Is it Time to Buy Natural Gas Companies?
By Mike Perras

Every few months a few investor buddies and I get together, play some golf and compare notes. One of the conversations that stuck me came from one friend who only plays the cyclical energy sector.

He tells me that it's a commodity, no different than gold or silver. Meaning that the producer or exploration company is always at the mercy of that specific commodity price. So far, so good, I get all that.

He was telling me that typically when the natural gas commodity price is low, just like it is now, exploration simply stops.

All what that really means is simply this, while we continue to use the existing supply, very little new supply is being added as the drillers wait till they see a better return or at least a higher commodity price.

Well that's kind of like cause and effect in play. As soon as the winter / heating season comes, and we all know it is coming, the demand will be higher for natural gas. While the supply has diminished, the demand grows and thus you start to see a spike in the commodity price of natural gas.

Well this almost seems too easy, or at least easy for an investor who is willing to play these energy cycles.

Because I follow the mining and oil & gas sectors specifically. I came across a small Canadian company called Yangarra Resources. Their stock trades around .04, was .20 over the past year, and as high as .40 just two years ago.

I was prompted to call their President & CEO Jim Evaskevich. We had a nice long chat and he echoed my golfing buddy's comments exactly. NG companies go through this cycle every year, the more booming winter months and quieter summer months, from a natural gas price perspective.

Jim said, his company had assets of $45 million dollars just last January and that has fallen with the natural gas prices. He did say his company is still profitable today even with NG's low price.

So if one paid closer attention to these commodity prices and then searched for companies in that sector, it stands to reason, you would have a new investment strategy on your hands. Well it certainly works well for Mr 10 handicap anyway.

I only mention Yangarra Resources specifically because they had a news release last week which I picked up on Stock Research Portal. And then it became the whole conversation of my golfing adventure. And once again, my golf score was not the adventure!

And by the way, Stock Research Portal is free, free with an email subscription. They segregate their information like I've never seen anyone else do. Drilling, finance, M&A to name just a few. If it's well organized, quality research you want, I think you'll be impressed with their site.

About The Author: Mike Perras is a former media executive and faculty of business professor. Today he is a freelance writer and also manages the Canadian Stock Alerts blog. It is updated weekdays in real time, and the primary focus is to find stocks with higher than usual trading volume. Mr. Perras doesn't advocate buying the stocks he mentions. Nothing in this article is either designed to meet readers personal financial situations, or intended or taken to be investment advice.

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NiSource owns the largest natural gas pipeline in the U.S. through a subsidiary, Columbia Gas Transmission. NiSource serves nearly 3 million customers along the Eastern corridor, and provides services across the natural gas value chain, including storage, transmission, distribution, and marketing

Natural Gas Prices in 2010

By Vernon Trollinger

Natural Gas Powers Texas

According to the US Dept. of Energy, Texas produces and consumes more electricity than any other state. Over half of Texas’ energy comes from natural gas-powered generation plants. Texas produces 25% of the nation’s natural gas and is the largest producer; storing and supplying natural gas via pipeline for all regions of the country. Yet while Texas has large reserves of low grade coal, most of what is burned in its coal-fired plants is brought in via train from Wyoming and Montana.

So, it makes sense for Texas electric power generators to rely more on the supply of natural gas in our back yard rather than waiting for the next 10,000 tons of coal to roll in from Wyoming. Natural gas burns cleaner than coal and does not leave behind large amounts of cinder and ash that require proper disposal.

In the past, natural gas was usually uncovered when drilling for oil. Many middle eastern oil companies commonly used natural gas to push oil out from deposits in the earth and then let the gas burn off (called “flaring”). This was because there was neither large local demand for natural gas, nor a way to safely transport it overseas to markets that wanted it.

In Texas, the practice was very different. Natural gas and oil have been twin commodities that helped build Texas. Natural gas pipelines stretch in all directions from Texas and it has long been used throughout the US for heat, light, and electrical generation. So, it’s little wonder that in this country its price has long been bound to oil, a commodity in a very volatile market where prices are often shaped by world events. For this reason, power generating companies have paid more for natural gas than coal, nuclear, and wind. Because it is the most expensive and so heavily relied upon, the price of natural gas determines the price of electricity.

