Marc Courtenay's  Instablog

So natural gas is falling and falling hard. It's below $2.81 as I write this and no one seems to know where it will fall to. My guess is around $2.50 per BTU. I hope I'm wrong though because I'm beginning to put my money where my convictions are.

I recently bought some Chesapeake Energy (NYSE:CHK), which is up today more than 3%, partly because we are told that many of their contracts are hedged at a much higher price than the current price of natural gas.

United States Natural Gas (NYSE:UNG) hit a 52-week low today of $11.29, and it wouldn't surprise me to see it fall below $11 before this is all over with. Check out this 6-month chart:
If a picture paints a thousand words, the above chart tells it all. As soon as UNG fell below $11.72 I began to buy and I'm hoping to make my biggest purchases below $11, but who knows if it will fall that low.

The futures market is telling us that a year or two from now natural gas prices will be above $6, so I like the upside potential with an investment like this one.

Now when it comes to Atlas Pipeline Partners (NYSE:APL) I'm beginning to think that Chris Mayer of Capital & Crisis fame is correct when he wrote today, 
"You’d think pipelines would be a simple asset, but the layers of financial engineering made Atlas much more complicated than it appeared. I didn’t understand it as well as I should have and it cost us.

"My initial recommendation on Atlas, then, was flawed from the get go. To make matters worse, though, I stuck with it. In my defense, the company still owned important right-of-ways in the Marcellus Shale. But the financial difficulties forced Atlas to sell assets, including a 49% interest in this crown jewel.

"And the dilution keeps coming. On Monday, Atlas announced it would issue another 2.7 million units to a group of institutional investors at a price of $6.35 per unit(!), which also gives these investors the right to another 2.7 million units over the next two years -- at the same price!

"The shareholders will have to share the remaining value in the company with more and more people. Owning a share in Atlas is like having an interest in a slice of pizza that keeps getting cut into more and more slices." Ouch and double ouch!

Will I be selling my shares of APL? Probably, but I'm going to think about it over the weekend and do some analysis of my own. I'll probably defer to Chris' confession and conclusion and look for more promising pastures.

Investing is fun only if we can be unemotional and very objective about our decisions. That isn't always easy, but like you I'm striving for that kind of glorious maturity.

Natural gas might fall much farther than I and many others anticipate, but as a source of energy I still believe it is and will always be one of the best and one of the cleanest. As an investment theme, only time will tell.

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Disclosure: I own some CHK, UNG and APL