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  • cmontx cmontx • Mar 15, 2013 8:26 AM Flag

    Watford Gamble

    He said that he thought NG would head higher, and that he would defer on hedging out to 2014 until we got a good pop. Riverboat gambler in my opinion, but he is looking "more right" every day. We need a few more weeks of cold weather/high drawdown, and that would get us to 4+ on spot gas. Will that be enough for him to Hedge out for 2014? Sorry I didn't add more down at 17

    Sentiment: Buy

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    • slikwillhe slikwillhe • Mar 21, 2013 11:22 AM Flag

      My eyes are trained on the production numbers.At some point, when it happens that the production numbers begin to fall, the bullish argument for higher prices will be vindicated. Patience. It's a close game here.

    • addy269 addy269 • Mar 15, 2013 9:59 AM Flag

      Well it wasn't exactly a super risky gamble as there was somewhat of a floor in NG prices given slow down in drilling, cap ex, and plethora of coal switching. I'm glad they aren't hedged although some 2014 hedges might be appropriate in the $4.25 - $4.50 range and then scale back seller. The problem with supply glut really doesn't begin to disappear till mid 2015 and that is when it really begins to tighten and I can see us getting to $5.50 without too much difficulty.

      • 1 Reply to addy269
      • gray1808 gray1808 • Mar 15, 2013 7:21 PM Flag

        The weather has helped draw down the storage surplus and we can be at the 5 year average storage by April. It may be difficult to rebuild the storage in 2013 because demand keeps increasing and depletion is greater than estimated.

        The markets can panic if it appears that there is a shortage and there could be a spike in natural gas prices this summer. Look at what happened in New England in February 2013 where spot natural gas prices spiked to $10 mmBTU during a shortage caused by insufficient pipeline capacity during a cold snap.

        I was defending Watford a few months ago on this message board about not hedging saying that he knows the supply/demand forecast better than we do. At the time, the UPL stock crumbled and everyone said that UPL was taking crazy risks and he was wrong. The shorts had a feast on UPL, but now it appears that they have run for the hills and helped cause the UPL stock price to rebound in a hurry.

        If UPL does not hedge soon, then it is a good sign that Watford thinks there is a lot more room for natural gas prices to run in 2013.

 
UPL
23.170.46(+2.03%)9:57 AMEDT