Natural Gas

[winston]

The Huge Chinese Energy Bet You're Not Hearing About By Matt Badiali

Either the Chinese government reads DailyWealth… or it already understands the secret to making huge gains over the next few years.

I'm talking about "hoarding"… in this case, hoarding proven, undeveloped natural gas reserves, or "PUDs." These are reserves of gas in the ground that haven't yet been tapped with a well.

Those reserves could shoot up hundreds of percent in value as natural gas prices rise. The market hates natural gas right now. It's so cheap, it hardly makes sense for the companies that own these reserves to tap them and bring them to market.

But as natural gas prices rise, those reserves will start to look a lot more attractive… And the companies that own them will see their value soar. (For an example of the leverage here: A 22% rise in natural gas prices from October pushed shares of giant natural gas producer Chesapeake up 43%.)

That's just a fraction of what I expect. When natural gas prices go from today's $4 per thousand cubic feet (mcf) to $6 or $8, which I expect we'll see sometime in the next three or four years, shares of Chesapeake and its peers will go up hundreds of percent.

That's what the Chinese are banking on. They're buying massive hoards of natural gas.

Back in October 2010, the Chinese National Offshore Oil Company (CNOOC) paid $2.16 billion for a 33% stake of Chesapeake's 600,000 acres of the Eagle Ford Shale – a huge, gas-rich swath of Texas land.

Then last month, CNOOC put up another $1.3 billion for 33% of Chesapeake's 800,000 acres of The Niobrara Shale. The Niobrara is similar to the Eagle Ford, but located up in Northeastern Colorado and Southeastern Wyoming.

Finally, this week, China's big dog, PetroChina, paid $5.4 billion for a 50% stake of natural gas producer EnCana's 1.27 million acres in Canada's Montney Shale.

The Montney is underdeveloped, so we don't know much about it yet. But it's clear PetroChina thinks highly of it: The price amounts to about $5.40 per mcf.

The engineers at PetroChina know that there are trillions of cubic feet of natural gas under that ground. And it won't be produced for three or four years. In other words, the folks at PetroChina are buying cheap, undeveloped, North American natural gas reserves… and betting the natural gas price is heading up over the long run. That's smart… And we should be doing exactly the same thing.

Fortunately, we can get a better price than PetroChina paid. Take a look:

Company PUDs per Share $/mcf Nov 2010 $/mcf Today
Galleon Energy 8 mcf $0.50 $0.58
ATP Oil and Gas 14 mcf $1.01 $1.27
Penn Virginia 11 mcf $1.36 $1.54
Petroleum Development 22 mcf $1.48 $2.10
Goodrich Petroleum 7 mcf $1.85 $3.06
Berry Petroleum 15 mcf $2.36 $3.02
Sandridge Energy 2 mcf $2.44 $3.50
Chesapeake Energy 9 mcf $2.39 $3.38
EQT Corporation 15 mcf $2.44 $3.02
Energy XXI Bermuda 9 mcf $2.44 $3.57


We first published this table in November last year. Natural gas is up 17% since then. And that little jump in the price of natural gas pushed these PUDs higher.

I expect natural gas to ease back over the next few months, which will likely bring these prices back down a bit and give you a good chance to pick up some cheap PUDs. It's a great long-term bet.

You see, Chinese companies like PetroChina and CNOOC understand something fundamental: The world will be hungry for more and more energy over the coming years. That's why they're gobbling up coal, uranium… and natural gas.

One of the best ways to play this decades-long trend is to get in ahead of China. Buy cheap natural gas in the ground. And be patient.


www.dailywealth.com

[winston]

Japanese Earthquake

The clear winner in all of this is natural gas. Natural gas-fired electricity is relatively clean. It's dependable. It can provide huge amounts of "always ready" electricity.

Natural gas currently has environmental concerns with the waste water produced by new drilling methods, but it's the "least bad" choice from the perspective of most reasonable people.

The hippies don't like natural gas. They'd rather see us produce electricity from the flapping of butterfly wings… or simply return to the Stone Age.


Source: Growth Stock Wire

[winston]

NATURAL GAS IS SUPER CHEAP… RIDICULOUSLY SUPER CHEAP

Even though "Brent Crude" is getting cheaper, it's still a heck of a lot more expensive than natural gas…

In last Saturday's "Chart of the Week," we highlighted the budding downtrend in Brent Crude. While most Americans only know our domestic "West Texas Intermediate" price, "Brent Crude" is a better measure of what the rest of the world is paying for oil. Right now, it's paying around $107 per barrel.

