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 November 15, 2021 at 5:56am

The Listed Companies have all 'promised ' to keep production flat for 2022 . The privately held companies are indeed growing production ... Recent production data suggests rapidly increases in production ...  Nationally gas stockpiles are increasing rapidly .. Winter Weather will be a key factor for upcoming prices .... 

 After a spectacular run in the past year ....

I am slightly 'bearish ' as of today on the Energy Sector ,,, Butttt , that could change with the next News Headline 

Permalink Reply by farmgas on November 15, 2021 at 6:19am

Why are public companies holding back production & spending?  Are they fearful of losing investor support?  Isn`t holding back by public companies taking a risk from private company growth?

Permalink Reply by Ralph cramdon on November 16, 2021 at 12:30am

Publicly traded producers have over extended themselves both with debt and share counts ... Investors / Bankers have recently demanded FREE CASH FLOWS ,,, Free Cash Flows enable them the chance to reduce debt , pay a dividend , buyback shares ,,, The great Shale race is mostly over ... Most of the Tier #1 plays have been developed , therefore the need to add on more debt has faded .... Most Appalachian producers are spending 50% of their Free Cash Flows for 2022 production which will keep their production fairly flat ....  and for many generate returns in the 15  to 20% range ..... 

 The Woke crowd does not invest in Producers anymore ... The only way to attract Investors for these drillers is to finally produce financial returns that Investors cannot ignore ...

Permalink Reply by farmgas on November 16, 2021 at 12:44am

As tier 1 "core areas" are being drilled out how do gas companies plan to sustain life for their companies in the long haul?  Can they dribble out new wells here & there and provide enough revenue for investors?  After all, pipelines are needed for successful operation of these gas companies.  Are there enough of the general pipelines for interconnection by smaller gathering pipelines?  I`m just thinking of investment costs for new pipelines vs ROI.

Permalink Reply by Ralph cramdon on November 16, 2021 at 4:16am

Farmgas your post had  no 'reply ' button .. 

 

Gas Companies will continue to consolidate as their Tier 1 lands evaporate .. Cabot is the latest example .. CNX could be next ..Pipeline gathering outfits will continue their work , though the glory days of that sector is well in the rear view mirror ... Major Interstate connectors will continue to have difficulty getting permits for new systems as the Woke crowd flexes their 'green ' muscles 

Permalink Reply by farmgas on November 16, 2021 at 5:14am

I don`t understand why the "no reply button" is not included with some replies.  Your response to me didn`t have one too.

Your responses seem to match my feelings & beliefs about the future of the gas industry in PA.  The best days seem to be far behind us.  Trying to understand how the future may or may not offer opportunities to receive a gas royalty check is frustrating, but the reality seems clearer as time rolls on that it might never happen.  It does seem clear to me that renewable energy is gaining support and the economics might not support gas drilling in the future.  Will the gas energy industry accept what appears to be only another 25 years or so of life?  Will knows it could be longer too & probably will!  I don`t want to spark a political debate with my thoughts.  How seriously are discussions in the investment business about which gas company is stable vs which one`s are vulnerable for sale?  Does a gas company take on a new public appearance if they are going to be bought out.  In other words, do they all have a similar attitude about growth, spending or public appearance & comments?  Just wondering about the companies you mentioned...  It`s like sharks in the ocean sensing another fish is in trouble and circling around it.

Permalink Reply by Ralph cramdon on November 16, 2021 at 8:08am

Consolidation has always played a big part in the energy sector .. CNX has moved not as much as others as the knock is lack of future drill sites .. CHK production in PA is constrained by lack of pipes , but CHK PA division is profitable .. RRC / and AR have a decent amount of land as does EQT ... private Drillers such as Chief might also be sold , especially with these higher prices ....  

