I just read the UPL earning transcript and UPL management expects the declines in production for all the gas producers to result in a quick turnaround in natural gas prices to at least $4 by the end of 2013. The UPL view of a quick turnaround in natural gas prices because of reduced drilling and depletion is supported by many industry experts because of the rapid depletion of the shale wells. I was surprised to hear this same view from UPL management.
I'm not comfortable with saying over-all NG production will decline in the next 12 months, there is a lot of CAPEX being deployed and the rig count actually went up last week, the demand side of the equation may yield higher pricing, but I'm not comfortable with that given slow to market exporting ... I do agree UPL is in for some crazy stock price movement, and given their portofolo, someone may take them out too ... I'm long and was selling covered calls until the price dropped thru the floor ... now I'm just a wait and see, but will buy to cost average down as this selling frenzy plays itself out in the next week ...
UPL management is paying the price now for low prices, but they seem confident that the over supply of natural gas will end in the next few months especially with the production cutbacks in the last 12 months. There is considerable speculation on this issue from industry experts and I was surprised that UPL management took such as public stance on the expected pricing increase in 2013. When the natural gas prices rebound, there will be a dramatic shift in the UPL stock price. Stay tuned for the UPL rollercoaster in 2013.
The market will force NG prices to normal levels in 1-2 years. When this happens, you will see not only UPL, but several other NG companies have their share prices double or even triple what you see today, and it will be baked in the cake 9 months before it happens....So this is one of those golden opportunities to just park you money and wait it out.. It is a great way to build wealth. I did this with the refiners a few years back when nobody wanted to touch them....I have made a killing....But I am not a day trader.. I am a person who is patient , ignores the garbage, manipulation, etc........D