When the Wave Broke

Throughout 2007 and into 2008, petroleum and natural gas prices rose due to a popular tide of speculative investment. This drove resource development and innovation in natural gas technologies to bring gas reserves to market. Among these:

• The growing Liquified Natural Gas (LNG) trade is expected to increase at 6.7 percent per year until 2020. New fleets of inexpensively built ships and refineries expanded the industry worldwide. LNG now involves 15 exporting countries and 17 importing countries, including the US.

• Qatar announced its goal to develop both its Northfield natural gas reserve production (from roughly 54 billion cubic feet in 1995 to 2.7 trillion cubic feet in 2008) and its Gas-to-Liquids capacity. Qatar is now the world’s largest LNG exporter.

• Developments in horizontal drilling and rock fracturing techniques with high pressure water provide lower-cost access to several huge deposits of natural gas trapped in common shale. These include the Marcellus shale bed and the Barnett shale in Texas (much of it under Ft. Worth) – which has been estimated at holding 26 trillion cubic feet of natural gas and is producing 2 billion cubic feet per day.

In July, 2008, the petroleum/natural gas price wave peaked. Gasoline surged to over $4.00 per gallon and natural gas prices to $13.69 per billion BTU (mmBTU). The cost of Texas electricity exploded.

Inundated with high fuel prices, consumers all across America cut their travel and their energy use. In the fall of 2008, the economy contracted so severely that businesses laid off workers or closed. They stopped using natural gas to heat their buildings and stopped needing electricity to power their machinery. This helped drive down the price of oil, gasoline, and natural gas. But in the case of natural gas, the big developments in LNG supply and natural gas shale brought enormous amounts of natural gas out of the ground. Ready to use, it now lay idle in pipelines, tanks, and ships at sea. With plenty of supply but no demand, the price sank further.

One year after the price peak, the DOE’s EIA reported in its weekly natural gas storage report for August, 14, 2009:

“Working gas in storage was 3,204 Billion cubic feet (Bcf) as of Friday, August 14, 2009, according to EIA estimates… Stocks were 562 Bcf higher than last year at this time and 513 Bcf above the 5-year average of 2,691 Bcf.”

By September, 2009, natural gas lost over 80% of its July 2008 value and had plummeted to $2.409 per mmBTU. Texas electric rates fell as well.

Big Supply + Little Demand = Low Price

Because of booming US domestic supply, natural gas’ price tumble has decoupled it from oil’s price. As analyst Fadel Gheit put it, “[O]il is a global commodity; gas is a regional commodity. You can have a huge discrepancy in gas prices from country to country, from continent to continent, because of a lack of adequate transportation – the means of shipping to take gas from where it’s found in abundance to where it’s needed.”

As a regional commodity now, present US domestic natural gas prices are somewhat insulated versus shocks from international problems. New shale deposits being drilled throughout the lower 48 states provide a more stable supply and stable pricing. As a result, LNG imports to the US are dropping, prompting the United Nations International Energy Agency’s chief economist, Fatih Birol, to forecast a world-wide natural gas glut continuing through 2015.

In an interview with Bloomberg News, energy commodities analyst Stephen Schork painted this picture of the current natural gas supply: “We have more gas than we know what to do with in the U.S.; we have more waterborne gas floating around the world’s oceans that doesn’t have a home.”

When natural gas prices began their slide, many natural gas companies capped their wells and cut their production. The EIA recently reported in its Short Term Energy Outlook:

Total marketed natural gas production is estimated to have increased by 3.7 percent in 2009, despite a 59-percent decline in the working natural gas rig count from September 2008 to July 2009.

Even Qatar announced it will not pursue any new development in its North field reserve for another four years.

Right now, the two big drivers of US consumption are its winter and its economy. This winter, an early cold snap increased heating demands for much of the country and even caused a brief $1 price increase. Though faltering, the US economy has improved somewhat since September, 2008. Because of the slight contraction in productivity and the early cold weather, natural gas prices have risen from their September, 2009 low —but they are still 50% lower than their peak in 2008. The EIA statistic for the January 27, 2010 price at the Henry Hub in New York ($5.42 mmBTU) is 14% higher than the same date last year ($4.75).

The big new for 2010 is it’s still a natural gas buyer’s market. With storage levels still at 5 year highs, enhanced domestic production capabilities, and slow consumption growth, prices are not expected to rise dramatically through 2010. EIA projects that the natural gas spot price at the Henry Hub will increase to an average of $5.25 mmBTU in 2010, which is $1.27 more than the 2009 average of $3.98 mmBTU. Remember, this is an average price; seasonal increases will occur, especially during the summer cooling months in Texas when power demand is at its height.

