08
May

Thursday Night Gas Storage Review

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Natural gas yawned following an in line injection to storage. EIA reported an injection of 65 Bcf. The Street was at 62 and I was at 70 Bcf.

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June contract gas closed down a dime at $11.23, which in my opinion is just noise after a big run. I don't think prices are sustainable here ... but with oil making new record highs on an almost daily basis, a downturn is pretty unpredictable. Thankfully, or gassy exposure far outweighs our small (and now much smaller) put position in the (UNG) ETF.

Analyst's estimates are well below the current strip giving them a continual propensity to raise CFPS estimates throughout the year on the group. Perhaps more importantly, the high strip affords those names who have been more cautious in their hedging programs to lock prices they only dreamed about 6 months ago.

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It's also interesting to note that Barnett and Woodford economics work well in the $6 to $7 range. North of $10 NFX, just to site an example, is achieving triple digit IRRs in the Woodford. We are signs of cost creep, especially in the OCTG market but also in rigs and have positioned ourselves accordingly.

People are going to be a deepening problem going forward from roustabout to G&G types. If you've recently been displaced due to the subprime debacle there are no experience type jobs available aplenty in Louisiana with good signing bonuses and salaries approaching trip digits. On the technical side, the U.S. needs to teach more math and graduate more engineers but that should not be news to anyone. If Congress feels the need to interfere anywhere it should be with an eye towards encouraging more O&G focused scholarships.   

 

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