Brent's triple-digit price level is making natural gas one of the world's great "energy bargains." Like its energy cousin oil, natural gas has many uses.

It's used as a building block to make chemicals, fertilizers, and plastics. It's also used to fire power plants and heat homes and factories. And it's becoming widely used as a motor fuel.

You can expect all of these uses to increase. In just the past 10 years, America has gone from expecting to import natural gas to boasting the world's largest supplies.

Advances in drilling technology are allowing energy firms to find more and more of the stuff every day. The U.S. is now "the Saudi Arabia of natural gas," which has resulted in a flood of cheap gas.

You can see this cheapness with the "Brent Crude/natural gas ratio." This ratio compares the prices of these energy cousins.

Years ago, this ratio drifted between six and 10. Sometimes, the ratio would even spike to 14, which indicated really cheap natural gas.

But just recently, the ratio spiked to 32. Gas is ridiculously cheap, which is why we're going to start using a lot more in America.

www.dailywealth.com

[winston]

Natural gas plunge accelerates… price collapses 46% over the last six months, including a 21% drop in the past month.

[iam802]

But my electrical bills did not plunge

[winston]

Hmmm,,,,, maybe when oil becomes too expensive, people would be using natty for fuel in their car ....


CHART OF THE WEEK: THE BIGGEST COMMODITY COLLAPSE RIGHT NOW

For this week's chart, we look at the stupendous fall in the price of natural gas.

Oil's "clean cousin" natural gas is a jack of many trades. It's used as a building block to make chemicals, fertilizers, and plastics. It also fires power plants and heats homes and factories. And it's becoming widely used as a motor fuel.

Expect all of these uses to increase. In just the past 10 years, America has gone from expecting to import natural gas to boasting the world's largest supplies. That's thanks to advances in drilling technology, which are allowing natural gas producers to find more and more of the stuff every day. The U.S. is now "the Saudi Arabia of natural gas," which has resulted in a glut… and much lower gas prices.

For a picture of this glut, we look at the past two years of price action in natural gas. As you can see, "natty" spent much of 2011 drifting in the $3.75-$4.50 range. But the mild winter has meant lower demand… and new supplies continue to flood the market.

This has caused the fuel to sink 34% in just two months. It has also obliterated natural gas producers like Encana and Chesapeake Energy. Our contrarian interest is piqued.

Source: Daily Wealth

[winston]

China Natural Gas

The National Development and Reform Commission (NDRC) announced on December 27, 2011 the launch of natural gas pricing reform in Guangdong Province and Guangxi Zhuang autonomous region.

Price caps for Guangdong and Guangxi are set at RMB2740/m3 and RMB2570/m3, respectively, while trading prices can be negotiated between buyers and sellers.

The new scheme is aimed to steer toward a more market-driven pricing mechanism from the current government-guided pricing mechanism, which is tightly linked with the ex-factory prices.

At the first stage, the government will adjust the price caps on a yearly basis, and the adjustment frequency will move toward every six months and eventually to a quarterly basis.

As for unconventional gases, the ex-factory prices for shale gas, coal gas and coal-bed gas will be market based. Unconventional gases are currently trading well above the traditional natural gas, thus hurting their competitiveness.

We believe the demand for unconventional gases will start to pick up as the price gap narrows.

Despite the price adjustments last May (the third time since 2005), natural gas prices still failed to reflect the scarcity of resources and the balance between market demand and supply.

The more market-oriented pricing mechanism will greatly benefit the three oil and gas SOEs, namely PetroChina, Sinopec, and CNOOC.

We believe that PetroChina, owning 70% of the total domestic natural gas production, will enjoy the new scheme dominantly.


Source: Phillips

[winston]

Natural gas prices jump 20% in two days.

[kennynah]

iran issues?

[winston]

Natural Gas fueling stations

According to the Census Bureau, the U.S. has more than 100,000 gasoline fueling stations (to serve 234 million vehicles). But we have only 1,000 natural gas fueling stations. We'll need thousands more to support the trucking industry's switch to natural gas…

Several U.S. companies are opening natural gas fueling stations… And most are trading at 52-week highs. But as Frank says, "We are still in the early stages of the natural gas infrastructure trend. In other words, investors can still cash in on this trend by investing in some of the companies building 'America's Natural Gas Highway.'"

Frank believes once these stations are built, major car manufacturers like GM, Ford, and Toyota will start manufacturing cars that run on natural gas.

It's a huge trend… one that can make you rich.

Source: Growth Stock Wire