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  • commandor58 commandor58 Mar 7, 2013 2:54 PM Flag

    Bull Market in NG

    Started on 3/6. Buy NG stocks on weakness and buy if NG breaks out above $3.65.

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    • NG's high with its recent run was $4.44-a few cents short of my $4.50 prediction. Unfortunately, the NG stocks did not participate to the degree that I expect. However, earnings and cash flow estimates are way up because of the run above $4.00-which was not predicted earlier in the year.

      The bullish story is still alive and well as rig count is at 18 year lows, 354, and commentary from the UPL mgt team stated that current industry investment will not sustain production at current levels (about 65 bcf/d)-they predicted production will fall the 2ndH of 2013 and throughout 2014. That mgt team does see $4.50 by the end of the year and $5+ in 2014. They also commented that industry wide investment won't return until NG prices are above $5 sustained.

      So, I'm a buyer of more:ECA, DVN, WPL, WPX and BBG when NG hits $3.75 and the "consensus" bearish outlook returns.

    • Going out the rest of the month, NG builds will be less than the 5-yr averages-putting inventories further into deficit. On 4/30 or 5/1, the EIA will come out with data on February's production-it will show further declines vs Jan and be the 3rd month in a row production has fallen.

      It is my expectation that NG prices, for this run will peak that week, so gains on NG stocks should be taken before 5/3-the day of April jobs numbers-which could be quite soft.

      Otherwise NG hit a 20 month high today in the low $4.20s-$4.50 still possible in the coming weeks.

    • NG has moved into the $3.90s, close to my March target of $4.00-predicted a number of weeks ago. Hopefully everybody is up on any NG stocks they bought. Once across $4.00, profit taking on some positions is OK, but any weakness later should be bought.

      Over the course of 2013, NG should drift up to $4.50 as that price is close to the industry's average all-in cost plus an acceptable profit %. At the price, rig count will move higher, from the 14 year low set last week at 407, but won't be enough to bring on a rush of new supplies that disrupt the price. What will be needed is $5.00+, sustained, before rig counts bring on enough supply-with a 6-12 time lag.

      Bottom line, I'm not looking to sell any "core" positions until NG price gets above $5.00 and rig count gets above 500. Otherwise long and strong, buy on weakness.

      • 1 Reply to commandor58
      • Some very good news on NG recently.
        1)NG hit a 19 month High today at $4.12
        2)Rig Count hit another 14 year low at 389
        3)Coal shipments continue to be down y/y every week this year. So, even though NG prices are up, utilities have not switch back to coal
        4)Monday, EIA will report that Jan production will be down from Dec's which was down from Nov's all-time high.

        In a nutshell, inventories are at a 2 year low, demand continues to increase y/y, producers continue to take rigs out of service as a consequence production is falling.

        Looking for NG to hit $4.25+ next week, with upside to near $4.50. Expect analysts to come out with favorable reports for just about all producers-leading to 10% upside for next week. i bought more DVN today.

    • commandor, your plan is coming together nicely. NG is at $3.76 at this moment. Despite RSIs near 70+, I'm holding trading shares as you suggested in UPL, etc. I repurchased shares of DVN early this morning near 56. May be late for any further chances to bulk up positions there but quite happy overall. Thanks.


      • 1 Reply to mawchek
      • NG and NG stocks still cheap, although if NG hits $4.00 the stocks will be due for a pullback. This morning's data from the EIA, has NG inventories at a 2-year low-they will go lower with next week's report.

        As much as I have been wrong on the broader averages, my NG stocks have me participating very nicely with still more to come.

        What has surprised me is how little ECA has moved. In the past, several sum-of-the-parts analysis have put its value close to $40. Today, it should be in the mid 20s, if NG gets and stays above $4 then upper $20s.

    • You called it long ago....Have been buying ECA anytime it goes below $18/share and DVN below $55/share....CCRN is looking strong on no news and little volume. Thanks!

      • 2 Replies to bsbilleter
      • It should not be lost on investors that terrorist activities have been increasing in Africa-especially in countries that produce energy. Islamic "groups" killed several hostages, over the weekend, which will, over time, hurt Nigerian oil production. This will mean, over time, that NA energy assets should become more valued by the market. Obviously, this favors oil producers as well as NG. I bought more DVN last week.

        I should also add, that Barron's noted from the Household Survey, that "full-time" jobs fell 77,000 in the month of Feb. In another article I had read a higher figure. I also read, that 100,000+ jobs of the 236,000 were related to to the birth/death assumptions inherent in the report each month.

        Bottom line, the economy may be producing "jobs", but not as much as the 200,000+/month rate, that is the average of the last few months. Of those jobs, many a "part-time" (my guess many are seniors getting fast food jobs because they can't earn any interest on their savings) or other employed persons getting a 2nd job because Obamacare penalizes 30+hrs/week employees. I also suspect that other seasonal adjustments are being manipulated. Also to note, the participation rate, at 63.5%, hit a 31 year low. The participate rate should be rising in a "stronger" job market.

        For those that want to buy high and sell higher-good luck. I continue to raise cash-except for NA energy and special situation positions. Fitch downgraded Italy's debt on Friday.

      • Alot of positive data W/R to NG this week:
        1)Insider buying in UPL and ECA
        2)Draw was 146 vs consensus estimates of 130. End of season inventory now estimated to be around 1850-1900 vs 2000+ a few weeks ago
        3)From EIA's weekly production stats, production has been down w/w three weeks in a row-pretty much insuring Feb production will be lower than Jan's and March is starting lower than Feb's
        4)Rig count at 407 a 14 year low
        5)NG price finished at $3.63, just below the breakout price of $3.65
        6)Many NG stocks were up greater than 10% this week

        Going back weeks ago, I though NG could hit $4.00 in March-so far so good.

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