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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Joe Dancy who wrote (142931)	12/25/2010 3:10:53 PM
From: big guy	Read Replies (1) \| Respond to of 206325

From a full time Yooper to a part time Yooper Merry Christmas Joe. The chart of ARTW looks ready to explode and I will be in Monday morning. Scott

To: Joe Dancy who wrote (142931)	12/25/2010 3:54:24 PM
From: quehubo	1 Recommendation Respond to of 206325

There are many stocks that will appreciate quite well when NG prices move up. It will just be a matter of time. The environmental rules and regulations are taking their toll on older coal plants. Sooner or later demand from increased ng fired generation will be felt. I have a few stocks like EXC FE just collecting dividends waiting for power margins to improve.

To: Joe Dancy who wrote (142931)	12/26/2010 6:48:18 AM
From: Ed Ajootian	Respond to of 206325

JoeD, great point re: coal to gas switching. The best piece I've seen on this issue was Citi's Natural Gas Weekly dated 12/2/10, see link to the 10-page report at msg. #142283 (courtesy of Dennis), the summary paragaph of which follows: "Coal to Gas Switching – Should remain the effective “clearing mechanism” for the North American supply/demand balance in 2011. Coal to gas switching last year totaled ~1.1 Tcf in aggregate with composite spot natural gas prices averaging $3.78/MMBtu. In 2010, tempered by the hottest summer on record, we project aggregate coal to gas switching will be just over 0.6 Tcf but, assuming a return to normal temperatures, will again be closer to 1.0 Tcf (or ~2.7 Bcf/d) in 2011. However, our $4.25/MMBtu composite spot natural gas price forecast next year is underpinned by our projection that Central Appalachian coal prices will average $65/ton versus ~$55/ton in 2009. Importantly, any upside to our $4.25/MMBtu forecast next year, apart from higher coal prices, would be driven by a tighter supply/demand balance than we are currently projecting and would have to tighten by at least 2.7 Bcf/d to be priced above coal, or to eventually reach $5.25- 5.50/MMBtu. If the supply/demand balance were to be tighter than currently projected, this would most likely be the result of rig efficiency dropping sharply versus our current more flat trajectory. If rig efficiency did drop 20% by the end of next year, then the supply/demand balance could tighten by 2.7 Bcf/d by the end of 2011 but this would still put the full-year average well below the $5.25- 5.50/MMBtu level to price natural gas above $65/ton Central Appalachian coal." **************************************** It appears that natty is now fairly closely tied to coal -- in '09 with Central Appalachian coal prices of $55/ton we saw natty average $3.87/mcf, and this year, with coal averaging $65/ton we are seeing average natty prices of around $4.25/mcf. So if coal prices stay flat next year, you can see the logic of Citi's call for natty prices to stay flat also. Interestingly, Citi is apparently coming up with a much larger natty supply/demand imbalance (pre coal-switching) since they are expecting 2.7 BCFD of coal switching next year vs. RayJames' call for 1.5 BCFD. Per Citi, coal mining costs (at the margin) have increased to right around the current selling price so there would seem to be little ability for the coal producers to adjust their prices down in response to low natty prices. So its hard to conceive of a scenario where natty prices average lower than, say, $3.75/mcf for next year. This helps explain why the large companies are still increasing their exposure to selected natty plays. Since they see a pretty solid "floor" price, as long as they can find plays that are profitable at that price they will keep adding natty exposure. Exxon Mobil recently announced a natty property acquisition whose size was, for them, miniscule, and would only make sense for them to do if they planned to do a whole mess drilling on the acreage at some point. I believe this was prompted by similar thinking about there being a solid floor for natty prices going forward, underpinned by coal-to-gas switching. Obviously if coal prices continue to creep up next year (as they have this last year) then the floor price for natty should increase accordingly. Has anyone seen any good forecasts for next year's coal prices (ideally, Central Appalachian)?