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Dogpound

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  • Natural Gas Gains: Not Convinced of Sustainability [View article]
    Shut-in gas, wells drilled and not yet tied in, currently almost 800 drilling rigs targetting gas in the USA, and incremental imports of LNG will keep a lid on prices for the next year or so.

    Declines are a problem that will affect North American Production in the longer term (12 to 18 months) but near term the volume of new gas, shut-in gas & incremental LNG imports will counter the effect.

    There has only been one other time in 16 years where we have injected NG in the third week of November - consensus for this week could also indicate on more injection coming.

    Prices are still too high where companies like XTO, CHK etc. can still make an ounce of flesh due to high initial production rates of the horizontal/directional shale plays. Horizontal and directional rigs in the USA have only fallen off 26% since the peak over a year ago. The low production, longer payout vertical wells have been severely curtailed - however these types of plays were not responsible for the increase in onshore gas production in the US.

    If we pull an average amount of NG from storage over the drawdown season we could be exiting the heating season with +/-1850 BCF in storage - that would be approximately 28 to 30% over the 5 year average. In 2008 we exited at 1651 BCF and built to 3835 BCF - today is it estimated our production is 8% higher than 1 year ago and they are expecting increased LNG imports over last year. We just touch max storage this year - in 2010 we could run into storage constraints as early as September/August.

    Operators need to be parking rigs and quickly if we hope to burn off storage to normal levels and eliminate the overhang.

    NG may go on a run until mid January due to specualtion over codl weather etc. - once we determine our burn rate and exit level estimate gas will likely re-test $2.50 ish and spot prices will be worhtless. The NG rig count will likely drop from 727 to under 400 rigs.

    The Marcellus shale appears to have the best operating conditions due to its proximity to market and high heat content.

    If someone can tell me where the new market for natural gas is in North America where we can expect 8 to 10% yearly increases in demand I may turn bullish on NG short term prospects. Liquifying and exporting your natural gas from the USA would take an act of congress - from what I understand as a net energy importer that would be against the law.
    Dec 1 09:45 AM | 1 Like Like |Link to Comment
  • Nine Regional Housing Markets Now Down Below March Lows... and Counting [View article]
    It would be interesting to see a chart of home prices with correlation to rising/falling interest rate environments.

    I think most people here are in agreement that over the course of the next 1 to 5 years interest rates will be on the rise. If a 30 year mortgage rate rises from todays rate of +/-4.8% to 7.8% over the next couple of years any increases in house prices would also decrease home affordability/activity. We have enjoyed relatively low mortgage rates for quite some time thus fueling the housing boom.

    At what level of mortgage rates is recovery further stiffled?

    Do people believe the price of homes will escalate along with rising interest rates?
    Nov 30 05:51 PM | 2 Likes Like |Link to Comment
  • Climategate: Revolt of the Physicists [View article]
    The problem with man has always been his ego. Throughout history we have convinced ourselves of our intelligence, all knowing and reasoning capability.

    I live and work in Calgary, Alberta - 10,000 years ago this city was covered in approximately 1 mile of ice. I am not sure what caused the warming event that managed to melt all that ice but I do know one thing - man had nothing to with it.

    It is difficult for mankind to accept they have no control over their environment, to do so would be an admission of vulnerability.
    Nov 30 10:30 AM | 9 Likes Like |Link to Comment
  • Natural Gas: U-Turn Follow Up [View article]
    Marco,
    I agree with you in the short term (1 to 2 months) - I think NG runs to test the $5.75 area due to seasonal speculation and USD dynamics. By then (mid-end January) we will have a good idea on the exit storage level from heating season and it will turn to fundamentals.

    If storage is estimated to be above 1750 to 1800 BCF, with current gas shut-ins you will see gas move to low 3's by March/April. NG has a bright future in the long term, nothing like a low gas price being the best cure for a low gas price - however we are in for some volatile price movements with risk to the downside being higher in the near term IMHO.

    Yesterday was a bit of gift, thinly traded due to the US holiday - I loaded up HND and sold the position this morning - got very lucky. The dollar move yesterday almost guaranteed a pull-back.

    I have set my own basic rules, I rarely hold overnight, and never hold on the roll, I start with a 1/8 position, I take my profits on a 2 to 3% move. Lately I am not even speculating prior to the release of storage numbers, after the release I will take a position one way or the other. If I miss the trend I add another 1/4 then again 1/2 sometimes then a full position and once the ETF turns I take my 1-1.5% return. Once I have a full position I keep my stop very close and take the small loss instead of chasing any further. There have been some very volatile days where I have been in the bear/bull in morning and switch positions later in the day. It is definately not for the faint of heart.

    Investors must also keep a close watch on the weather networks 10 - 14 day forecasts and definately have the hurricane center on his favorites.

    Apologies for the tone of some of my comments - I have seen some people get crushed using these ETF's.

    Good luck

    Nov 27 12:23 PM | 2 Likes Like |Link to Comment
  • Natural Gas: U-Turn Follow Up [View article]
    Marco,
    HNU and HND are fabulous trading vehicles, I play them regularly - they are not long term investments. If you feel gas is going up play producers or service companies for long term gains. They are excellent short term plays when trending and day trading.

    Made out very well today on HND, held the shares for 20 hours. Contango favors the bear, backwardation favors the bull. Due to the monthly rolls of contracts your returns could be eroded even in an upward moving market. The monthly rolls have more to do with large gap-ups or gap downs than fundamentals.

    Real time quotes are essentially when playing these ETF's - due to rampant speculation commodities like NG and Oil are already volatile enough - not to mention these ETF's are double levered.

    The price of NG is not going anywhere near $11.25 in the next 18 months - nice chart though.

    Natural Gas will trade violently up and down until people understand the current fundamentals - in the end gas is going lower before it goes higher. Uneducated speculating using these types of investments have hurt many people - a few I know right here in Canada.

    You are gambling and good luck to you. An article like this could trap the unsuspecting investor into huge losses.
    Nov 27 11:30 AM | 3 Likes Like |Link to Comment
  • The Market Wakes Up to Natural Gas [View article]
    David,
    Smallest weekly build since March 2nd??? Of course - we are now entering draw-down season. You neglect to mention that last years draw during this week in November was -66 BCF and the 5 year average is -22 BCF. This with storage levels already 400 BCF over last years levels.
    Consensus for this week is a build of 11 BCF to a draw of 21 BCF - same week in 2008 was a draw of 64 BCF - this week is guaranteed to swell yoy storage levels.
    Nuclear power generation is being put back on - since Oct 2nd the US has had less nuclear power generation due to shut-ins.

    YoY natural gas production is increasing.

    Horizontal/Directional rigs are only down 263 rigs to 727 rigs since the peak in Sept/Oct - those are the wells drilling the highly prolific shale gas wells.

    I have heard Estimates of Shut-in gas in North America at anywhere between 2 to 5 BCF/d.

    Oil has very little to do with Natural Gas - it is a 95% closed market in North America. Please forget about the ratio.

    Natural Gas needs an alternate market (NG powered buses etc.) or a huge jump in NG power generation (which means killing the coal industry - not likely in todays economic environment)

    Current storage is 3835 BCF. A record cold winter where we pull +/- 2300 BCF from storage will still leave us 12.5% over the 5 year average of 1364 BCF at end of heating season - it doesn't appear to be starting that way does it?

    Last heating season we pulled 1837 BCF from storage - should the same type of demand exist we could see storage levels at 2000 BCF at end of heating season.

    What does that mean - storage is full by end of August - what is the price of Natural gas if status quo occurs?


    Nov 27 11:07 AM | 4 Likes Like |Link to Comment
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