I wonder how many of those NG rigs have room for incrased capacity? Although the rig count is low they might still be able to increase production to meet increased demand.
It's all about valuation. How much of the 14tcf resource is a recoverable reserve and at what price to extract and pipe to the coast. It' s not so cut and dry as to just pinpoint an exact number, as I'm sure the buyer would want their own drill samples which would take months with months of intense negotiations in between and after to determine fair market value and cap-ex. Toby Darden was tasked to bring the deal to closure and he's now retired from KWK and consulting for them. I don't think he would have retired with a deal half done, so it must be real close.
Yes, read last earnings transcript. Darden said he would have clarity by year end 2013. I assume the counter-parties would prohibit any announcement until a deal is signed. I think KWK wants this deal closed as much as we do.
I think it's a multi-tier deal. Read past earnings transcripts. At last look the deal would parallel Barnett. Chances are they already have a MOU and are awaiting PSA in hand before announcement. KWK has been working on this deal for two years. It should be any day now between here and March.
cont part 3
U.S. gas exports on the horizon
There will eventually be some serious competition, though. Barclays Commodities research estimates that the U.S. will become a net exporter of natural gas by June 2016. That estimate is ahead of the U.S. Energy Information Agency (EIA), which estimates that the U.S. will become a gas exporter in 2018.
Obviously Japan will be one of the main markets for U.S. natural gas. All of those gas shipments will probably mean falling prices that could eat into the bottom line of companies like Apache. The Kitmat project cost $15 billion, according to Bloomberg. Oversupply leading to intense competition could make it hard for gas producers to maintain revenues.
Japan's growing demand for LNG makes both Chevron and Apache good long-term energy plays right now. As long as the Japanese economy keeps growing, so will the market for natural gas.
These two companies are partners in what is known as the Kitmat LNG Project in British Columbia. If you haven't heard of it, Kitmat is a facility for the export of LNG on Canada's Pacific Coast. Best of all, Kitmat, unlike the facilities in Mozambique, is under construction right now. When it starts pumping, Kitmat will be able to export five million mt of LNG a year.
The gas will initially come from Apache's Horn River Basin and Liard Fields in British Columbia. The Horn River Basin could contain up to 424 trillion cubic feet of natural gas. There are also plans for a pipeline to bring in even more natural gas from Alberta. The Liard Basin contains an estimated 48 tcf of natural gas.
The obvious market for the Kitmat natural gas is Japan. Kitmat is closer to Japan than Mozambique, and it is located on an ice-free deepwater harbor, which means natural gas can be shipped year-round. LNG can even be shipped from Kitmat during the winter when LNG demand is highest in Japan.
Kitmat will be first of at least four natural gas export facilities in British Columbia. The other facilities are not expected to open until after 2020. That means Chevron and Apache will have a virtual monopoly for the first few years.
Japan's Insatiable Appetite for Natural Gas Is Key to Energy Stocks' Future
by Daniel Jennings, The Motley Fool Jan 21st 2014 12:30PM
Updated Jan 21st 2014 12:32PM
There's one word that describes why companies with large natural gas reserves are a good buy right now: Japan.
The Tokyo Electric Power Company (TEPCO) increased its purchases of liquid natural gas (LNG) by 7% in January. TEPCO, which supplies electricity to Tokyo, will buy 2.3 million tons (mt) of LNG in January. The company bought 2.2 mt of LNG in December.
TEPCO needs that natural gas after shutting down all of its nuclear reactors because of the Fukushima catastrophe. All 50 of Japan's reactors are currently shut down, and they'll probably stay shut in the face of political pressure.
Japan needs natural gas
The country is turning to natural gas to fill the void. Even Japan's Prime Minister Shinzo Abe is trying to negotiate deals to buy more natural gas from nations like Mozambique. Abe is reportedly involved in negotiations for a $20 billion deal to build natural gas export facilities there.
Japan obviously needs natural gas and is willing to pay for it. The country will need more LNG in the near future because its rate of economic growth is up and its stock market is booming. If the Japanese want the good times to continue, they're going to need natural gas.
