Poco Gas Naturale - gz
¶
By: GZ on Giovedì 12 Febbraio 2004 13:13
Idee di lungo periodo:
^gas naturale#^,
futures e settore di borsa
E' necessario leggersi dei mappazzi del genere per
speculare ? A chi è più abile basta sicuramente un occhiata
al grafico e voilà, ecco che compra e vende, ma chi
è più lento e meno perspicace (sono del segno del toro)
si sorbisce a volte anche cose del genere
Ad ogni modo la tesi di Weissman (che mi è simpatico
perchè faveva il consulente di strategia aziendale
e non l'analista,come me anche se lui ad alto livello)
è che c'è poco gas naturale in America e dato che a differenza
del petrolio non lo puoi importare
da 5-6 dollari può andare a 8-10 per BTU
(copiamo qui delle ricerche a cui facciamo riferimento
con dei link nel testo delle raccomandazioni nel caso che qualcuno voglia leggere anche da dove prendiamo le idee)
-------------------------Andy Weissman ----------------------------
Energy Sector Presents Compelling Opportunities In 2004
02/03/04 07:37 AM EST
Fundamentals thoroughly misunderstood by the Street.
Few other sectors offer comparable risk/reward ratio.
First, here's a little about my background. I spent 25 years advising CEOs of major energy companies on strategic issues. In 2000, I decided to focus on investment work, and formed my own investment firm, Energy Ventures Group (EVG). EVG manages a hedge fund that invests in publicly traded securities and commodities in the energy sector.
In recent years, Wall Street has missed almost every major move in the energy sector, from the collapse of Enron (ENRNQ.PK:OTC), to the meltdown of the Independent Power Producers to the fall of Dynergy (DYN:NYSE), El Paso (EP:NYSE) and the other major power marketers.
In our judgment, the reason for these misses is straightforward: while there are many bright analysts and bankers covering the industry, there simply is no substitute for learning the industry from the inside. We believe our industry expertise and network of contacts helps us generate opportunities with a uniquely favorable risk/reward ratio -- both long and short.
Currently, we believe that one of the best investment opportunities that exists in any sector of the economy arises out of a fundamental, multi-year dislocation that is occurring in the natural gas market.
In my postings today, I'll focus on why this dislocation is occurring, how long it is likely to persist, why the nature and magnitude of this dislocation has thus far been profoundly underestimated by most Wall Street analysts and the opportunities it presents for investors.
We believe that in 2004 few other sectors are likely to offer as attractive an opportunity for non-correlated gains. Further, 2004 is likely to be just the beginning of a multi-year run in which the impact of increases in natural gas and electricity prices is likely to ripple through every segment of the U.S. economy, with sweeping impacts on equity valuations in many sectors.
Huge Emerging Natural Gas Supply Deficit To Transform Energy Industry
02/03/04 08:36 AM EST
By 2010, expected gap should be 1.5 times (BTU-equivalent of) current oil imports from the Middle East.
We think it's certain to result in far higher prices for both electricity and natural gas.
In recent years, natural gas prices have far exceeded most Wall Street analysts' predictions.
In three of the past four winters, for example, natural gas prices have soared to levels at least 50% higher than any analyst (at least that we know of) predicted before the winter began. During 2003, prices were above almost every analyst's predictions all year long. Yet most Wall Street analysts see high prices as a temporary phenomenon, and predict a return to levels closer to historical norms as early as this spring.
Not surprisingly, the stocks of natural gas-oriented E&P companies typically have traded at prices that assume that the price for the commodity soon will fall to levels well below the current 12-month strip. Having spent my entire career advising the CEOs of major energy companies on high stakes strategic issues, I find this skepticism remarkable.
At least in my judgment, the evidence is now unmistakably clear that, at least for the remainder of this decade -- and in all likelihood beyond -- the U.S. faces an unprecedented shortfall in expected supplies of natural gas. The magnitude of this shortfall has recently been documented in a major new study completed for the Secretary of Energy by the National Petroleum Council: the most comprehensive study of supply and demand in the North American market undertaken in many years. This study found that, by 2010, North American supplies of natural gas are likely to fall at least 6.0 trillion cubic feet (Tcf) per year below the Council's previous estimates of expected North American needs. (The Council's Report -- to date, largely ignored by the Street -- can be found on its web site at www.npc.org.) This is equivalent, on a BTU basis, to 1.5 times the amount of oil the U.S. currently imports from the Middle East.
