Natural Gas Storage Report - April 17

[dan_s]

Working gas in storage was 850 Bcf as of Friday, April 11, 2014, according to EIA estimates. This represents a net increase of 24 Bcf from the previous week. Stocks were 850 Bcf less than last year at this time and 1,010 Bcf below the 5-year average of 1,860 Bcf.

Storage level is now OVER A TRILLION CUBIC FEET BELOW THE FIVE YEAR AVERAGE.

This is VERY BULLISH and I think next week's report could send natural gas prices over $5.00/mcf. The 5-year average refill for next week is 42 bcf and my guess is that we will see an injections around 10 bcf or lower.

As I have reported here many times, the Great Lakes are much colder than normal and all of the cities along the lakes, including Chicago, Cleveland and Detroit are likely to see evening temps low enough through June to require furnaces to remain on.

EIA's forecast of a 2,500 bcf refill this season looks impossible to me, but even if they are correct we will be heading into next winter with around 3,300 bcf in storage and that is not enough gas to insure we make it through the winter. Heating oil inventories are also very low.

Dan

[dan_s]

Top picks for adding more exposure to naturals.

> Unit Corp. (UNT)
> SM Energy (SM)
> Range Resources (RRC)
> Cimarex Energy (XEC0
> EOG Resources (EOG)
> Comstock Resources (CRK)
> Carrizo Oil & Gas (CRZO)
> Gastar Exploration (GST)

This is also very bullish for all of the MLPs on in our High Yield Income Portfolio and the Onshore Drillers. See the Drillers Watch List under the Watch List Tab.

[setliff]

question that anybody is welcome to answer----

the producing category in the eia report is broken down to salt and non-salt. (from salt domes?)

what does this mean and what is the signifance?

[dan_s]

Most of the underground storage locations along the Gulf Coast are old Salt Domes. In some of the major cities there are large above ground expandable tanks for gas storage. The have them in St. Louis where I grew up.

[bobs]

Dan...you didn't mention GPOR in the best NG plays.....is it because it already has moved up so much?

[wilmawatts]

"Salt injections" are just one form of injection reservoir. They hollow out the middle of a salt formation underground with water, and then use it like a tank. This allows very high rates of injection / withdrawal. Pretty much just limited by the capacity of the piping.

The other types of reservoir are more like conventional oil and gas reservoirs. They are comprised of rock with pore space (picture the water going into the sand on a beach). The rates of injection / withdrawal are limited by the permeability of the formation (i.e. the ability of the gas to pass through the rock).

[dan_s]

GPOR: Bob is right, they should be on the list of companies that are going to get a major revenue boost from increasing gas and NGL prices. I just missed it when I threw the list together yesterday.

My valuation for GPOR is based on the low end of their production guidance for 2014 (50,000 to 60,000 boepd). My Fair Value Estimate will be going up as they narrow their guidance number and if I can raise the oil, gas and NGL prices used in the forecast model.

Note that to reach 50,000 boepd, GPOR is going to need to move up from 27,100 boepd in Q1 (already confirmed) to 78,400 boepd in Q4. That is quite a move and I am not 100% sure they can to it.

There is really zero in the GPOR valuation for their interest in Grizzly, a Canadian Oil Sands project. I believe it has the potential to become a major story in 2015.