Energy Prospectus

Working gas in storage was 1,415 Bcf as of Friday, March 25, 2022, according to EIA estimates.
This represents a net increase of 26 Bcf from the previous week.
Stocks were 347 Bcf less than last year at this time and 244 Bcf below the five-year average of 1,659 Bcf.
At 1,415 Bcf, total working gas is within the five-year historical range.

The 5-year average (2017-2021) for ngas is storage at the beginning of the refill season is 1,662 Bcf.

For the last 13 weeks (a quarter of the year), net storage draws have been 260 Bcf below the 5-year average. So, if LNG exports remain near our export capacity of ~13 Bcfpd all summer, it will be difficult to rebuild storage to ~4,000 Bcf before the next winter heating season starts in November 2022. Demand for LNG is seasonal and normally declines in the summer. Obviously, Ukraine makes this an abnormal year.

I do expect net draws from storage over the two weeks ending April 8 to push the deficit to the 5-year average back over 300 Bcf.

For the month of April the 5-year average is a build of 224 Bcf. With winter weather hanging around the Great Lakes Region it is doubtful that April 2022 builds will be near the average.

During April 2021 ngas storage increased by 180 Bcf.

This may sound counter-intuitive, but during an extended period of a move higher in natural gas prices (if you believe the commodity's price will stay high) it is bullish for a "gassers" share price to exceed the First Call's target price. I consider it bullish, because it will cause more of the Wall Street Gang to look carefully at the company and either raise their price target or change it from a BUY to a HOLD or SELL.

AR, CRK, EQT and RRC are trading today above their FC price targets. CTRA is about $2 below the FC price target.

There has clearly been a Paradigm Shift on what the Right Price for U.S. natural gas should be. With the NYMEX strip for ngas now firmly over $5.00 and the paradigm that LNG exports will need to stay near our export capacity all year to meet Biden's promise to increase more shipments of gas to Europe, I believe there is SIGNIFICANT UPSIDE for ngas and NGL prices.

If we get to the end of May with gas in storage well below the 5-year average ngas storage level, we could see a bidding war between utilities for physical supply that pushes HH gas over $10/MMBtu. This may sound crazy, but if you pull up a 25 year chart for natural gas prices at the link below, you will see that the price of HH gas has gone over $10 three times in Dec 2000 ($10), Sept 2005 ($14) and June 2008 ($13). Also, it is important to note that the price spikes in 2005 and 2008 happened during the refill season because storage levels were below the 5-year average.

If the Wall Street Gang adjusts their valuation of "gassers' based on $5.00 ngas, First Call's price targets will be going much higher. All six of our "gassers" (AR, CRK, CTRA, EQT, RRC and SBOW) will be generating a lot of free cash flow if ngas stays near the current strip prices.

For charts go to: https://tradingeconomics.com/commodity/natural-gas