A supply shortfall of this magnitude cannot help but have a huge impact on future prices for natural gas. For much of the remainder of the decade, we expect natural gas prices to average at least $ 8.00 -10.00/MMBTU -- if not higher. Further, since natural gas-fired electric generation increasingly is becoming the primary source of supply to meet incremental electricity demand in every region of the U.S., the impact on electricity prices ultimately could be just as severe.
It is important to understand, therefore, why this massive, unexpected shortfall in natural gas supply has come about, what if anything can be done to ameliorate it and why the magnitude of impending price run-up is not yet better understood by the Street.
Sharply Escalating Natural Gas Prices Result From Collision Of Tectonic Plates
02/03/04 10:03 AM EST
Impossible to reverse this decade, in our view.
Implications for valuations in energy sector drastically underestimated by the Street.
Over the past 3 years, the spot market price of natural gas has more than doubled, to the point that prices in the range of $ 5.50 to 6.00/million BTU are now common.
These far-higher-than expected prices are not due to any short-term dislocation in the market. Instead, they result from two longer-term developments, neither of which can be reversed -- at least over the next 7 to 10 years:
The shift to natural gas-fired generation as the near-exclusive source of supply to meet the incremental electricity needs of the U.S. economy.
The simultaneous, rapid aging and decline of traditional sources of supply in both the U.S. and Canada and corresponding need to turn to new, more distant sources with far longer lead times. They are unlikely to make a significant contribution to U.S. supply until the end of this decade at best.
The result is to create an unprecedented mismatch between supplies available to the U.S. economy and expected U.S. needs.
The U.S.'s current dependence upon gas-fired generation to meet its incremental electricity needs results from decisions by power plant developers over the past five years to rely almost exclusively on gas-fired generation to meet growing demand. During this period, the U.S. built more than 220,000 megawatts of new generating capacity, over 97% of which is gas-fired. This is enough to serve the total electricity demand of Germany, Great Britain and France. It was built at a cost of more than $100 billion -- effectively forfeiting the opportunity to add a more diversified mix that might have included a greater proportion of coal and renewable energy.
The U.S. is now dependent upon expanding utilization of these units to meet virtually all of its incremental electricity needs for at least the next 7 to 10 years. That's the minimum lead time required to make substantial changes in the composition of the U.S. generating mix, which is now more than 40% gas-fired.
Fueling these units will result in a massive increase in power sector consumption of natural gas. A study recently completed by our firm concludes that, for the economy to grow at a normal rate, power industry consumption must expand by a minimum of 3.5 Tcf by 2010 and 5.7 Tcf by 2015.
This is an unprecedented increase, especially in so short a time period. Even if the traditional sources of supply were in their prime, therefore, it would put intense pressure on the market. Unfortunately, traditional sources of supply are weakening just as we need them most.
Development Of Alternative Sources Of Supply Will Take Many Years
02/03/04 11:08 AM EST
NPC study establishes limits on traditional North American sources of supply.
LNG will not make major contribution until 2010 or later.
Many Wall Street analysts seem to believe that, to the extent shortages have begun to develop, we can "drill our way" out of the problem. To the extent that this strategy isn't sufficient, increased imports of liquefied natural gas (LNG) are expected to eliminate any remaining pressure, no later than 2006 or 2007.
Both sets of beliefs, however, underestimate drastically the magnitude and scope of the impending deficit and the massive effort required to overcome it.
While we are not in any sense "running out" of natural gas, the recent NPC study referred to in my earlier post concluded that, with the sole exception of the Rockies, every major basin in the U.S. and Canada is rapidly aging. As a result, every year, more and more natural gas must be produced from new wells simply to replace production lost from existing wells.
This year, the decline rate is estimated at 31%. In other words, the 320,000 existing wells in the U.S. and Canada, drilled over a period of almost 3 decades, are likely to produce only 69% of what they produced last year. The remaining 31% of our natural gas supply must be produced from wells that had not yet been drilled when 2004 began. That's almost half as much as the expected total production from existing wells.
This is an awesome task. Further, the effective use of seismic technology to "cherry pick" the most attractive prospects means that the remaining prospects for drilling tend to be much smaller and have a much shorter expected useful life (often measured in months rather than years).
