John Polomny

Three Reasons to Be More Bullish on Natural Gas than on Oil

What about depletion and the collapsing rig count? The last time the rig count dropped this much the natural gas price advanced 80% over the following 12 months.


On Apr 22 09:47 AM scfranklin94 wrote:

> No need to get bullish on NG just yet; we'll probably hit the limits
> on storage by September, forcing massive shut-ins. Aubrey is dreaming
> if he thinks NG is going to be back to $9 by December. Most likely
> scenario is that gas declines to $2.50 by Sep/August and then that
> will be the time to buy. This coming winter will have record storage
> on hand, so even if it is as cold as this last one, prices probably
> won't rebound greatly until a year from now. If the winter of 2009-10
> is a warm one, be prepared for an end-of-winter storage number of
> 2 Tcf or more, which will keep a lid on prices until 18 months from
> now.
>
> So will NG prices go up in the long-term? Of course, but it might
> be a year to 18 months.

Growth in U.S. Natural Gas Production Expected to Reverse

A bit early to buy Nat Gas producers however it is interesting to note that the new shales gas wells deplete vary rapidily, something like 45% in the first couple of months of production. I agree that the lower investment in E&P will lead to a substantial increase in price by this time next year. If you like these shares, and they will benefit from an increase in the gas price, then selling puts at these levels seems like a good trade. You pick up some nice premium money and if the stock gets put to you then you get the shares you were planing to buy anyway.