Despite its massive asset sales over the past few years, Chesapeake still holds many productive natural gas producing properties. And, as Shell pointed out by its purchase of BG Group, natural gas isn’t dead, by any means. When it comes to looking at where future growth in energy usage will come from, liquid natural gas (LNG) stake holders still have faith.
Yes, lower oil prices are a threat to Natural Gas in the short term, not necessarily by acting as a major fuel substitute, but by delaying the conversion of trucking fleets from diesel to compressed or liquefied natural gas.
But oil prices are a bump in the road.
Chesapeake insiders are betting that the future of natural gas and oil are going to be brighter than the market anticipates, and I agree. It’s not a question of if we’ll see a recovery in energy prices, but when the recovery will occur.
And since no one is going to ring a bell when the recovery finally happens, it makes sense for investors to do some select buying of beaten-down names
An alternative approach would be to require US refineries to speed up their ability to process US crude thereby reducing our dependence on foreign crude.
Also, attach a requirement that more government owned and subsidized vehicles must be powered with natural gas.
Respondents said they planned to run an additional 730,000 b/d of very light crude in 2016 than they did in 2014. With more favorable access and economics, they have the capability to run an additional 800,000 b/d of the new crude oil—for a total of 1.5 million b/d—in 2016 than what they ran in 2014, they indicated.
“Respondents will achieve their plans to increase use of this new crude production by continuing to reduce imported light and medium quality crude oils and by investing to better utilize this domestic resource,” the survey said.
Common sense would suggest that refiners would gobble up all the $45 oil before they bought Brent for $10 more.
One reason may be that refiners are set up to process the type of oil that foreigners produce more than American type oil.
From 2010 through 2014 the US increased nat gas consumption by 11%. And yet, the storage numbers stay within a certain range.If consumption continues to rise and production remains the same or decreases due to reduced drilling activity, it would seem that the price of nat gas has bottomed and could increase drastically when exports of LNG begin to consume 6% of production in the next year.
CHK shareprice got down to $13.59 in May of 2012 when the natural gas price briefly went under $2.00. Nat gas price recently is at its lowest since 2012.
I think the 1350 number could be close but I arrive at it by comparing previous withdrawals and temperatures.
I think the biggest draw so far this season was 236 the first week of January and the temperatures last week and this week are about 24% colder. That puts the next two draws at 300 each.
The average March draw for the last 10 years is 200bcf.
This also adds up to a storage number of about 1350 at the end of the heating season.
I don't know why these numbers are so important since the US has never come close to running out of supply in the Spring or running out of storage room in the Fall (except for maybe 2012). It's probably the main excuse that traders use to move the price up and down.
LNG will start exporting nat gas later this year and will purchase 6% of US production. In addition to that, a half-dozen other LNG export terminals are planned along the Gulf Coast.
I looked at storage numbers from 2011-12 and noticed that at the beginning of that heating season the peak storage was 3852 bcf. In contrast, the storage peak for the current season was 3611 bcf.
By the end of January,2012, the total draw of gas was -886 bcf and so far this season the total draw is 1183 bcf.
The last draw of the 2011-12 season was on March 9 with a storage of 2369 bcf. The current storage as of 01/30/15 is 2428. We only need to draw 60 bcf to have less gas in storage than in 2012 and there are about six more draws.
My guess is that the price of nat gas went to $2 in 2012 because of plentiful supplies- much more than we will end up with this year.
The price of nat gas recovered to 2.80 by May, 2012, 3.15 in July, and close to $4 in November.
I think nat gas is oversold at $2.58 but nobody can say with certainty where it goes from here.
UNG has 2 splits. The first split for UNG took place on March 09, 2011. This was a 1 for 2 reverse split, meaning for each 2 shares of UNG owned pre-split, the shareholder now owned 1 share. For example, a 1000 share position pre-split, became a 500 share position following the split. UNG's second split took place on February 22, 2012. This was a 1 for 4 reverse split, meaning for each 4 shares of UNG owned pre-split, the shareholder now owned 1 share. For example, a 500 share position pre-split, became a 125 share position following the split.