Energy Prospectus

I use Henry Hub gas price as the basis for gas prices. Future realized gas prices are calculated based on a common Henry hub scenario minus a specific delta versus Henry Hub based on the average difference over the previous twelve months. There are major differences in natural gas prices between oil and gas companies.

Summary
Gas prices were low in 2023 and 2024. Starting Q1 2025 gas prices have shown the signs of a sustained recovery. USA companies realize higher gas prices than their Canadian counterparts. Some US oil companies in the Permian see very low realized gas prices.
Realized gas prices have not kept up with the recent increases in Henry Hub gas prices. This is true especially for Canadian gas companies. For US gas companies it is less obvious. The gap between realized gas prices and the Henry Hub gas price should close in 2025/2026.

Due to the increased gap with Henry Hub yet to be closed, the value of Canadian gas producers in the ranking model seems to be underestimated. Examples are high ranking companies such as Yangarra Resources (3rd), Spartan Delta (4th), NuVista Energy (11th) and Peyto Exploration (17th). The same is true for some US Permian oil producers like Riley Exploration (2nd), Ring Energy (20th), and Permian Resources (30th).

Henry Hub gas price versus realized gas prices
Henry Hub gas prices have been low in 2023 and 2024. The Henry Hub gas price was sitting in this period in the region of $ 2.00-3.00/MM Btu. With the cold winter weather in Q1 2025 the low gas price trend was broken. Gas prices started increasing to > $ 4.00/MM Btu. Gas futures indicate that Q1 price increases are sustainable.

In 2023 realized gas prices were close to Henry Hub, both for US as well as Canadian companies. In 2024 realized gas prices have not kept up with the Henry Hub prices. A gap has started to open up. In Q1 2025 the gas was $ 1.00/MM Btu for US companies and to $ 1.80/MM Btu for Canadian companies.
Part of the widening gap is due to a lack of gas export from the Permian in west-Texas. I expect the gap between realized gas process and Henry Hub to close again in 2025/2026. This means I am under-estimating the upside for some US gas companies, especial gas companies.

US oil and gas companies - realized gas prices
There are significant differences between US gas companies in Q1 2025 as illustrated in the first chart below. Some realized gas prices are close to Henry Hub, some are not.
Coterra and Sabine Royalty Trust are outliers. Coterra is underlying the others because it operates partially in the Permian. Gas prices in the parts of the Permian (Waha) are low due to current lack of gas export pipelines. Some oil companies operating in the Permian (Matador, EOG, SM Energy, Ovintiv, Civitas) have limited issues with low gas prices. This can be partially explained as some of the companies are operating in multiple basins. This can be seen in the second chart. Other oil companies (Permian Resources, Riley Exploration, Ring Energy) are struggling with low gas prices. These companies all feed gas into Waha.

New gas pipelines are coming onstream in 2025-2027. Waha gas prices should increase towards late 2027. The new pipelines mean that the profits for Permian Resources, Riley Exploration, Ring Energy can improve starting 2027 and that the ranking model undervalues these companies.

Canadian oil and gas companies - realized gas prices
There are significant differences in realized gas prices between Canadian oil and gas companies in Q1 2025 as illustrated in the charts below. All realized gas prices are well below Henry Hub. The gap between realized gas prices and the Henry Hub gas price has widened up dramatically. The average gap in gas prices was $ 0.70/MM Btu in Q4 2025 and widened to $ 1.80/MM Btu in Q1 2025.
No Canadian gas company comes close to the realized gas prices of US gas companies.

I expect the gap between realized gas prices and Henry Hub to close in 2025/2026 with the start of Canada LNG in H2 2025. This means that the ranking model is under-estimating the potential all the Canadian companies especially gas companies.

Conclusions
Gas prices were low in 2023 and 2024. Starting Q1 2025 gas prices have shown the signs of a sustained recovery. USA companies realize higher gas prices than their Canadian counterparts. Some US oil companies in the Permian see very low realized gas prices.
Realized gas prices have not kept up with the recent increases in Henry Hub gas prices. This is true especially for Canadian gas companies. For US gas companies it is less obvious. The gap between realized gas prices and the Henry Hub gas price should close in 2025/2026.

Due to the increased gap with Henry Hub yet to be closed, the value of Canadian gas producers in the ranking model seems to be underestimated. Examples are high ranking companies such as Yangarra Resources (3rd), Spartan Delta (4th), NuVista Energy (11th) and Peyto Exploration (17th). The same is true for some US Permian oil producers like Riley Exploration (2nd), Ring Energy (20th), and Permian Resources (30th).

Look at my forecast model for Spartan Delta (SDE.TO and DALXF) and you will see that their realized natural gas prices are way down from where they were in 2022 and 2023.

Spartan Delta's realized natural gas prices below are $Cdn per mcf.
2022: $5.38 < The North American natural gas market was very tight in 2H 2022. It is expected to be as tight in 2H 2025 based on "Days of Demand". The significant tightening of the U.S. Ngas market is why EIA's forecast below is so high.
2023: $4.11
2024: $2.08 < Mild winter of 2023/2024 and abundant "Associated Gas" from the Permian Basin kept the U.S. market oversupplied
Q1 2025: $2.41 < Very cold January/February drained storage.
My 2025 full year forecast for Spartan Delta's natural gas price is $2.44. < Probably too conservative.
My 2026 forecast is using $3.45 for NGas, but if EIA's forecast below becomes reality, Canadian natural gas prices could go over $5.00Cdn early in 2026.

EIA's current forecast is that U.S. natural gas prices per their May STEO Report:
"We forecast the Henry Hub spot price will average nearly $4.20/MMBtu in the third quarter of 2025 (3Q25). Despite rising seasonal demand for natural gas heading into summer, our forecast for the 3Q25 Henry Hub price is almost double the price from a year earlier and is contributing to our expectation of less natural gas use in the electric power sector on average this year compared with last year." < EIA's forecast for 2026 is $4.80/MMBtu.

Higher natural gas prices in Western Canada should give InPlay Oil (IPO.TO and IPOOF) a big revenue boost in 2H 2025 and 2026. With the closing of the accretive Pembina Acquistion on April 7th, InPlay's production is now approximately 18,750 Boepd with a mix of approximately 49% crude oil, 39% natural gas and 12% NGLs. The "PCU-7" area within their Pembina leasehold is "gassy" and recent wells completed in that area have very high initial production rates.