Another week, another record.
Hopefully by now you've gotten used to seeing record crude prices. As usual, we started to see a sell off after nearly reaching $145.85 a barrel last Thursday. This morning, crude dipped over six dollars a barrel before bouncing back over $141 per barrel this afternoon.
But it's not just oil that's been on my mind.
If your mind has been fixated on "America's Oil Crisis," (I still can't get over the fact that some people believe it's only a problem in the U.S.) perhaps it's time to take a look at natural gas.
It's a good bet that whenever you see oil prices climb higher, natural gas is moving up right alongside it. I know that all we hear about nowadays is how oil prices are out of control, but you might be surprised that natural gas has actually gained more so far in 2008.
Take a look for yourself:
Think about that for a second.
We're approaching Katrina-level natural gas prices without any significant supply disruptions. Can you think of the last time you heard someone say, "I'm not heating my home anymore because natural gas prices are out of control."
I have a feeling we won't be seeing that kind of protest anytime soon.
Unfortunately, we might run into problems as Canadian natural gas production gets into trouble. As you know, Canada is a key part of the North American natural gas market. Production in the Western Canada Sedimentary basin (where Canada gets an overwhelming amount of their natural gas) is in decline.
The good news, however, is that unconventional deposits are becoming much more attractive to companies, especially now that natural gas is trading around $13/Mcf. Areas like the Horn River Basin are starting to get a lot of attention.
The unconventional natural gas boom isn't just restricted to Canada, either. In the U.S., the Barnett Shale is a perfect example of how new technology can heat up unconventional natural gas plays.
The Haynesville Shale
I know it has been a little while since we last talked about Haynesville natural gas. And I can't help but think that was back when oil sold for $129 a barrel, and natural gas was under $11/Mcf.
Located in Louisiana, the Haynesville shale deposit has been under the spotlight recently. Even though the deposit could hold a massive amount natural gas reserves, there's a lot of testing that needs to be done. Regardless, you can be sure that companies are going to go after that natural gas.
And then comes a slight catch, however, because extracting the natural gas isn't as easy as conventional deposits. Producers have to drill over 10,000 feet below ground to extract the natural gas.
If there's so much gas there, how come we're only hearing about it now?
I would assume that the rise in prices has a lot to do with the answer. Back in 2002, we were paying about $2/Mcf for natural gas. The profitability margin has obviously jumped considerably. Even if prices plummeted back to $8/Mcf, the Haynesville shale would still remain an profitable investment.
Some of those producers are worth checking out, too.
Two Stocks To Play in the Haynesville Shale
Of all the players rushing into scooping up acreage in the Haynesville play, there's two in particular that you should check out.
One of the best unconventional natural gas plays is clearly Chesapeake Energy (NYSE: CHK). Not only have they had tremendous success in the Barnett shale, but has gotten a hold of over 500,000 acres in Northwest Louisiana. In other words, these guys have both the experience and the property.
I've seen a few company names get tossed back and forth across the media over the last few months. If you're looking to get into the Haynesville plays, take a look at Petrohawk Energy Corp. (NYSE: HK). Last week, the company announced the completion of its first horizontal well. Despite not having as much acreage as Chesapeake,
Petrohawk still holds approximately 275,000 net acres in the Haynesville and Bossier shales, stretching from Louisiana into eastern Texas. Even though Petrohawk is trading just below their 52-week high, there could be a lot of momentum behind them.
Until next time,
Keith Kohl
P.S. Over the last few years, unconventional oil and gas plays have undoubtedly become a hotbed for investors. It would only be fair if you had the same opportunity to profit in those plays like my other Energy and Capital have. If you're interested in joining them, feel free to check out the $20 Trillion Report.
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Or is this just a case of the 60 cents per liter is about all the Mexican market can handle, any higher and the public may revolt?
There seems to be a bounty of untapped resources and the whole crisis is ficticious bull. I have never seen such gouging and to the extent it is, and the public sits by and takes it. The governments dont care they get their cut.
The oil companies and etc have their faces up to their neck deep in the troughs.
I have said this for some time, there is enough blame to go around for who or what was the cause for the high rising fuel cost. No fuel shortge in the ground that's a fact. Our Government Senate and Congress did nothing to prevent the rising cost. Consumers drove what they wanted the bigger the better(wrong)not caring or wanting to know what they were doing to the demand/supply of fuel, or the damage it would do to our economy.
Oil producing countries controlled the production of crude, which supply was not keeping up with the
demand and getting out of control, this allowed prices to rise even more. Another addition to the problem was OPEC. We were purchasing Billions of Dollars for Crude per year from them and the other Middle Eastern Countries, they were in control of nearly all crude available around the globe. That includes cost per barrel.
The damage has been done, and we stood by and watch it happened, The US Government, Big Automakers, Consumers, American Gasoline Companies, and let us not forget our so called allies that produce most of the crude. Furthermore the Major American Oil Companies known as the seven sisters import all of their crude from the Middle Eastern Countries, rather than drill in approve sites throughout America. By America not drilling off-shore, ANWR, and other approved drilling sites in the U.S. to relieve us from our dependence of foreign oil, we must continue to be at the mercy of the Middle East for crude..Why???? Yes we made mistakes and are paying dearly for them, but now we know and are aware of what needs to be done to help correct our mistakes. The powers to be MUST take positive action to rectify and improve this situation.
There needs to be decisions made and measures need to be taken without further delay. Who was at fault does not matter anymore, but delaying corrective measures from taking place should be a crime, and those responsible for delays should be severly punished. The government wants to sue OPEC for causing high fuel prices, well those who will be responsible for delays should also be sued for negligence, and if they are in public office should be disgraced, impeached and, and removed from office. Do the crime, pay fine, and do the time.....