Surging Natural Gas Prices

How are the surging natural gas prices affecting drilling this year, and what about going into 2022?  Are the gas companies taking advantage of these higher prices?  What`s next?

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Permalink Reply by Ralph cramdon on April 7, 2022 at 3:51am

When NY banned drilling on My Lands as well as everyone else , I continued to Invest in Energy Equities ..... Roughly 70% all in Natural gas Producers , the rest in Pipelines .... Last year I was much heavier in Oil ... 

 

Energy Investing over the last 20 years has been the Roller Coaster Ride .... Today Energy Investors seem very smart , what will the Future Look Like ???? 

 Anyone who says 'this time is different ' is fooling themselves .... 

 Energy Investing is like a drug ,, The Highs are great , but the Lows suck .... 

Permalink Reply by farmgas on April 10, 2022 at 4:33am

How do investors view gas companies who do not pay stock dividends?  What are the motivations of a gas company for not paying dividends and the potential downfall for them?  What does it say about top management?  Why would anyone invest in them?  I don`t get it!  

Permalink Reply by Ralph cramdon on April 11, 2022 at 1:04am

Great Questions Farmgas ..... 

 This Dividend vs Buyback discussion echoes throughout the Boardrooms of producers .. Each outfit has its own opinion .... 

CHK / CTRA both pay a variable dividend , basically they more they make the higher the dividend .. CHK dividend is likely the highest currently .. 

 EQT just restarted a modest dividend .. CNX is busy buying back shares , though certain Investors have been lobbying for a Dividend Increase ..... CNX has excellent Cash Flows , but their hedges frankly stink in todays higher priced gas environment ... CNX Share Price has fared better than I had expected , as I disliked their underwater hedges .... Congrats to CNX Longs .... 

 AR probably will start Dividends sometime soon .... AR was on the ropes of Bankruptcy has now become close to Investment Grade ..... I know for a fact that some of AR Founders are strong believers in Dividends ,,..... 

 Bank of America seem to like lesser dividends and more buybacks .... they criticize outfits like CHK for their high dividends ... 

 I am a sucker for Dividends IF the coverage ratio makes sense ... CHK  and a few pipeliners are in the Portfolio ,, Others I own do not currently pay, but their Balance Sheets have become extremely Strong .... 

 Buybacks at low prices make a lot of sense , buybacks at todays prices become more of a discussion ...... 

 Its been one heck of a ride .. 

 PS , I just got an update of Property Listings in Tioga County , prices remain strong ..... 

Permalink Reply by paleface on April 11, 2022 at 1:18am

Ralph, CHK annual div.( $ 1.22 )  CVX annual div ( $ 5.68 )

Permalink Reply by Ralph cramdon on April 11, 2022 at 2:37am

Nice to hear from you Paleface ...

 

CHK pays a Variable Dividend of 50% of its Quarterly Free Cash ... 

  CHK first qtr payout was $1.78 [ if memory serves me ] which consists of a base amount and that variable amount ... $1.78 on a 4 quarter basis would amount to $7.12 a year ..... And expectations are that upcoming quarters are even more profitable than the 1st qtr .... 

 CHK presentation projects  a 13% annual yield at todays gas prices  

Due to recent mergers CHK is 78 % hedged this year , lees in 2023 .... 

I do not follow CVX , though they don have very good Permian Grounds ...... 

 KNTK  a permian pipeliner pays a $6 dividend , its controlled by Blackrock ...... its worth a look 

Permalink Reply by farmgas on April 11, 2022 at 3:17pm

So what am I missing here; loan money (buy their stock) to gas companies without a return on that investment!  Would I only get a return if the stock price increases sometime into the future & I sell it?  Obviously I`m not an investor!!

Permalink Reply by Ralph cramdon on April 12, 2022 at 6:02am

Not sure of your Question Farmgas , but I throw out an answer anyway ..

 

I Invest in Gas Stocks to profit sometime in the future ... For years outfits relied on increasing production and reserves , that Model was Broken and Investors demanded a Investment that produces Free Cash Flow [ $$$ after all expenses } ... Currently those in the 10% range or lower are being yawned at , those in the Mid teens and higher have done better .. Those who entered the current Covid cycle with depressed Balance Sheets have done very well AR / RRC ... Those heavily hedged not as well .. 

Free Cash Flowm yield is a good indicator of how the producer is fairing vs others in the Market ... Investors can easily measure performance via Free CAsh metric .... 

 I am all in , yet only own 5 stocks as of today ,,,, With these inflation reports my sell button is on the radar ,, the cycle will once again repeat itself sometime down the road ... Rising rates will cool the Economy and lessen demand for fuels ..

 COAL is hitting record highs which forces Electric Generators to switch to cleaner somewhat more affordable N GAs ... Everytime coal rises , N Gas follows .... Europe is in need of a lot of coal ....

Permalink Reply by farmgas on April 12, 2022 at 9:07am

You have addressed my question very well.  Buy stock now and hope for a growth for it in the future and set aside dividend  growth.  Sounds risky but I think it has worked for many companies in the past.  So would investors have a predetermined sell point if the stock declined in value?  Unless there is interest in supporting a local company it still seems a very risky way of investing to me.

Permalink Reply by Ralph cramdon on April 13, 2022 at 12:40am

Timing is everything .. 

Takes a fair amount of effort / digging deep into a Company's guts ... Balance Sheets are awfully important  ,, as well as an outfits competitiveness .. Future   growth prospects are critical as well ....

 Then after all the work needed to find a good prospect , none of us know the next news headline .... Inflation ? Recession ?? Covid ??? War ???? , ETC ????

 In the long run money has to be invested due to inflation ...At the current rate of inflation ,$100,000 today will purchase $80,000 worth of goods next year ..... 

 Many years ago I decided to learn one Industry and learn it well ...Its been all Energy for me ....

Permalink Reply by farmgas on April 14, 2022 at 2:31am

$7 natural gas!  Where`s the ceiling??

Permalink Reply by Ralph cramdon on April 15, 2022 at 12:08am

Been playing this game a long time , I never thought I'd see $7 gas during Shoulder Season ... 

 Coal price as well ... Gold / Silver fairly quiet    ... 

 Prices would be lower if   more pipes  had been allowed ......

 Cost of thousands of items will be sky rocketing as they are made from N Gas ....... 

Permalink Reply by farmgas on April 18, 2022 at 1:44pm

How about $8 NG?  With so many gas companies heavily hedged, is it possible to separate some of their production & expose that gas to the current spot pricing?  I`m not clear on how hedging works?  

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