carbonates

As Natural Gas Prices Decline, Natural Gas Stocks Rise

I still think it will take a cold winter to bring gas prices back up, or an especially active hurricane season.

I see no real progress in Washington towards encouraging natural gas use. Most of the actions taken in Washington so far this year will hurt both domestic natural gas producers and domestic oil producers, and give Canada and other sources of imports an economic advantage.

The one thing that is still a wild card in all of this is that pesky decline curve on shale gas wells. While shale gas added tremendously to production last year, most of those wells have anywhere from 60-80% annual declines. It takes continuous drilling to keep most gas shale plays producing steadily. The gas shale effect could go away by the end of this year.

I'm holding the natural gas stocks I have (I have a large position in coal bed methane), but not buying more for now. I think we will see more declines before we see the next bull market for gas. In fact, I think we are going to see a serious shake-out with a few natural gas producers going broke this year as they watch their leases expire undrllled, or desperately try to drill to hold the leases at a loss.