But not for short term stimulus. But rather the elite has implemented a completely rational energy policy. Domestic natural gas will displace imported oil. They outlawed ethanol from food and are focusing on food yield with our seed technology and irrigation. Obama irrationality has given them a huge boost and sustained competitive advantage in bargain basement coal.
I am not adding all at once nor will I go over 5% of portfolio.
But it is logical their currency will have to go up long term. Obama / Progressive do not understand economics but the children of communists educated in our universities, do.
Unfortunately a solid natural gas play for all the wrong reasons.
You are correct of course. The properties were bought at distressed prices from BP while the general perception was natural gas would be glutted for a decade. What is so fantastic and if memory serves the all in FD and tip cost was low $2 and an 18 year reserve life on Hugoton.
Given how unstable and uncertain our economy is given the current policy insanity, I cannot say the market price of the properties has doubled. But at this current gas price and falling drilling, the expected cash generation certainly has more than doubled. It is at the heart of it a margin business and no one is expecting natural gas to continue to sell below the marginal cost of production five years from now. Price increases are all real cash generation fro line.
So the fact is the economic value of the properties has doubled+ for us. It is interesting and important to note the analysts do not get paid for forecasts beyond five years or really much beyond two. Even if they project it out the discount rate is so high it doesn't matter in the math. So this longer term value is the sort of thing which tends to get lost in the figuring.
Management caught two real whales. Now they just need to make sure everything is tight and clean in the engine room until the economy improves. Sadly that is at in all likelihood at least four years away. So I would like to see them slow down on the organic production growth and focus on improving efficiency and coverage for now. Things are so unstable I am not so sure a distressed ng liquids whale might not need saving in the near future.
That would depend on how desperate companes are to get rid of their property. But you could expect to probably pay more now sence gas has almost doubled. With a cold winter coming Ng will go up even more.