by Travis Johnson, Stock Gumshoe | April 27, 2012 5:41 pm
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Travis, great review of the natural gas industry, including pipelines,engines,transportation,etc.. It is a pleasure to read something succinct rather
than all the hyperbole from other letter writers I review periodically.
Thanks.
Franklin
Thanks for the timely, well written and helpful review.
Peace,
Michael, Irregular
Truly a great review of the natural gas industry. This article is of great help.
Absolutely great article. I am so impressed with your ability to consistently write such in-depth and informative reviews that lay everything out for your readers.
Thanks.
Barry
Great natural gas review. I’m looking to buy SJT, HGT, Range when the bottom hits . Hopefully there is capitulation. TJ
Thanks Todd — and thanks for sending along your letters, interesting stuff.
Do u think the push in lng will be a bIg help in lowering unemployment & increasing tax revenue to reduce the national debt or will it come into being to slow. Sales to Japan & other Asian countries & England & others that depend on Russia for natural gas.Seems to me the whole world would benifite from it. Or not?
I think it will be extremely slow — I wouldn’t imagine that it will have a marked impact on the marketplace within the next few years, this won’t be flipping a switch and changing the balance of trade in the world. But it could allow natural gas prices to start climbing within a few years, in my opinion.
I know but if nat. gas is $2.00& they can export for $12.00 to &14;00Wouldn`t they be building ships as fast as they can. I worked for Chart Inds. for 31 years.This was when it was Minnesota Valley Eng.in the 80`s we built tanks for LNG.1 was for a locomotive .Also some for Hydogen .We also built quite a few for transporting liquid nitrogen.Halliburten was using it for fracking back then.When gas & oil came back down that was the end of that. I think it would be a better choice then elec.cars. claude
It certainly might speed up if shipyards increase capacity, but as of now “they” reportedly are building ships as fast as they can — order now, get it in probably 2015 at this point.
TRAVIS,
Who has the export terminal capacity to ship LNG to foreign buyers at this time or in the forseeable future?
There’s a tiny one in Alaska, but that’s it for the US so far — Cheniere (LNG) has the permits to turn their import facility into an export terminal, but I assume it will take a couple years. Other plans include one in BC, but these are big, expensive, scary (for some local residents) projects, long lead time.
Isn’t Dominion doing something in Baltimore to reverse a facility they control into an export facility. I understand that Williams Partners is expanding their pipeline operations in the NE and have just signed up a nat.gas contract with an electric generating utility ? Now there is a rumor out about a “Cline” shale oil field in West Texas that’s supposed to be big. Anyone know anything about that?
Standard Oil became the dominate player in their time by driving the cost of kerosene down to where it was the cheaper alternative. Maybe this is happening with Nat. gas?
Travis:Forgot to say I think you just wrote a great article on Natural Gas. Printed it off for future reference.
Extremely comprehensive write up. Pretty much answered all my questions. I for one, see the country, if not the world headed for a natural gas/ electric economy. This is a pure “green” play. The king that folds nicely into one’s wallet.
The USA’s natural gas boom is a dream come true, though there is the nightmare ominous risk aspect. I perceive that ye are very “well”-informed and because
I’m not here worrying about “climate change” (allegedly coal is considered worse) so much as fearing eventual catastrophic water contamination. There are negative articles and at least one anti-fracturing documentary movie GAS something. Enormous amounts of water and “chemicals” are utilized, reportedly the partly secretive fracting art/technique is apparently NOT REGULATED by the Federal Government, reportedly thanks to Bush II. Please see ROLLING STONE’s article index, there are capitalist reading fees for those damned scare articles now … so nevermind. My snail
mail RS subscription through FREE SNATCHER is only $3.50 for a year. And what has massive water pollution potential got to do with any investing by me? Well, I’m not an existentialist.
I have been long TGP for several years and the units seem to have held up extremely well in the MLP space. Exporting LNG seems to be a no brainer for N America. What are your thoughts on MWE ? My largest single holding which has lost 25% in the past month or so . I am staying invested but am sure wondering if the whole “gas pipes and storage hype” is falling off a cliff ! On the other hand , there is a lot of M&A going on in the space. I inherited 10000 shares of Provident Energy 5 years ago and sure enough Pembina bought the company and raised its dividend to boot. I at least understand the economics of what the industry is doing and see the extra boost that comes from access to low cost of capital in a “capital intensive” space . Least I didn’t even think about FaceBook for 1 sec. , ! Stay with economics I can understand seems to work best for me..
