Saw a comment on global LNG, supply is not coming on as expected. Only 13% of global 12bcf/d will be completed this year, lots of reasons, but one is the increased demand in the supplying countries. LNG exports could end up being a catalyst for higher US gas prices. Still think that maybe buying long term gas reserves now could end up being a smart move in a few years, if you can make a good return at
If we can get to an average forward price deck of $5 ARP will do great.
We may not see that until 2016 though, and that is fine because we will be
able expand through our presence in PA and the OH, (The Marcellus will be
a mature basin by 2016 with lots of opportunities for consolidation for us)
to at least double our production by then while increasing our market cap
by far less. ARP could be a home run with a price above $30 and a distribution
in excess of $3 and a coverage ratio of 1.2 ...that is what I will be looking for.
There will be some restrictions on export. I would not look for exports to be a saviour of pricing. I think the propane/ethane exports will counter the LNG exports. The logic being that propane/ethane exports will result in more liquids rich drilling, with more gas being the side effect. The reduced rig count and continued focus on oil should eventually help balance supply and demand, but thus far, supply appears to be steady over the past 2 years, in fact rising by a percent or two.
What has not been mentioned much is the huge backlog of uncompleted wells that producers have been finally turning online to sales as frac crews become available. I firmly believe that these wells are also playing a huge part in the sustained supply, in addition to the increased efficiency in terms of the number of wells that can be drilled per year per rig and the improved completion efforts resulting in larger recoveries.
Long term, I think gas moves towards $4.50/mcf. Futures now going out several years are trading at $4.20/mcf, which I would note is significantly above the $3.31 realized price we are currently receiving. I would not hold my breath for sustained prices above $4.50/mcf.