 Windmills seem to be in fashion , problem is they produce only 50% of the time ... I see a need for N Gas for years to come .. I believe within 10 years or so many of the tier 1 sites will be used up , leaving to tier 2 sites and higher prices .. Those days of Folks in PA getting $5,000 bonuses seem to be history , but higher average prices seem to on the way ... If I was a Royalty Owner in the Gas region in PA , I would still be bullish .. Bonus payments will be lower , but more and more Folks have been 'educated' as to deductions on their Royalty contracts .....thus less chance of getting shafted by bad contracts ... 

Permalink Reply by farmgas on November 16, 2021 at 8:27am

Windmills seem to be moving towards off shore locations which is fine by me.  I don`t favor them on mountain ridges.  Some solar sites seem to be popping up on abandon coal strip mine sites in PA.  I too foresee NG being needed for another 30 years+.  Of the gas companies you mentioned I too see CNX as having less drilling sites then the others, although in the CPA region there are thousands of potential sites.  Once they drill out SWPA & Northern WV they will have to drill in the CPA region.  What do you mean "CNX has moved not as much"?  I think many of the tier 2 acreage is land already held by production.  Signing bonuses will be less of a factor for the gas companies in those areas.  Will new pipelines be needed in the tier 2 areas since tier 1 areas have better takeaway capacity now.  Thanks for sharing....

Permalink Reply by Ralph cramdon on November 16, 2021 at 10:44am

CNX share price has not moved much in comparison to AR / RRC and even EQT ...  COG merged because Investors did not see a way for COG to grow ... It became 'dead' money , hence the merger, even tho it has the lowest cost of production .... Local pipes will be needed , Interstate pipes are a big issue with the "green " crowd ...... 

 I too enjoy our banter , it makes me refresh my  convictions on some of my Investments ... Currently  out of N Gas stocks after a very successful run with AR ... Have been watching production growing rapidly and National Inventories getting closer to 5 year averages ... The wild card is the weather ... Seems like the East is trending colder .. Gas was up 6% today ..... 

Permalink Reply by farmgas on November 17, 2021 at 11:09am

Another day for the gas price to rise.   Cold weather forecasting has a way of stirring the prices upward.  That can only get better, hey!  You mention CNX stock pricing isn`t moving too much.  One day it`s up a little and the next day it`s down a little.  Is that a normal pattern for most gas company stocks?  How involved do investors penetrate into a gas company quarterly report to really learn & understand their plans?  Do they just look at financial reports only?  Quarterly reports seem to be pretty shallow now with actual planning information.  

Permalink Reply by Ralph cramdon on November 17, 2021 at 2:45pm

CNX is up 28% year to date , while AR is up over 200 % year to date .. The knock on CNX is a lack of future drilling sites and the high amount of hedges in place .. 

 Reading the qtr reports is very important , as often the news provided by producers is 'polished' with only positive spin ... Balance Sheets can really be helpful is understanding the overall health of a company ... many Investors were lulled into buying Chesapeake even though its Balance Sheet told a story of impending doom ... Transcripts of qtr reports is sometimes helpful , although many Analysts ask softball questions to remain on good terms with Management .... Good terms means having more direct access to Management , who will then answer phne calls from easy going Analyst ...   

 Investor who is 'smart ' looks beyond the headlines to gauge how much Free Cash was generated ... N gas was up 6% yesterday and down 4% today .... very fickle .... I am currently out of gas stocks after being overweight most of the year .... the future ?? The Weather will determine how gas reacts this winter .... 

 Farmgas , do you have land in PA ? I own Rights in the 'sorry' State of NY 

Permalink Reply by farmgas on November 17, 2021 at 3:18pm

Yes, I own land in Central PA.  Not in the investment business but just a landowner wanting gas royalties.

It sounds like 28% is not too good for a gas company considering how well others are doing. 

Your mention of "soft ball questions" is exactly a beef I have with the call transcripts for the quarterly reports.  I want to scream at the analysis to ask more "open ended questions" such as when do you plan, how will you achieve, why aren`t you, what`s holding you back, what will it take, where will you drill next, etc.  The analysis do exactly as you say and it`s frustrating to listen to them.  The quarterly reports in years past were very useful & helpful for landowners to understand and plot the movement of their gas company.  It`s virtually useless now.

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