Energy Prospectus

Share prices
• The share prices of some gas producers have shot up in 2024, while others have been stagnant.
• CNX resources (+56%), Comstock (+26%), Antero (+25%), and Peyto Exploration (+24%) have seen sharp price increases in 2024.
• In contrast, EQT (-8%), Coterra (-7%) and Paramount Resources (-1%) are in negative territory.
• It is unlikely that current share prices reflect the low 2024 gas prices.
• More likely, share prices reflect anticipated higher gas prices in 2025 and onwards.

Future natural gas prices
• The $ 1 million dollar question for gas producers is: Where will gas prices head from 2025 onwards?
• 2024 gas prices ranged from a high of $ 3.25/MM Btu in January 2024 to lows of $ 1.40/MM Btu in the summer of 2024, recovering to $ 2.33/MM Btu in late September.
• Annual average gas futures are roughly $ 3.20/MM Btu for 2025 and $ 3.60-$ 3.70/MM Btu for the years thereafter. Gas futures are lower in summer and are higher in winter.

• Future gas prices will be the result of a balance between gas supply and gas demand.
• Drivers for higher prices are new LNG exports, increasing power demand for AI, and general gas consumption increases (especially in winter).
• Drivers for lower gas prices are current oversupply with wells shut-in, volumes in UGS above average, substantial proven reserves, and even higher probable reserves with higher future production.

Ranking of gas producers
• For ranking I use the gas future prices as shown above.
• Canadian gas producers rank higher than their American gas counterparts.
• Canadian gas producers Peyto Exploration (7th), NuVista (13th), Advantage Energy (15th), ARC Resources (21st ), Tourmaline (24th) and Paramount Oil (28th) all rank in the top 30.
• American producers such as Range Resources (34th), Gulfport Energy (35th), EQT (43rd), Chesapeake (52th), Coterra ( 47th), CNX (70th), Antero (78th) and Comstock (80th) rank lower
• Virtually all the gas producers (with exception of Comstock) have in 2024 a good/solid balance sheet. This is not a differentiator

Effect of a future 5.00/MM Btu gas prices
• With variable fluid compositions, margins, costs structures, etc., gas producers do not display similar economic responses to gas price variations.
• To cover the effect of production growth, I compared the eps of gas producers in 2025 with Henry Hub gas of $ 3.20/MM Btu with the eps in 2028 with gas at $ 5.00/MM Btu.

Canadian gas producers
• Peyto Exploration: Proven reserves (5.0 tcfe = 18 years production) allow strong production growth. The 2025 eps of C$ 2.86 (PE=5.2) can go up to C$ 5.26 (PE=2.8) in 2028. Shareholder returns in the period 2025-2028 of 8-11%, can increase to 11-15% with a HH gas price of US$ 5.00/MM Btu.
• Nuvista: Proven reserves (2.4 tcfe = 13 years production) allow some production growth. The 2025 eps of C$ 1.63 (PE=7.0) can go up to $ 3.36 (PE=3.4) in 2028. Shareholder returns in the period 2025-2028 of 5-12%, can increase to 10-20% with a HH gas price of US$ 5.00/MM Btu.
• Advantage Energy: Proven reserves (2.6 tcfe = 13 years production) allow some production growth. The 2025 eps of C$ 1.09 (PE=7.0) can go up to C$ 2.93 (PE=3.4) in 2028. Shareholder returns in the period 2025-2028 of 6-14%, can increase to 10-20% with a HH gas price of US$ 5.00/MM Btu.
• ARC resources: Proven reserves (7.8 tcfe = 9 years production) allow no production growth. The 2025 eps of C$ 12.22 (PE=10.3) can go up to C$ 4.21 (PE=5.4 in 2028). Shareholder returns in the period 2025-2028 of 6-10%, can increase to 9-15% with a HH gas price of US$ 5.00/MM Btu.
• Tourmaline: Proven reserves (15.7 tcfe = 12 years production) allow some production growth. The 2025 eps of C$ 5.75 (PE=10.5) can go up to C$ 11.56 (PE=5.2 in 2028). Shareholder returns in the period 2025-2028 of 5-8%, can increase to 10-12% with a HH gas price of US$ 5.00/MM Btu.

