 BCF.
Working gas in storage was 2,636 Bcf as of Friday, September 7, 2018, according to EIA estimates.
> This represents a net increase of 69 Bcf from the previous week.
> Stocks were 662 Bcf less than last year at this time and 596 Bcf below the five-year average of 3,232 Bcf.
> At 2,636 Bcf, total working gas is below the bottom of the five-year historical range.
Last year the draws from storage began the week ending November 11, 2017. Historically, they usually don't begin until the next week, so I am basing my calculation on the belief that we still have 9 more weeks to refill storage.
There is no indication that the weekly builds will suddenly exceed the 5-year average. In fact, the opposite is likely. Over the last 12 weeks, 10 of 12 weeks have been builds below the 5-year average and the deficit to the 5-year average has grown by 99 Bcf. The two weeks where builds were larger were each just 5 Bcf higher than the 5-year average.
My SWAG ("Scientific Wild Ass Guess") is that storage will build by another 615 Bcf to 3,251 Bcf before the winter heating season begins.
> Last year we had 3,790 Bcf in storage the week before the first draw and Henry Hub gas spiked to over $3.50/MMBtu with the first cold wave
> The 5-year average is 3,844 Bcf in storage before the first week of draws in mid-November.
Let me be CRYSTAL CLEAR:
1. The United States has massive reserves of natural gas in the ground. Key words underlined.
2. Supply of gas has grown rapidly in the U.S. and will continue to grow
3. However, demand for U.S. natural gas has grown even more (proof is the weekly storage reports) and it will continue to grow (2 more LNG export facilities come on-line in Q1 2019)
>> U.S. natural gas is the cheapest energy on this planet, so strong demand growth is "logical".
4. Reserves in the ground and production capacity are two totally different things. A significant increase in "production capacity" will take a SIGNIFICANT NUMBER OF NEW WELLS that must be drilled, completed and tied into gathering systems.
5. Utility companies are required by law to maintain pressure in their natural gas distribution systems that bring gas to homes and businesses.
6. This is not a "Just in Time" system. For example, if a major cold wave moves into Chicago the utility companies that serve the area cannot wait for upstream companies to run out and drill & complete more wells. They must have supply standing by to meet spikes in demand.
7. BTW the time to drill, complete and tie in a new gas well to a gathering system takes months, not days AND drilling rigs and completion crews are not just sitting around in a nearby parking lot waiting for a call to run out and start a drilling program.
8. This is a SHORT TERM situation that is likely to cause a SHORT TERM spike in natural gas prices. Gas in storage is WAY BELOW what is needed to make it through a cold winter.
9. Last but not least, all three of the "gassers" in our Sweet 16 are profitable at TODAY's natural gas and NGL prices.
> AR's realized gas price in Q2 was $3.51/mcf, net of big cash settlements on their hedges. All of AR's gas is hedged at $3.50/mcf through 2019.
> RRC's realized gas price in Q2 was $2.78/mcf
> GPOR's realized gas price in Q2 was $2.32/mcf and Gulfport reported EPS of $0.64 and operating CFPS of $1.06 for Q2. Gulfport is the most profitable of these three.
Maybe we have a mild winter, but maybe we don't. Only God knows the weather for sure.
Working gas in storage was 2,636 Bcf as of Friday, September 7, 2018, according to EIA estimates.
> This represents a net increase of 69 Bcf from the previous week.
> Stocks were 662 Bcf less than last year at this time and 596 Bcf below the five-year average of 3,232 Bcf.
> At 2,636 Bcf, total working gas is below the bottom of the five-year historical range.
Last year the draws from storage began the week ending November 11, 2017. Historically, they usually don't begin until the next week, so I am basing my calculation on the belief that we still have 9 more weeks to refill storage.
There is no indication that the weekly builds will suddenly exceed the 5-year average. In fact, the opposite is likely. Over the last 12 weeks, 10 of 12 weeks have been builds below the 5-year average and the deficit to the 5-year average has grown by 99 Bcf. The two weeks where builds were larger were each just 5 Bcf higher than the 5-year average.
My SWAG ("Scientific Wild Ass Guess") is that storage will build by another 615 Bcf to 3,251 Bcf before the winter heating season begins.
> Last year we had 3,790 Bcf in storage the week before the first draw and Henry Hub gas spiked to over $3.50/MMBtu with the first cold wave
> The 5-year average is 3,844 Bcf in storage before the first week of draws in mid-November.
Let me be CRYSTAL CLEAR:
1. The United States has massive reserves of natural gas in the ground. Key words underlined.
2. Supply of gas has grown rapidly in the U.S. and will continue to grow
3. However, demand for U.S. natural gas has grown even more (proof is the weekly storage reports) and it will continue to grow (2 more LNG export facilities come on-line in Q1 2019)
>> U.S. natural gas is the cheapest energy on this planet, so strong demand growth is "logical".
4. Reserves in the ground and production capacity are two totally different things. A significant increase in "production capacity" will take a SIGNIFICANT NUMBER OF NEW WELLS that must be drilled, completed and tied into gathering systems.
5. Utility companies are required by law to maintain pressure in their natural gas distribution systems that bring gas to homes and businesses.
6. This is not a "Just in Time" system. For example, if a major cold wave moves into Chicago the utility companies that serve the area cannot wait for upstream companies to run out and drill & complete more wells. They must have supply standing by to meet spikes in demand.
7. BTW the time to drill, complete and tie in a new gas well to a gathering system takes months, not days AND drilling rigs and completion crews are not just sitting around in a nearby parking lot waiting for a call to run out and start a drilling program.
8. This is a SHORT TERM situation that is likely to cause a SHORT TERM spike in natural gas prices. Gas in storage is WAY BELOW what is needed to make it through a cold winter.
9. Last but not least, all three of the "gassers" in our Sweet 16 are profitable at TODAY's natural gas and NGL prices.
> AR's realized gas price in Q2 was $3.51/mcf, net of big cash settlements on their hedges. All of AR's gas is hedged at $3.50/mcf through 2019.
> RRC's realized gas price in Q2 was $2.78/mcf
> GPOR's realized gas price in Q2 was $2.32/mcf and Gulfport reported EPS of $0.64 and operating CFPS of $1.06 for Q2. Gulfport is the most profitable of these three.
Maybe we have a mild winter, but maybe we don't. Only God knows the weather for sure.