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  • Treasury Bonds and Recession: This Time It Really Is Different [View article]
    You must have a lot of horses in this race.

    It is refreshing to read an optimistic blog occasionally but I think you are grasping at straws.

    So - would you be suggesting we are headed for hyperinflation given the quick increase in treasury rates? Let me guess - your next blog will detail how fortunate the savers will be to receive 10% interest in their savings accounts in 30 months.

    I don't think even the bears on this site would have disagreed that one way to stop deflation is to print money (insert clapping for the Fed here) - please elaborate on how this does not create ancillary problems.
    Feb 11, 2010. 05:40 PM | 5 Likes Like |Link to Comment
  • Canada's Housing Bubble [View article]
    Good Article, however the government is our problem not the Canadian Banks.

    A consortium of banks has asked the Finance minister to decrease amortization periods from the current 40 years to 30 years and increase the minimum down payment from 5% to 10%.

    So far this advice has fallen on deft ears. The banks see the writing on the wall and I personally feel we will see property values plummet here by the 3rd or 4th quarter of 2010.

    The median home price in Calgary is currently $402,000 up from $375,000 one year ago

    Feb 10, 2010. 11:09 AM | Likes Like |Link to Comment
  • Don't Be Fooled if a Greece Bailout Emerges, It Solves Nothing [View article]
    It is amazing these days, we are the instant gratification generation.

    Governments are acting like messiahs - everyone wants a pain free recession or a way to make delevraging easy.The shifting of debt onto taxpayers is obscene, people and governments must realize, and soon, that the best medicine will be to take the nasty pill and recovery will be slow, unemployment will be high and some companies and institutions will no longer exist as we know them.I hope for our childrens sake that we will soon admit our mistakes and this generation takes the hit, not our future ones.
    Feb 10, 2010. 09:28 AM | 7 Likes Like |Link to Comment
  • Bullish Wheels Now in Motion for Natural Gas [View article]
    I think youare correct Elliott.

    Producers are starting to hedge big time here in Canada. $6.00 gas is a gift from retail speculators playing these investment vehicles. North America is awash with NG - it has a bright future 2 years out but as for the next 6 months to a year it will go lower. When the shoulder season comes expect to see gas trading sub $4.00

    Operating costs on existing gas is sub $4.25 in Canada (+/-$3.50 in the Marcellus) - and yes I understand that new gas may take $5.00 to $6.00 to justify - what I know short term is that we don't need more new gas.

    All that being said - there is a very good chance gas may test $6.25 over the next few weeks - I am standing by and beginning to build my position in HND.

    So far in the drawdown season we have drawn down 23 BCF less than the same period in 2008 - the deficit is growing in this cold weather. LNG is increasing and Canadian exports are increasing as storage here in Canada is also at extreme highs. Companies that had shut-in gas over the last 6 months have started opening up those wells.

    I have heard comments that freezing wellheads are dropping production and supporting prices??? The most efficient NG storage device is the well its produced from so this logic makes me laugh.
    Jan 6, 2010. 12:25 PM | 1 Like Like |Link to Comment
  • Natural Gas Up on Huge EIA Draw [View article]
    Pretty misleading headline, the draw was actually low and substantiated by your evidence. I have followed NG storage and fundamentals for over 15 years and "huge" is definately not a word I would have used to describe last weeks drawdown.
    Dec 14, 2009. 09:31 AM | 4 Likes Like |Link to Comment
  • EIA Natural Gas Inventory: -64 bcf vs. consensus of -45 bcf. Henry Hub futures +6.7% to $5.23.  [View news story]
    You should do a bit more research. Last years drawdown on this week was 66 BCF and the 5 year average is 90 BCF.
    In the last 4 weeks which is considered the drawdown season we have drawdown a net of 40 BCF compared to a drawdown of 181 BCF last year during the same 4 weeks.

    On Dec 10 10:53 AM wingfootedgodhead wrote:

    > cold weather plus 9 months of us gas rig counts averaging 700 - just
    > cant keep up with high depletion rates in the shale gas trends.
    Dec 10, 2009. 12:22 PM | Likes Like |Link to Comment
  • 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