Natural Gas
Posted: Wed Apr 10, 2019 8:31 am
From TPH Morning Notes 4-10-2019
Midnight Sun in West Texas, Flaring Set to Rise
Economics and increased ESG focus incentivize upstream pipeline commitments
Sector: Macro | Ticker: Waha | Recommendation: NR | Target: NA | Close $0.35/mcf
With Waha pricing continuing to hover around zero despite the resumption of EPNG compression capacity, the path forward for incremental natural gas production points to a material increase in flaring over the next six months. While regulatory messaging has thus far been accommodative, the dramatic acceleration of ESG reporting and board interest raises the question of how flaring fits into that discussion. Flared natural gas contributes to industry emissions with liquids rich, associated gas generally having a higher concentration of byproducts given lower combustion efficiency. Though ESG concerns alone may not drive a wave of takeaway commitments, when combined with transport economics that are well in the money we suspect willingness to contract among the upstream community will see a step-change in coming months. KMI's Gulf Coast Express and Permian Highway add ~4.1 Bcf/d of capacity vs. the >5.0 Bcf/d of residue gas production growth we expect through exit to exit 2018-2021, necessitating ratable greenfield capacity adds beyond current queue.
Natural Gas Headed for a Leg Down?
100bcf build next week could be the catalyst
Sector: Macro | Ticker: HHUB | Recommendation: NR | Target: NA | Close: $2.71/mcf
While we're looking for a below consensus build in this week's EIA report, we see potential for the following week to report a 100+ bcf build, or 5x the 5-year avg, which would likely prove to be a negative catalyst for natural gas markets. Flow data for the current week shows res/comm demand falling off a cliff, down ~9bcfd w/w, which combined with depressed LNG demand and a slightly weaker pull from power and industrial, has total demand down ~12bcfd w/w. If these numbers hold for the balance of the week, it's possible next week's storage report shows >100bcf build, relative to a 5-year avg build of 20bcf, and a 36bcf draw last year. The 5x build vs. norms would reduce the storage deficit to 24%, down from 34% in just 3 weeks, further reducing any concerns over seasonally low storage levels.
Midnight Sun in West Texas, Flaring Set to Rise
Economics and increased ESG focus incentivize upstream pipeline commitments
Sector: Macro | Ticker: Waha | Recommendation: NR | Target: NA | Close $0.35/mcf
With Waha pricing continuing to hover around zero despite the resumption of EPNG compression capacity, the path forward for incremental natural gas production points to a material increase in flaring over the next six months. While regulatory messaging has thus far been accommodative, the dramatic acceleration of ESG reporting and board interest raises the question of how flaring fits into that discussion. Flared natural gas contributes to industry emissions with liquids rich, associated gas generally having a higher concentration of byproducts given lower combustion efficiency. Though ESG concerns alone may not drive a wave of takeaway commitments, when combined with transport economics that are well in the money we suspect willingness to contract among the upstream community will see a step-change in coming months. KMI's Gulf Coast Express and Permian Highway add ~4.1 Bcf/d of capacity vs. the >5.0 Bcf/d of residue gas production growth we expect through exit to exit 2018-2021, necessitating ratable greenfield capacity adds beyond current queue.
Natural Gas Headed for a Leg Down?
100bcf build next week could be the catalyst
Sector: Macro | Ticker: HHUB | Recommendation: NR | Target: NA | Close: $2.71/mcf
While we're looking for a below consensus build in this week's EIA report, we see potential for the following week to report a 100+ bcf build, or 5x the 5-year avg, which would likely prove to be a negative catalyst for natural gas markets. Flow data for the current week shows res/comm demand falling off a cliff, down ~9bcfd w/w, which combined with depressed LNG demand and a slightly weaker pull from power and industrial, has total demand down ~12bcfd w/w. If these numbers hold for the balance of the week, it's possible next week's storage report shows >100bcf build, relative to a 5-year avg build of 20bcf, and a 36bcf draw last year. The 5x build vs. norms would reduce the storage deficit to 24%, down from 34% in just 3 weeks, further reducing any concerns over seasonally low storage levels.