I'll add my 2 cents here. First, we are WAY off topic by discussing macro-economics and oil here and then trying, in some very direct way, to relate them as a cause/effect on CNXT's future. I really don't see it that way, though I could be seeing what I want to see!
The rise in petroleum+gas prices has not been a seasonal event and it's VERY possible that we are facing an extremely tough consumer 'pricing' environment for oil and Nat. Gas(NG) going forward. Current storage figures for NG are dramatically lower this year then they have been the past 2 years. During these last 2 years, Oil, Gasoline and NG consumption has been increasing. Going forward, demand will continue to increase with all the new NG fired power plants being built throughout the country, new home building with NG instead of electricity, Gas-guzzling SUVs, etc....
When Oil dropped to $10/bbl, the industry pretty much stopped drilling. They shut down marginal wells and stopped most of the capital spending in the industry. As a result, we are now faced with the very real possibilities that we won't be able to have sufficient supplies to meet demand and that our lack of stockpiles for winter demand will be such that the futures market will keep prices higher than almost anyone currently expects.
For NG to be priced over $3.50/Mcf at this time of year is pretty amazing, in my opinion. One simply can't dismiss the rise in NG and Oil prices as a seasonal issue and, BTW, these are very real, inflationary pressures on our entire economy. If NG prices continue to rise into the winter, the cost of heating houses in the US will be the highest ever seen and, I can rest assured, there will be a great outcry from the populous.
The naive-joe-six-pack will blame OPEC-but a very large portion of the blame should rest on our own government, who didn't give a rats ass when the petroleum/NG industry was struggling due to the extremely low prices seen during 1998. Massive layoffs were happening in the oil business during 1998 and early 1999 but cheap oil made our country very happy, 'so who cares'! Right now, there is a lack of qualified personel to staff the growing demand within the oil/NG industry.
Very few cared about the oil industry while prices were cheap and people could fill their gas tanks and heating oil storage tanks at rock bottom prices during the winter of 98-99. Our economy was booming, the stock market was soaring and commodity prices were dirt cheap!
Things have turned around 180 degrees for oil/NG prices since then. Our Energy Secretary, Mr. Richardson, is now pleading with OPEC to increase production. Funny how no one cared about the oil producing countries problems when oil was $10/bbl. "OPEC MUST INCREASE PRODUCTION NOW" is the cry from Washington these days. Our government still fails to show serious support for our own Oil/NG industry. If they did, we might not be in such a difficult situation.
The above has little to do with the fundamentals for CNXT going forward. We will be faced with a more difficult environment for all businesses, CNXT included. Having said this, I still completely disagree with the premise that CNXT is 'overpriced' at this level.
All I can do is wait, because I know that over the next few quarters(and years) that this company will prove I'm correct.
Just my opinion.
Michael |
