Buzz - All / Natural Gas
I'm not really a "I told you so" type of guy, but the handwriting was on the
wall this time around. I have also noticed the better trading stocks are
those related to natural gas. A splurge like this happened early this
year in the winter, but was short lived. Buzz, keep in mind, Western
Canadian producers have problems distributing gas due to lack of
pipeline capacity. This results in very low natural gas prices which have
historically been about 50% of NYMEX price. In fact, Alberta Spot
Pricing is tradable now on the commodity exchange.
This is how I see it. I feel pipeline problems will be corrected in 2-1/2
to 3 years and Alberta pricing for natural gas will catch up to prices
the rest of the North American continent is experiencing. What this
means to me is that we can expect a 50% gain in investment over this
period of time ------if a company just stands still in terms of production.
Granted, prices are now at highs, but I think they will average $3.00
by then also. Natural gas is and has been the promoted cleaner fuel
by the U.S. and good for the environment, etc.. Over half of Canada's
natural gas production is exported to the states. You will notice I post
quite a little information on pipelines and the reason is the effect it will
have on the producers. Just a short comment on oil prices. Companies
have enjoyed a good year because of pricing. However, without impact
international situations, I don't see improvement from this year to next.
I believe most companies will estimate somewhere between $19.00 to
$20.00 bbl for their 1997 budgeting.
Your choice of Canadian 88 Energy is a great gas play. Watch financial
and operation reports for a company called Blue Range Resources. If
they improve to offset writedown in reserves a few months ago, they will
also be a good gas play. My favorite is Newport Petroleum, which I've
mentioned on numerous occasions and nobody else talks about it. I
have gone out on the limb last February and told all this is a $9.00 stock
(more than a double) by year end. There's a little company named Harbor
Petroleum, which bit off a lot of debt and got into trouble, which I've been
watching all year for signs of a turnaround situation. I noticed shares
have risen about 50% over last 2-3 weeks. Watch their reporting.
In closing, I might mention that I think action in energy stocks will slow
by month end thru early March, at least for those companies which are
weighted more towards production in oil.
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