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John Polomny
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John Polomny is an individual investor and speculator seeking unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • The Cure For Low Prices Is Low Prices 7 comments
    May 15, 2012 10:43 PM | about stocks: SJT

    It appears that the low natural gas prices that we have seen over the last several months are now possibly going to lead to a supply crunch and higher prices later this year. The recent lower prices for natural gas has led to a collapse in gas drilling as evidenced by the operating rig count data as supplied by Baker Hughes.

    The number of rigs drilling for gas has dropped almost every week since last fall to a recent 598 rigs drilling for natural gas. As can be seen from the Baker-Hughes website there has been a steady shift in drilling rigs from gas drilling to oil drilling over the past several months.

    Interestingly enough the total number of rotary rigs operating is pretty steady. This data makes economic sense as exploration and production companies shift capital and equipment into higher margin and higher netback oil and liquids drilling.

    The problem is that although the shale gas wells that were drilled are very prolific when first put on production they have huge decline rates. In fact the typical Barnett shale well sees a production decline in the neighborhood of 60% plus the first year. I have seen Haynesville shale wells that have production declines of 90% during the first year after the well is brought online. The point being is that contrary to the 100 year cornucopia of forever low natural gas prices that has been reported in the media it appears that the natural gas market is still following its historic boom/bust cycle. I would argue that in fact the data shows we have a pretty good chance of having substantially higher gas prices later this year. Check out the American Oilman website with data on gas injections into storage and the chart of gas injections. The chart gives a great visual on how depletion is bringing the supply/demand balance back into equilibrium and will, in my view, overshoot to a situation of too little gas this upcoming winter.

    The situation could be further exacerbated by any type of weather incidents like a hurricane in the GOM or high temperatures this summer with electrical production needed for air conditioning coming from natural gas fired gas turbines.

    My view is that natural gas prices are going to head higher than most people currently think and I am playing it via San Juan Royalty Trust (NYSE:SJT). I can get a nice dividend, around 5.5% currently, while I wait for natural gas prices to move higher. Any speculators interested in this trade should watch the weekly injections and rig count. This is not advice do your own due diligence.

    Disclosure: I am long SJT.

    Themes: natural gas Stocks: SJT
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  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 5/13/12 equals 600 up 2 from last week. Rigs drilling for gas last year at this time 866.

     

    Natural gas injections for this week were 61 BCF against the five year average of 90 BCF. This is the sixth straight week of below average injections into storage.
    18 May 2012, 08:21 PM Reply Like
  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 5/18/12 -5/25/12 equals 594 down 6 from last week. Rigs drilling for gas last year at this time 881.

     

    Natural gas injections for this week were 77 BCF against the five year average of 101 BCF. This is the seventh straight week of below average injections into storage.
    25 May 2012, 08:43 PM Reply Like
  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 6/15/12 -6/22/12 equals 541 down 21 from last week. Rigs drilling for gas last year at this time 873. This is the lowest number of rigs drilling for gas since May 1999

     

    Natural gas injections for this week were 62 BCF against the five year average of 84 BCF. This is the eleventh straight week of below average injections into storage.

     

    With tropical storm Debby causing the shut in of around 25% of GOM nat gas production I expect another decline next week.
    24 Jun 2012, 05:22 PM Reply Like
  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 6/22/12 -6/28/12 equals 534 down 7 from last week. Rigs drilling for gas last year at this time 874.

     

    Natural gas injections for this week were 57 BCF against the five year average of 79 BCF. This is the twelevth straight week of below average natural gas injections into storage. It is my view that the record heat we are experiencing will put further strains on gas supply as natural gas peaking units are used in order to meet air conditioning demand.
    1 Jul 2012, 07:40 PM Reply Like
  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 6/28/12 -7/06/12 equals 542 up 7 from last week. Rigs drilling for gas last year at this time 873.

     

    Natural gas injections for this week were 39 BCF against the five year average of 82 BCF. This is the 13th straight week of below average natural gas injections into storage.
    8 Jul 2012, 11:10 AM Reply Like
  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 7/06/12 -7/12/12 equals 522 down 20 from last week. Rigs drilling for natural gas last year at this time 885.

     

    Natural gas injections for this week were 33 BCF against the five year average of 90 BCF. This is the 14th straight week of below average natural gas injections into storage.
    14 Jul 2012, 01:51 PM Reply Like
  • John Polomny
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    Author’s reply » Number of rigs drilling for natural gas week of 7/13/12 -7/19/12 equals 518 down 4 from last week. Rigs drilling for natural gas last year at this time 889.

     

    Natural gas injections for this week were 28 BCF against the five year average of 69 BCF. This is the 15th straight week of below average natural gas injections into storage.
    20 Jul 2012, 10:47 PM Reply Like
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