I don’t know anything specific about MarkWest, to me it looks like it’s priced roughly comparably with its peer “pretty big” pipeline MLPs. I’m still a bit fan of Pembina but have never owned it, we are in uncharted territory for MLPs vis a vis interest rates — they’re always valued as income investments, based on what they can pay out and what comparable investments (like bonds, REITs, etc) yield, but with treasury rates so freakishly low it seems to skew everything. Good REITs are yielding 3-4%ish now, so you can argue that MLPs ought to get a little bit of capital appreciation, but there is also quite a bit of company-specific concern for the MLPs that depend heavily on production increases in new natural gas areas — if you invest to build a gathering system in the Haynesville shale, and then the natural gas price drops so low that they shut in some wells, your payback gets tougher because there’s less volume than expected due to the slowed production. Pipeline MLPs are not directly commodity price sensitive, since they work like toll roads, but they are indirectly (just like a toll road operator isn’t sensitive to new housing starts directly, but they do lose future toll revenue if new developments aren’t built near their toll road).
It’s now a year later and I’m still getting killed by Westport. Yet another offering just to get capital, not to pay debt, killed the share price. It seems like they just keep diluting and spending the capital.
The only ray of light at this point is that Burlington Northern Santa Fe (owned by Buffet) has gone to CAT to build gas powered engines which can pull 100 cars. They in turn went to WPRT for the engines. I have no clue what that means but they have proven time and time again they are not shareholder friendly!!!! I have no idea when the new venture is scheduled to start; just look for another offering to dilute the shares again……
First off, for the sake of full disclosure, I own a speculative position in what I’m about to discuss. I’m telling everyone else because I’d like to give something back for all the help this community has given me, and all the money it has saved me by exposing the authors of a lot of these advisory services for the charlatans that they are. Thank you all for your support.
If you look at a one-year chart of natural gas futures, ETF’s, and ETN’s, you see how last year’s polar vortex impact played out: in about September through October, price oscillated, jumping each time one of the almanac publishers said there would be a harsh winter, bottoming for the year at the end of October and then screaming upward until the end of January. It’s very easy to see on Velocity Shares 3x Long Natural Gas ETN (UGAZ), which is what got me interested, bottoming at $11.92 during the first week of November 2013 and peaking at $42.73 at the end of January 2014.
It’s happening again. And this time, in addition to the forecast of another polar vortex, the last news I saw on natural gas reserves is that they’re down 40% from this time last winter.
If you look at a daily chart of the last two months or so, you can see the range-bound activity, and if you strike a trendline across the bottoms on 05, 12, and 24 September, you’ll see a great projection of where to be layering in a position. The last few cycles have been in the slightest uptrend, and I’ve bought every dip. The plan is to buy every time price touches that trendline, 25% stop-loss, and sell on the last trading day in January, regardless of what price is doing if not already stopped out, looking for a repeat of last year’s activity or some reasonable facsimile thereof.
Yes, I know, “past performance doesn’t guarantee future results.” Thank you legal department for that public service announcement. 😉 But seriously, if we have the same forecast as last winter with 40% less natural gas available than last year, barring the arrival of benevolent aliens with a new energy technology that instantaneously makes NG obsolete (or for conspiracy theorists, hostile aliens arrive and instantaneously take all the natural gas and furnaces that use it in exchange for enough gold to pay off the US debt), something similar can be expected. The volatility on this particular ETN (UGAZ) was the most extreme during this period last year of all ETF’s and ETN’s I could find, and since this is entirely a speculative play, it’s the one I’m going with. “Your mileage may vary,” of course, as might my own.
So there it is. If anyone has a suggestion for a tweak, or notices something I’ve missed, by all means, please say so. My position is positive right now, so if it was a dumbass thing to do and I’ve just been lucky so far, now is an excellent time to hear that I need to be out. 😉 Good fortune to all, and happy hunting!
Thanks David, appreciate the thought-out trading idea.