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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives

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Dec 31 4:00 PM EST

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To: Roebear who wrote (34533)	7/4/2012 6:13:11 PM
From: architect*	3 Recommendations Read Replies (1) of 220943

finally switch more usage over to cleaner, cheaper natural gas. Electricity generation from natural gas instead of oil or coal is a no-brainer, after that, the game changing energy investments will be elsewhere, either LNG plants exporting or CNG (compressed natural gas) powered cars and trucks. It seems to early to investment in companies preparing for CNG cars and trucks and lots of politics and billions of investment capital are required to build a LNG plant in somebody's beach front neighborhood. At some point, when long term trends develop in switching more energy over to natural gas, I'm all in as an investor. The profit margins currently favor oil production even in places like the Bakken and Western Canada where a barrel of oil has a wellhead sales price of under $70 / bbl compared to a barrel of Brent, Louisiana, or Dubai oil selling for $100 / barrel. Even the wellhead sales prices for liquid gas have been dropping. western Canadian companies were producing the liquid gas profitably and could afford to give away the dry gas, or sell it at a loss. The reserve writes downs in natural gas producers are going to be brutal in the 2012 reserves reports. The expiration of $4 -$6 mcf hedges will also expire and new hedges in the $2.80 mcf are at or below break even for most natural gas producers. There may be some play in natural gas prices if you bet gas prices will increase before current hedges expire. My guess is that the market hasn't fully discounted the natural gas reserve write down that are coming in 2012. After the write down in asset value from declining prices occurs in Q1 2013, then as share prices plunge, that might be the time to begin investing in the future of natural gas. I've been watching Niko Resources NKO.to drop from $50 / share down to $13 / share as more and more of their gas reserves become un-economic, as international gas prices begin to drop along with North American natural gas prices. NKO's ATH was $110 / share. Golar LNG (GLNG) is worth a look. GLNG looks rich to me, but until the natural gas reserve write downs in 2012 occur or some game changing natural gas technology occurs, GLNG (LNG) is the only aspect of the natural gas industry in North America that looks appealing to me.

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