While I've been devoted to coal since early last fall, I missed the first part of the natural gas move but woke up to the movement in mid February [Feb 11: An Interesting Development in Natural Gas]
I posted the charts of 6 stocks (this is a very large sector with many large, medium and small players) whose charts were beginning to show some very interesting strength. Let's look at the price appreciation since
CHK +30%
DVN +25%
EOG +35%
KWK +27%
RRC +15%
SWN +39% (with today's spike)
I was a bit skeptical of the early move, so it took me some time to begin to "believe" and I created 2 positions a month later [Mar 17: Beginning First Natural Gas Play - Cabot Oil & Gas (COG)] and [Mar 19: Second Natural Gas Play - EOG Resources (EOG)] I have only had about a 2% stake with these 2 combined so I believe I really missed the boat on this one. Since then I've been waiting for this pullback than never arrives.
I'm still wondering what exactly is driving this group - my guess back in February was perhaps as some coal companies are moving from 10% of production for export to 30%, that is leaving less "energy resources" in the US, which natural gas is coming in to fill the "relative shortage"; coal being much easier to transport overseas. Or it could just be tracking up with the massive move in crude. Either way, with results like this from Southwestern Energy (SWN) - you just have to sit back and applaud.
- Southwestern Energy Co's (SWN) quarterly profit more than doubled, beating Wall Street expectations, helped by an increase in production and higher realized natural gas prices.
- The company raised its second-quarter natural gas and oil production outlook.
- For the first quarter, the company reported net income of $109 million, or 31 cents a share, compared with $51 million, or 15 cents a share, a year ago. Analysts on average were expecting earnings of 25 cents a share, before items, according to Reuters Estimates.
- Gas and oil production rose 71 percent to 39.1 billion cubic feet of natural gas equivalent (Bcfe).
- Southwestern's average realized gas price was $7.70 per thousand cubic feet (Mcf), including the effect of hedges, up from $6.71 per Mcf in the same quarter last year. (consider the spot market price is north of $10 and you see the earnings power coming in the future)
- Average realized oil price was $96.55 per barrel, compared with $55.17 per barrel in the year-ago quarter.
- The company raised its second-quarter natural gas and oil production outlook to 41.5 to 42.5 Bcfe, up from 36.0 to 37.0 Bcfe.
Long Cabot Oil & Gas, EOG Resources in fund; no personal position
6 comments:
I believe NG can get to $14; price moves in NG generally end with a spike and this is not it; in this case, the technicals identified this for me back around $8 for NG and I sent you my analysis of such. After a 2 year base, there were a lot of positive technical signs that pointed higher
It is sort of funny, because when I wrote my February piece I had to go to some old watch lists I had that I had not touched in 2-3 years. Had to get refamiliar (sp?) with the space. I used to use the canadian names, ECA, and the like back then but with the US peso I suppose the American players are much better now.
There is supposed to be some ratio with crude to nat gas and if that ratio held I read that ng is supposed to be $14
So maybe it signals we have $30 of "fluff" in crude oil prices; if ng is in the $10s. (if the ratio is correct)
Anyhow, I still believe we get some correction in all these commodity names relatively soon. Hard to commit new money to such extended charts.
The ratio I am aware of is oil to NG should be greater than 10 to 1; when the price of oil is > 10x NG, NG tends to perform well. This is not a strict timing signal but to suggest that NG is attractive relative to another energy source. At the time, I wrote some fundamental reasons why NG might move higher: 1) another energy source; 2) use in conversion of other energy sources like corn to ethanol; 3) just another commodity that hasn't exploded higher; 4) the suggestion being that the normal seasonal cycles had been disrupted
**There is supposed to be some ratio with crude to nat gas **
Come on guys, when did you start investing in energy, yesterday??
The ratio is 6:1
That means burning 6000 cubic feet of NG will give you as much energy as burning 1 barrel of crude oil.
Currently the ratio is over 10, due to transportation demand that pushes crude above its BTU value ratio equivalence with other fuels.
yea, right on. fundamental issues with natgas and it should go higher for all reasons already mentioned. been long UNG for a while now and trying to come up with a solid price target for it since its not exactly the same as buying nat gas contracts. ie: $10 natgas = $__ UNG. there have been some divergences between the two before though so its hard to figure out the exact correlation.
got me wondering, mutual funds can't even invest in futures can they?
there's no stopping Natural Gas. we're good for at least another year. i'm seeing it hit 15.
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