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Cold start to December in the Great Lakes Region is very bullish for natural gas demand. If we continue to have triple digit draws from natural gas storage, which is now likely, gas storage is going be dangerously low heading into January. By "dangerous" I mean that we may see natural gas rationing in some major U.S. cities in February.
Natural Gas Demand - Nov 25
Natural Gas Demand - Nov 25
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Demand - Nov 25
Read comments by Range CEO.
sweet spot exhaustion and DUC storage
send this to Canada
https://boereport.com/2018/11/26/seven- ... e-america/
sweet spot exhaustion and DUC storage
send this to Canada
https://boereport.com/2018/11/26/seven- ... e-america/
Re: Natural Gas Demand - Nov 25
Thank you for posting that article and I urge all of you to read it carefully.
Trust me on this: We are heading for a "train wreck" if Dr. Joe Bastardi's winter forecast is correct!
BTW the U.S. national weather service is now in agreement with his forecast.
WHY?????????
1. If U.S. natural gas in storage is under 2,500 Bcf on December 31st there is NO WAY we can make it through a colder than normal 1st quarter without natural gas rationing in major U.S. cities. This will hit the large cities around the Great Lakes the hardest. If you live in Chicago, start planning for this now. Buy a few electric space heaters.
2. It is total HOTWASH that there are 1,000s of DUC wells that can be completed to sales "just in time" to meet a demand spike. Even if there are, there are over a million producing oil & gas wells in the U.S. and completing a few hundred more will be like pissing on a forest fire.
3. The big Marcellus/Utica companies (AR, RRC, COG, GPOR etc) will not run out and ramp up drilling programs to meet demand unless gas is a lot higher than $3.00/MMBtu. I think the NYMEX strip will need to be over $4.00 before they increase their drilling program and even then it won't solve the problem in a year.
4. It is also HOGWASH that associated gas from the Permian Basin will solve this problem. In the short-term, all of the pipelines are already full and in the long-term, very little Permian gas will make it to the Northeast market. Permian gas might keep West Texas gas prices low, but they will not have much impact on Henry Hub gas.
The author is absolutely right that the Wall Street Gang believes in the "cheap U.S. gas forever" theory because the "herd" believes it. This winter is going to put an end to that myth. Refilling storage is not an option. My guess is that on 3/31/2019 natural gas in storage will be under 1,000 Bcf. The 5-year average is over 1,700 Bcf. Do the math yourself to see how much demand that will add to demand during the next refill season, in an already tight gas market.
Remember this: The Barnett Shale was once the top producing natural gas field in the country. Now it is in steep decline. Why??? because once the Tier One leasehold is drilled out and goes on decline, there is no way to drill enough Tier Two wells fast enough to offset the decline. This is true for every major oil and gas field ever discovered.
Trust me on this: We are heading for a "train wreck" if Dr. Joe Bastardi's winter forecast is correct!
BTW the U.S. national weather service is now in agreement with his forecast.
WHY?????????
1. If U.S. natural gas in storage is under 2,500 Bcf on December 31st there is NO WAY we can make it through a colder than normal 1st quarter without natural gas rationing in major U.S. cities. This will hit the large cities around the Great Lakes the hardest. If you live in Chicago, start planning for this now. Buy a few electric space heaters.
2. It is total HOTWASH that there are 1,000s of DUC wells that can be completed to sales "just in time" to meet a demand spike. Even if there are, there are over a million producing oil & gas wells in the U.S. and completing a few hundred more will be like pissing on a forest fire.
3. The big Marcellus/Utica companies (AR, RRC, COG, GPOR etc) will not run out and ramp up drilling programs to meet demand unless gas is a lot higher than $3.00/MMBtu. I think the NYMEX strip will need to be over $4.00 before they increase their drilling program and even then it won't solve the problem in a year.
4. It is also HOGWASH that associated gas from the Permian Basin will solve this problem. In the short-term, all of the pipelines are already full and in the long-term, very little Permian gas will make it to the Northeast market. Permian gas might keep West Texas gas prices low, but they will not have much impact on Henry Hub gas.
The author is absolutely right that the Wall Street Gang believes in the "cheap U.S. gas forever" theory because the "herd" believes it. This winter is going to put an end to that myth. Refilling storage is not an option. My guess is that on 3/31/2019 natural gas in storage will be under 1,000 Bcf. The 5-year average is over 1,700 Bcf. Do the math yourself to see how much demand that will add to demand during the next refill season, in an already tight gas market.
Remember this: The Barnett Shale was once the top producing natural gas field in the country. Now it is in steep decline. Why??? because once the Tier One leasehold is drilled out and goes on decline, there is no way to drill enough Tier Two wells fast enough to offset the decline. This is true for every major oil and gas field ever discovered.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Demand - Nov 25
I have updated my forecast/valuation model for Range Resources (RRC) and it will be posted to the EPG website later today.
My valuation is $33.00 per share and there is definitely upside to that if their realized natural gas prices is over $3.00/mcf in 2019. Range's realized natural gas price in Q3 was $2.82/mcf.
RRC is selling for $15.28 today (less than 4X 2018 operating cash flow per share).
On 11/15/2018 Piper Jaffray sent an updated forecast/valuation to Reuters / First Call. They rate RRC a BUY with a valuation of $26.00/share.
RRC is generating free cash flow from operations today and should continue to do so while they continue 10% to 15% annual production growth year-after-year.
There are 25 analysts' reports included in the Reuters / First Call price target of $21.69. It looks like only three of them are dated in November. Obviously, the other 22 don't include the recent spike in gas prices.
My valuation is $33.00 per share and there is definitely upside to that if their realized natural gas prices is over $3.00/mcf in 2019. Range's realized natural gas price in Q3 was $2.82/mcf.
RRC is selling for $15.28 today (less than 4X 2018 operating cash flow per share).
On 11/15/2018 Piper Jaffray sent an updated forecast/valuation to Reuters / First Call. They rate RRC a BUY with a valuation of $26.00/share.
RRC is generating free cash flow from operations today and should continue to do so while they continue 10% to 15% annual production growth year-after-year.
There are 25 analysts' reports included in the Reuters / First Call price target of $21.69. It looks like only three of them are dated in November. Obviously, the other 22 don't include the recent spike in gas prices.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group