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Dogpound

Dogpound
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  • The Outlook for Natural Gas in 2010: Invest with Caution [View article]
    Truth is that 3 to 4 years ago we were on a treadmill trying to replace declines with new gas and had difficulty doing it - thus the increase in LNG import facilities.

    What people that are not in the industry do not understand is that the technological advances made in the last 2-3 years have made these reservoirs economical - the single biggest change is the down-hole tools that allow the multi-stage fracturing of horizontal wells - period.

    Yes declines are high - but initial production levels are huge and create short payouts for NG companies. Average decline on a Marcellus shale well (3.5 mmscf/d for 30 days, falling to 1.2 mmscf/d after 1 year, after 18 months 850 mscf/d) - what people do not understand is that these wells can then be re-fractured - although rates do not return to initial production they can be re-stimulated to increase the recoverable gas at very good rates of return on capital.

    We have drilled through these zones for many years with vertical wellbores and everyone said - "maybe one day that gas may be recoverable" - move on.

    Hans - I am a bear with current production/storage and demand constraints - yet even I am projecting a year end storage estimate of 1800 - 1850 BCF (even that's too high for a recovery in prices) - I am assuming their will be approximately 3 to 5 BCF/d shut in due ot pricing levels - people forget that the most efficient NG storage device is the actual well that produces said NG. If you are correct at the +/-2150 BCF level - storage will be full by the middle to end of August - that means NG spot pricing of zero through July/August/September - I think before that happens you will see producer shut-ins occur at a rapid pace limiting end of season injection storage levels - it will be the shut-in gas and incremental LNG imports as prices spike up occasionally that will keep a lid on NG futures for the next 18 months. Drilling rigs targetting NG will fall to half of current levels by the summer.
    Dec 10, 2009. 09:14 AM | 2 Likes Like |Link to Comment
  • 4 Developments that Could Send UNG Lower [View article]
    UNG is a short term trading vehicle, contango is helping to erode the returns of investors. The massive retail buying of futures and the monthly roll of this money is also supporting a price that does not support fundamentals.

    Be very careful in the short term (2 to 6 months) speculating on an increase in the price of NG futures. NG futures may test the 5.3 to 5.75 area before heading lower.

    NG has not been embraced by the public and politicians - it can be a game changer if new markets are allowed to be developed. We are awash in NG with no where to use it other than power generation and heating. Canadian exports to the US are down approximately 3 BCF/d yoy and IEA suggests the US will decrease imports by another 12% in 2010 while increasing LNG imports from your friends in the middle east.

    Drilling Rigs - do not put much stock in the decrease in drilling rigs. Horizontal/Directional drilling rigs sit at 732 (down 259 yoy) - if we had a statistic for average initial production per drilling rig that number would be considerably higher yoy and when you figure in shut-in gas in North America that will keep a lid on prices for some time without the development of a new market.

    The recent run in Natural Gas is due to the seasonal speculation and people not understanding near term demand, storage and onshore production fundamentals.

    Yes it is getting colder (always does this time of year) - we will exit the drawdown season at approximately 1800 BCF in storage (+/-32% above the 5 year average and 10% higher than 2009).

    We have shown we can find Natural Gas - the USA has to take the lead and develop these new markets and quickly.

    Why do we continue to downplay our own innovation and resources and put our economies at the mercy of middle eastern regimes.
    Dec 9, 2009. 09:06 AM | 4 Likes Like |Link to Comment
  • How Not to Trade Natural Gas [View article]
    Natural gas front month hit a low of under $3.00 in September - January futures were +/- $4.50 when that occured - guess what January gas is now trading at +/-$4.50
    People do not understand that the contango eats away your profits when going long on these types of ETF's.
    These are nice short term trading vehicles thats all.
    Dec 4, 2009. 08:46 AM | Likes Like |Link to Comment
  • Natural Gas Gains: Not Convinced of Sustainability [View article]
    You may be correct, I heard the 8% number quoted in an article from Bloomberg a month or so ago.

    With gas shut-ins I am amazed we are still injecting in the third week in November.

