xco management would like to take it private - on the conference call
sounds like they will have a deal to sell their TGGT stake and do some big partnerships in the next few months
should coincide nicely with natural gas production slowly declining, nat gas storage surplus disappearing, and the short getting caught
last year was the year to be shrt nat gas drillers. seems like everybody is slashing capex on drilling and you can't turn that back on in just a few months. from the upl call the idea is that nat gas capex will be down more than 50% until nat gas hits $5 then it can take years to get production levels back up
nat gas shorts like to say that there are hundreds of wells just waiting to be hooked up. That is even worse for the shorts because once they are gone there will be no wells to replace that production, that is when nat gas production really falls off the cliff and it occurs in period where gas drilling is down 80% and no money is budgeted for drilling. It is not like companies can get the board to commit new funds, get the proper permits, find the rigs and the workers overnight - will take a year at least to get money to committed to nat gas drilling when the problem is noticed
Nice insight or maybe just wishful thinking, but what do you mean when you say, "when those hundreds of wells are gone?" Hey, that too ain't gonna happen overnight or anytime soon and in the mean time, NG could plummet under $2 again...know what I mean??
I know the story. I was short drillers last year because you could see that production was ramping up from everybody in the shale gas explosions. The nat gas surplus was 900 BCF versus the 5 year average. It began shrinking last year and is now only 350 BCF. It is still shrinking now. I would expect it would be gone by the beginning of next winter. I have gone through the conference calls of the top 20 producers and most of them have cut gas drilling activities to just a fraction of where they were 2 years ago so production is going to drop and when it does it isn't going to be able to reappear that quickly (read the UPL conference call transcript). Some will say there are hundreds of wells to come online in the marcellus and while that may be correct that backlog is shrinking. I think the real question is whether a gas company can get through this slump without having to sell its assets and not have the production capability when they come out the other side side. XCO seems to have a lot of parts moving on that front trying to monetize legacy and pipeline assets while looking to do other acquisitions. Doesn't hurt to have a couple of big deep pocketed investors like wilbur ross either.
Its not likely you will see NG plunge under 2. In fact , ( and I am humble enough to admit I could be dead wrong)- I think you are seeing NG lows right now. 3-350 area.. Most NG producers have cut way back on their production. For most producers with maybe the exception of UPL, some segments of others that already have wells, it simply does not pay for them to get NG unless its at least 4-5. And to get new wells, forget it.. Nobody is going to do this unless NG is north of 5 at a minimum. So what I think you are seeing now is the first or second inning of a very slow turing large ship - The producers/market is going to force NG back to normal levels - and when this happens you will see XCO and many others triple from what you see right now.......Its a waiting game.....D