As a result, the NPC concludes, it is now necessary to deploy virtually every drilling rig in North America just to prevent further declines in production. The significance of this fact often gets lost.
Many analysts' reports focus intently on whether there has been a slight year-over-year increase or decrease in production in any one month or quarter. This, however, misses the larger point: It is no longer feasible to expand production from U.S. or Canadian sources by anywhere near the rate required to meet expanded power sector demand.
Although LNG can eventually make a major contribution to U.S. supply, only a limited number of new projects are likely to be completed in the Atlantic Basin before the end of the decade. Until then, even if new delivery terminals are licensed in the U.S., increased LNG imports are likely to have only a limited impact on the U.S. market.
Even in the next decade, as power sector demand continues to grow, it is likely to take until the middle-to-latter part of the decade before LNG, gas from the Arctic Circle in Alaska and Canada and increased deepwater drilling in the Gulf finally catch up to increased power sector needs. In the interim, prices inevitably will have to rise to far higher levels in order to drive large amounts of industrial demand out of the market and balance near-term consumption with limited near-term supply.
We find we can add to our performance by actively trading natural gas commodities. However, we give relatively little weight to our long-term views regarding likely future trends in natural gas prices in our daily trading. Instead, we attempt to use our industry expertise to assess a number of issues that often have a major impact on day-to-day and week-to-week price movements in the futures market.
These issues include:
The most likely injection or withdrawal into storage for the next week;
Likely changes in weather;
The impact that these changes in weather and other factors are likely to have on the near-term (e.g., next day or later in the week) cash market price;
The impact that likely increases or decreases in the cash market price, changes in money flows and other factors are likely to have on the opening price in the futures market the next day and over the course of the week;
Changes that are (or are not) occurring in industrial consumption of natural gas, Canadian imports and imports of LNG;
Potential federal or state action that could affect the natural gas market; and
How all of the foregoing affect the way that PIRA, CERA and major Wall Street analysts assess the market.
Based upon this analysis, we then look for opportunities where the front month and/or next month is under- or over-priced relative to where we believe it will move within the next 1 to 2 trading days. We set a price target based upon the action in the market at the time.
When we see an opportunity where we believe the downside is limited and the likelihood of a price movement of at least $2,000-$4,000 per contract is relatively high (if our price target is met), then we pull the trigger. Even so, we trade on a scale that is relatively small relative to the total amount we have under management. If our risk/reward criteria are not met, we stay out of the market.
But, of course, no strategy is foolproof.
From the standpoint of investors with a long-term horizon, we believe there are few better opportunities available than investing in some of the better managed, gas-weighted, relatively lightly hedged E&P companies. Some of the favorite names that my Portfolio Manager, Dan Lindsay, and I share include: Pioneer Natural Resources (PXD:NYSE), XTO Energy (XTO:NYSE), and Cimarex (XEC:NYSE). Among the larger cap names are: EOG Resources (EOG:NYSE) (always one of our favorites), Devon (DVN:Amex) and Burlington Resources (BR:NYSE). We also like Hugoton Royalton Trust (HGT:NYSE), with an 8.5% dividend yield which should increase significantly if commodity prices increase.
In the service sector, we generally like BJ Services (BJS:NYSE), Patterson-Uti Energy (PTEN:Nasdaq), Nabors Industries (NBR:Amex) and Weatherford International (WFT:NYSE). The services sector has had a pretty good run-up lately so we are less heavily-weighted towards it than we would be under other circumstances.
Our challenge as fund managers, however, is to earn strong positive returns for our investors now, despite what we believe is the Street's failure to fully recognize the value of some of the better names in this sector. To do this, we take advantage of the high volatility of the sector, actively trading both equities and commodities futures. But with rare exceptions, our strategy does not involve day trading.
The basic principles of our trading are the same for both equities and commodities, but the execution differs slightly for each.
On the commodity side, we find that it rarely makes sense to hold positions for more than a few days given the extraordinary volatility in the market. Even if the market is in the midst of a major move up or a major move down, we can still generally maximize our performance by buying or selling at least a portion of our position after a particularly strongly rally (or sell-off) and then buying back in on the correction. By contrast, on the equities side, we are more inclined to establish a core position, and then trade around it by expanding or contracting the size of our position based upon what we see occurring in this market. We find that a more productive strategy than a pure buy-and-hold given the volatility of this sector.
