This hodge podge of misinformation and misunderstanding is why we will make a lot of money the next two years. From CSFB today comes this unbelievable confusion. Especially read sentences 2,3,and 4:
"Unfortunately, since the E&Ps are heading into
budgeting season currently, the rising strip is likely to encourage even higher capital budgets
for 2007, which will only enhance un-needed production growth. A few short months back, the
humble Credit Suisse E&P team felt that initial budgets for US gas would likely fall in 2007
(down 5% or so). A few weeks ago we thought that they would be flattish to up a little. Now
we think they are likely to be up 10 to 15% (at least initially). This level of budgeting would
suggest rising rig counts and accelerating growth (greater than current 3% run rate). As we
have written previously, production growth is a problem because base demand growth is only
1% or so. However, producers will continue to neglect this issue until price action in the
market stops signaling a shortage of gas.
Lots of Degree Days to Go: Weather for the heating season-to-date has been mild so
far, with total heating degree days (HDDs) for the month of November about 9% below
the 5-year average (see Exhibit 1). The bulk of the heating season is still ahead of us,
though, as November represents just 14% of total winter heating demand (see Exhibit
2). Given the ample natural gas inventories in storage and moderate temperatures
through November, we will need some colder weather to bring gas storage down to
more normal levels. How cold will it need to get? We believe a "normal" cold winter
(about 15% colder than the first quarter we experienced last year) will not be enough to
absorb the storage surplus. Under a normal (5-year average) winter weather scenario
and assumptions of 2.2% total gas supply growth (based on 3% US onshore production
growth, 2.5% offshore production growth, 2% reductions in Canada imports, flat LNG),
and 7.6% natural gas demand growth, we still expect end-of-March 2007 natural gas
storage to be at about 1.56 Tcf (or 27% above normal). To bring the storage down to
normal levels, we need weather that will be cold enough to push the country to consume
17% more natural gas than normal over the course of the winter." |