For Texas electricity consumers, this means that energy prices will remain low through for the rest of the year, though there will be some fluctuation due to seasonal demand, as stated. However, one thing about the near future is certain: consumption of natural gas will increase as economic conditions improve. Businesses will need more people as they will get back to running equipment and machinery – and they will all use more energy. As consumption rises, more generators will burn natural gas to meet that need. Natural gas prices will rise. And so will the price of Texas electricity.

Long Term Solutions for the Texas Energy Consumer

The best thing an electricity consumer in Texas has right now is energy choice. If you sign on to a two year (24 month) plan now, you can lock in the current 2010 rate through 2012. Switching between now and spring when rates are low could save you hundreds of dollars over the next two years. Why? Because you can take advantage of a long term fixed energy plan that locks in the current low energy price. In the near future, the EIA projects that prices will increase in 2011, averaging $6.00 mmBTU as the existing surplus shrinks in the face of a rebounding economy. That’s a 13% increase in price. Right now, if your energy plan is locked in at .114 cent/kWh for 1500 kWh per month, you’re paying about $171/month. But in 2011 given a 13% average increase, your bill could jump to $193.23/month. That’s a difference of $22.23/month or $266.76 for the year.

To maximize your savings for these next two years, you need to act before mid-April because that’s when the price begins its annual increase for summer cooling costs. To find a long term plan that will help you save the most money, go to Bounce Energy and check out their Price Protector 24 plan. Qualified customers will receive movie tickets, bill credits, companion airline tickets, price reductions and more for paying their bill on-time!

About the Author: Bounce Energy is a Texas Electric Company based in Houston. Bounce Energy's goal is provide more than low Texas Electric Rates to our customers. With innovative and flexible plans, excellent customer service, and superior customer rewards, Bounce Energy offers a unique approach to Texas electricity.

Source: www.isnare.com
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Natural Gas as an Alternative Energy Option
By Gregoire R. Anaya

Natural gas is methane, which is produced by the decomposing organic matter. It has to undergo an intensive processing that removes impurities from methane gas, which includes by products like propane, ethane, pentanes and hydrocarbons having higher molecular weight, sulfur and trace amounts of nitrogen and helium.

This alternative source of energy generates energy through gas and steam turbines. Most of the high capacity plants use natural gas and especially high power can be generated by a combination of gas and steam turbines in a cyclical manner. It also produces lesser exhaust gasses when combusted.

It is most commonly used at homes for purposes like cooking, operating ovens, cooling and heating, central heating, and to run clothes dryers. At a broader level it can be used to run furnaces, boilers and heater.

Tupolev, a Russian aircraft producer is researching to utilize liquefied natural gas in combination with hydrogen to fuel an aircraft. The advantages of using this hybrid fuel are that they produce higher energy per calorie of fuel, can cool the engine air in order to achieve greater efficiency of compression and reduce the temperature of gasses emitted. It is much cleaner than the currently used aircraft fuel. Not only this, it be an effective source for hydrogen using the hydrogen reformer.

Natural gas definitely has better incentives for using it however, the main problem in utilizing this source of energy is its storage and transportation as it has a lower density. Pipelines for natural gad are safe and economical but are not a good choice for laying out across oceans.

Pipelines across oceans use natural gas in a liquefied form whereas carrier trucks carry natural gas in its compressed form. Transport of gasses is either direct or to a retailer who then distributes this gas; the latter method can prove to be costly due to the level of maintenance required.

Before it came to be effectively used as a source of energy, it was burned off as wasteful fuel or flaring when it was extracted along with petroleum. Currently this gas is re-circulated for recovery at a later period; this pumping back also makes oil extraction easier due to high underground pressure. A revolutionary concept that has emerged out of this is the utilization of landfills to produce methane, which is then utilized to generate power.

Natural gas has been named as the cleaner fossil fuel that produces less carbon and its by products and by itself is a gas that can increase global warming at a faster rate than that of carbon dioxide. However, it is not a very serious issue as it is not released in huge amounts.

For more information about alternative energy and alternative fuels, visit MyEnergySubstitute.com.

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