My next post will explore how we apply this philosophy to our commodity trading in particular. After that I'll describe a particularly good set-up we see potentially emerging that applies to both the commodity side and the equity side of our portfolio.
Key is to couple deep industry expertise with experience trading in the sector.
Well positioned to out-perform other sectors of the economy in 2004.
I've very much appreciated this opportunity to share with you today some of my thoughts about investing in the energy sector.
I believe the U.S. faces a massive shortfall in supplies of natural gas over the next several years, as I hope I've made clear. This shortfall poses a potentially grave challenge to the nation's economy.
From an investment standpoint, however, it also poses an outstanding opportunity to earn non-correlated returns. Further, I believe that a prudent investment advisor should strongly consider recommending to clients that a portion of their portfolio be invested in energy-related equities and/or commodities that will benefit if energy prices rise. This diversification is key precisely because of the adverse impact higher energy prices could have on other sectors of the economy.
In my postings today, I have focused exclusively on issues pertaining to the natural gas market, since in my judgment they present one of the most compelling investment opportunities I have seen in my lifetime. In the end, however, the natural gas scenario presented here today is just one example of our broader thesis, that the energy sector is one where industry expertise and trading knowledge can combine to produce outstanding returns.
Once again, I've really enjoyed writing these postings, and hope you find them of help. If you have further questions, please feel free to contact me at Andy.Weissman@thestreet.com.
None
Potential Set-Up in Natural Gas Market
02/03/04 03:03 PM EST
Illustrates contrarian approach.
A set-up that appears to be developing in the natural gas market may illustrate how we typically approach both the equity market and the commodity market.
In December and early January, the commodity market soared, with the February futures contract racing from $4.97/MMBTU just before Thanksgiving to close at $7.33/MMBTU on Friday, Jan. 9 (the contract high). This was a gain of just under 50% in only 6 weeks.
Since Jan. 9, however, futures prices have plummeted. While the February contract is now off the board, the March contract closed last Friday at $5.395/MMBTU, down $1.575/MMBTU from its close on the Jan. 9 of $6.97/MMBTU. This effectively gave up all of the gains since Dec. 2, just two days after the current rally began. The fall in other months' contracts has been just as severe. As of the close last Friday, the July contract settled at $5.159/MMBTU and the October contract at $5.151/MMBTU, both well below the cash price in the same months last year.
The principal reason for the decline: a nearly-universal belief developing that, given amounts of natural gas currently in storage, end-of-season storage is likely to wind up as high as 1,200 to 1,300 Bcf. That's as much as 450 to 550 Bcf above last year's end-of-March figure of 735 Bcf.
The reasoning is that, if withdrawals from storage during the remaining 9 to 10 weeks of the season approximately equal 5-year average levels, that's exactly the range we'll be in. And if end-of-season storage is this high, it's perfectly reasonable to assume that prices will be somewhat softer than last year. This prospect has undoubtedly affected both the commodities market and natural gas-related equities.
But is it reasonable to expect that withdrawals will roughly approximate these prior levels?
The size of the withdrawals will depend upon two factors: weather over the remainder of the winter heating season (particularly between now and late February) and the overall supply/demand balance this year. The lesson learned last winter is that the supply/demand balance in winter months has shifted dramatically from prior years. The number of gas-heated homes and offices is up dramatically and supplies have fallen precipitously. When the temperature turns cold it is necessary to withdraw far more natural gas from storage than in prior years (often 50% or more, depending on the year to which the comparison is being made).
November, December and January were somewhat milder than the historical norm. Late January, however, has been very cold. And the meteorologist in whom we have the greatest confidence sees a substantial possibility that February will be far colder than the norm.
It's too early to tell how the weather will evolve. But based upon his current forecasts we would not be surprised to see temperatures -- and withdrawals from storage -- along the lines of the following:
If storage ultimately is drawn down to this level (which is only 100 Bcf above the same week last year), we would expect this draw-down to have a powerful effect on the price of natural gas futures, at least for the April contract and later. We also would expect there to be at least some beneficial affect on natural gas equities.
Over the next few days and weeks we intend to monitor both proprietary weather forecasts and storage withdrawals with particular care. We will keep an eye towards capturing the opportunity this scenario potentially will present, if and when it becomes clearer.