Japan is now the world's largest importer of natural gas, and that demand is poised to grow. In addition to Mozambique, Abe was in Canada in September trying to negotiate to buy—you guessed it—more LNG.
Kitmat is the key to profiting from Japanese LNG demand
Naturally, investors will be wondering how to profit from this situation. Well, there are two publicly traded energy companies in excellent position to cash in on the Japanese LNG market right now: Chevron (NYSE: CVX) and Apache Corporation (NYSE: APA).
These two companies are partners in what is known as the Kitmat LNG Project in British Columbia. If you haven't heard of it,
Oh, and perfect timing Kem. You timed buying that NG position like God herself whispered into your ear and personally gave you the tip.
Rub it in why don't you...or better yet, send some wealth our way?? Here I sit for what seems eternity with KWK while watching all these other high-flyers make double digit gains. I recall when you said you bought UNG and NG futures. I bought a few UNG Dec $20 calls and did well on them. But I didn't buy UGAZ at $14.50 and instead held a heavy KWK position. When O when will this thing make the big move I'm expecting.....
You make a valid point supor and this could be short lived spike with the cold weather. However, I'd like to think $5 is the new floor and possibly closer to $6 or even $7. I for one think domestic price of NG is much lower than it should be, based upon 1) what the rest of the world pays which is $12-$15 mmBtu 2) Historic NG prices being closer to $7 depending upon how far back you chart your analysis 3) Historic correlation of NG to oil being close to 10/1 put NG around $9 or so. 4) LNG export terminals coming online as soon as this year (maybe) which could boost demand for export and underlying price 5) BHI rig count still low by historic standards. Who knows....Like any commodity I suspect there's a small group of wealthy elite somewhere pulling the strings and setting the price. Short term up or down is anyone's best guess, but I think long term the demand will support the increased price. The sleeper in all this is coal, and if the EPA backs off on implementing stricter emission requirements later this year it will be the best long term investment you could make. We're talking 3-4 years or more. I'm still in WLT. And was in ACI but have been slaughtered there for three years and could not bear the pain anymore.
Not really, because the institutional holders that own roughly 70% of the float are loaning out those same shares (and the retail investors shares) to the shorts. The retail ownership is much higher than 0.61% of the total float.
They already have the drill results. I think the deal is multi-tier and involves both an upstream and downstream partner. We'll see.
And hopefully NG prices also help close this HRB deal in the next week or two. Feel like a broken record as I keep saying that for the last few months, but still think a deal is real close. HRB 14 TCFE. If half this is recoverable, and KWK made $1-$2 per mmbtu, we're talking massive windfall reserves and valuation spike. Note, value of KWK right now is based upon 1.5 TCFE all inclusive. Of which HRB is currently only valued based upon 105bcf. So do the math, KWK market cap should be considerably higher. 1.5 TCFE = current $3.09 share price. What share price for 8 TCFE or 10 TCFE? Is it $6, or $8, or 5x higher at $15? We'll know soon enough....
The Wall Street Journal Markets Alert
Natural Gas Tops $5 for First Time Since 2010
Natural-gas prices hit $5 per million British thermal units for the first time since August 2010 on expectations that continued cold weather in many parts of the U.S. would keep demand high for the heating fuel.
Natural gas for February delivery recently traded up 28 cents, or 5.9%, at $5.010/mmBtu. Prices have climbed nearly 16% this week.
Total shares shorted have decreased in last few weeks down from almost 30mm to 27mm.
Quicksilver Resources Incorporated
Daily Short Sale Volume
Short Interest (Shares Short)
Days To Cover (Short Interest Ratio)
Short Percent of Float
Short Interest - Prior
Short % Increase / Decrease
% From 52-Wk High ($ 3.54 )
% From 52-Wk Low ($ 1.44 )
% From 200-Day MA ($ 2.27 )
% From 50-Day MA ($ 2.88 )
Price % Change (52-Week)
% Owned by Insiders
% Owned by Institutions
Trading Volume - Today
Trading Volume - Average
Trading Volume - Today vs. Average