    Imports from Canada to the US were approximately 100 BCF lower in October 09 versus October 08.

    I would like to know how much gas is shut-in/awaiting tie-in from new drills. Encana reports 0.3 BCF/d shut in, thought CHK had alot shut in as well.

    When things correct we will see quite a move on gas to upside - I am just not convinced declines will be that huge given the productivity of the new wells being drilled now, and making up the deficit with shut-in gas/incremental LNG impoorts.

    I think the initial productivity per drilling rig is a lot higher than 1 year ago.

    You are right I think we are in are in an oversupplied condition for at least a year.

    On Dec 02 09:11 AM Mmarrkk wrote:

    > Dogpound: when you quote the 8% increase from a year ago, are you
    > looking at EIA Sept 08 compared to Sept 09 numbers? If so, need
    > to remember that Sept 08 was artificially low due to shut in's from
    > hurricanes. The shut in's were short term and back on production
    > in the month or two that followed. Better comparison would be August
    > 08 to August 09 or October comparisons (when the Oct 09 data comes
    > out next month).
    >
    > In general I agree with our thesis but probably not to the extent
    > you push it. Oversupply, yes. Critical? not yet. I believe we
    > will see declines starting to kick in, but it won't be enough for
    > the top to blow off on gas prices for at least a year.
    Dec 2, 2009. 10:17 AM | Likes Like |Link to Comment
  • Electric Vehicles vs. Natural Gas Vehicles [View article]
    Canada has a lot of shale gas reserves and we are your friendly low populated neighbor to the north. We already are importing +/-30% less gas into the US because you have found those reserves. Add in capacity from the Canadian Arctic with a large pipeline in +/-10 to 15 years and North America is awash with Natural gas and no place to use it.

    The USA needs a bridge fuel from oil to alternative energies - Natural Gas is that fuel. The longer the USA continues to thirst for oil from countries that support and breed terrorism, the wealth drain on America will continue to increase.

    Natural gas burns 50% cleaner - that should be good news for the pro environment crowd and a no brainer in an attempt to reduce dependancy on foreign oil.

    We are not moving from the internal combustion engine to the fuel cell.

    The first easy conversion is fleet vehicles (buses, short-hall transportation etc.) decreasing emmissions in the cities and creating jobs in North America.

    Why do we find it so hard to embrace a game changer - are we worried about ruining these middle east economies?
    Dec 2, 2009. 09:14 AM | 6 Likes Like |Link to Comment
  • Natural Gas: It's All About the Drills [View article]
    That is correct - the largest development in unlocking tight gas reserves has been multi-stage fracturing and more specifically the downhole tools that allow the procedure. Horizontal drilling technology has been around for awhile - coupling the two processes has been the recipe for enabling these companies to unlock the tight gas reserves economically.

    As far as exporting LNG - I am not sure how expensive North American Gas can compete with gas drilled in third world hotspots like Indonesia, Thailand etc. when that same gas has no other market and is located closer to the end user (China, Europe, Japan etc.). I mentioned in another comment that I am almost sure exporting gas from the US will take an act of congress - not completely sure on this though.

    If the drilling of these shale gas reserves is to continue at the current pace an additional market must be created and quickly.

    Decreased Coal use in Power Generation is the only "relatively" quick fix for the short term glut - however a longer term market must be created (NG powered Buses etc.). I am not sure how receptive some politicians will be to kill the coal industry in an economic environment like this.
    Dec 1, 2009. 12:10 PM | Likes Like |Link to Comment
  • U.S. Oil and Gas Rigs Increase for the 6th Week [View article]
    The best chart is the horizontal/directional one. Tells us the decline in rigs was only on vertical wells - not the high impact shale gas plays that have attributed the glut of production over the last few years.

    It would be a difficult statistic to compile but I gurantee the average initial production per drilling is higher today than it was 1 year ago.
    Dec 1, 2009. 09:52 AM | Likes Like |Link to Comment
  • 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, 2009. 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, 2009. 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, 2009. 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, 2009. 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, 2009. 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, 2009. 11:07 AM | 4 Likes Like |Link to Comment
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