American gas producers
• Range Resources: Proven reserves (18.1 tcfe = 23 years production) allow strong production growth. The 2025 eps of $ 2.80 (PE=11.1) can go up to $ 6.45 (PE=4.8) in 2028. Shareholder returns in the period 2025-2028 of 4-5%, can to increase to 8-13% with a HH gas price of US$ 5.00/MM Btu.
• EQT corporation: Proven reserves (27.6 tcfe = 13 years production) allow some production growth. The 2025 eps of $ 4.30 (PE=8.3) can go up to $ 9.50 (PE=3.8) in 2028. Shareholder returns in the period 2025-2028 of 6-8%, can increase to 12-16% with a HH gas price of US$ 5.00/MM Btu.
• Coterra: Proven reserves (13.9 tcfe = 9 years production) do not allow production growth. The 2025 eps of $ 2.31 (PE=10.3) can go up to $ 3.97 (PE=6.0) in 2028. Shareholder returns in the period 2025-2028 of 5-6%, can to increase to 8-9% with a HH gas price of US$ 5.00/MM Btu.
• Chesapeake/Southwestern: Proven reserves (29.4 tcfe = 11 years production) allow some production growth. The 2025 eps of $ 4.37 (PE=18.3) can go up to $ 23.02 (PE=3.5) in 2028. Shareholder returns in the period 2025-2028 of 9-14%, can increase to 14-20% with a HH gas price of US$ 5.00/MM Btu. Note that Chesapeake has the highest unit cost ($ 2.65/MM Btu) of all gas producers and in 2025 at $ 3.20/MM Btu is working with a limited margin. In 2024 it is surviving on strong hedging gains.
• Antero: Proven reserves (18.1 tcfe = 14 years production) allow production growth. The 2025 eps of $ 1.15 (PE=24.7) can go up to $ 4.03 (PE=7.0) in 2028. Shareholder returns in the period 2025-2028 of 3-5%, can increase to 6-10% with a HH gas price of US$ 5.00/MM Btu.
• CNX resources: Proven reserves (8.7 tcfe = 15 years production) allow production growth. The 2025 eps of $ 1.08 (PE=29.0) can go up to $ 7.44 (PE=4.2) in 2028. Shareholder returns in the period 2025-2028 of 1-6%, can increase to 3-12% with a HH gas price of US$ 5.00/MM Btu.
• Comstock: Proven reserves (4.9 tcf = 9 years production) does not allow production growth. The 2025 eps of $ 2.31 (PE=10.3) can go up to $ 3.97 (PE=6.0) in 2028. Shareholder returns in the period 2025-2028 of 0-2%, can increase to 0-15% with a HH gas price of US$ 5.00/MM Btu.

Conclusion
I like to be conservative in my gas price outlook. I do believe that gas imbalances can lead short term to very high Henry Hub gas price spikes. We have this seen before and it can happen again. However, these high prices do not last, as they trigger new gas supply, which will reset gas prices.
For my investments, I am sticking to the overall oil and gas company ranking. The only gas producers I currently own are Peyto Exploration and Nuvista, both Canadian. Maybe I am missing an opportunity, but so it is.

Good stuff.

I believe the "Right Price" for U.S. natural gas is between $3.00 and $4.00 per MMBtu. However, I believe we are one normal winter away from demand growth exceeding supply growth due to the lack of pipeline takeaway capacity in the Permian Basin and in Appalachia. I am using $3.50 for HH natural gas prices in my 2025 forecasts.

The U.S. can definitely ramp up production capacity in the field, but without more infrastructure it will be "stranded". Antero Resources has some good slides on this topic in their most recent slide presentation.

I recommend investing in "gassers" that also produce a lot of liquids.

Update from EIA posted today:
"The large buildout of LNG export capacity enabled LNG exports to grow from an annual average of 0.5 Bcf/d in 2016 to 11.9 Bcf/d in 2023. Currently, the United States has seven LNG export terminals in operation and five terminals under construction. In 2023, the United States was the world’s largest LNG exporter. By the end of this year, we expect two new LNG export facilities—Plaquemines LNG and Corpus Christi LNG Stage 3 (an expansion of the existing Corpus Christi LNG export terminal)—to start LNG exports." < These two new export facilities will increase exports by 3.3 Bcfpd.
and
"U.S. net pipeline exports to Mexico averaged 6.3 Bcf/d in the first six months of 2024, 7% (0.4 Bcf/d) more than over the same period last year and 2% more (0.1 Bcf/d) than the 2023 annual average. U.S.-Mexico cross-border pipeline capacity is set to expand as two new natural gas pipeline projects with a total capacity of 5.3 Bcf/d have received regulatory approvals. These projects are primarily targeting LNG export capacity being developed in Mexico that will be supplied with natural gas sourced from the United States." < Thanks to Team Biden's lack of support for new LNG export facilities, some are going to be built in Mexico. Moves good paying jobs and taxable income to Mexico. Is this part of their "Dumb and Dumber" energy policy?

Read more: https://www.eia.gov/todayinenergy/detail.php?id=63244