Industry injected 64 BCF of gas. Much lower than most analyst expected. Year over year deficit is getting very worrisome. Running out of time to get gas in storage for winter. It is now physically impossible to fill storage up. If numbers don't improve, we will be 500 to 750 BCF short by October. With oil inventories low, fuel switching not very likely without further pressure on oil prices.
Anybody doubt that an energy crisis is emerging??
If you live in Chicago, stock up on blankets. It will be awfully cold in January when we are out of storage gas.
From all of the political rhetoric I am hearing, I think some of the people that matter are starting to get concerned. Unfortunately, a search for a scapegoat seems to be the current mode of operation. I honestly thought that we would be catching up on injections by now.
flow estimate on BR yesterday. They rate BR a 1 with a nine month price target of 55. BR is on F U's Analyst Action List.
They rised the 2000 cash flow to 6.95 per share from 6.32. They are leaving 2001 essentially flat at 6.39.
In Q3, BR has approx 35% of its natural gas hedged at 2.50 per Mcf and in Q4 approx 22% hedged at 2.50.
Now, lets talk about their modeling assumptions: they assume natural gas reference price of 2.75 per Mcf at Henry Hub and crude at 23 per barrel. They state that for every ten-cent change in price of natural gas in 2001, BR's cash flow changes by about $.30 per share and for each dollar change in the price of a barrel of crude, the cash flow changes by $.14 per share.
If the current spot price for ng of $4.05 per Mcf and spot for crude of $31.69 was used, BR's 2000 estimated cash flow would be approximately $5 higher.
For valuation purposes, BR is being valued on cash flow and has historically sold for 5 to 12 times cash flow. The nine month target of 55 is 7.9 times estimated cash flow per share.
They comment BR has been a laggard to their peers, perhaps because they have been terrible in deepwater exploration (zero for nine).
My comments: The increase in the exploration budget may well have brought selling based on their track record. The good news to me is the increase in the budget should be comfortably carried by the additional cash thrown off by the favorable pricing environment. However, with every other peer achieving some degree of success in exploration, in my view a success in this area will go a very long way, as I believe failure is built into the market price.
It is stronger than goat's breath. Even I am starting to become more of a believer. Note - I said "more". Added some more EOG today as it didn't have the price action of BR. Probably just consolidating near it's all time hi.