BALTIMORE, MD-Forecasts of colder-than-usual weather in the US pushed natural gas prices an impressive 12% higher yesterday-the biggest jump since July-and drove related stocks higher across the board.
Over the past four trading sessions the AMEX Natural Gas Index-comprised of 15 producers and pipeline firms from the AMEX and NYSE-has tacked on a healthy 3.7%, putting it at 425.03 in late afternoon trading.
Now, a four-day move like this is certainly impressive. But don't worry . . . you haven't missed the really big moves yet. I think natural gas stocks still have plenty of room to grow from their current levels.
Already, more than 80 countries World-Wide are in a shortage that's crippling economies and starting wars for survival. And it's spreading. By 2025, without this technology, more than 3.9 billion people will be in danger.
Make an easy 66.7% this year from the world's most recession-proof stock!
The launch of the heating season traditionally takes place sometime in early to mid-November when temperatures fall and consumers flip on their furnaces. Around this time, utility firms are forced to tap into the inventories they've built up over the lower-demand spring and summer months to make up for a shortfall in supplies.
Last year's mild winter allowed inventories to reach record levels. In fact, gas inventories are currently 25% to 30% higher than normal for this time of year. But an earlier-than-usual cold snap in the Northeast and Midwest US may quickly deplete these inventories, causing natural gas prices to look more like they did around this time last year.
Natural gas started out this week opening at $5.75 per thousand cubic feet (Mcf) early Monday morning. At last look the ever-important heating gas was trading at $6.636, a 15.4% increase from Monday's open.
So the natural gas rally is far from over. In fact, I believe that even with normal temperatures this winter natural gas prices will top $10 per Mcf.
Sound preposterous?
It's not.
According to the US Energy Department, daily US natural gas production fell to a 12-year low of 49.8 billion cubic feet in 2005, in part due to aging fields. For this year and the next, US production is likely to decrease by a further 1%, while supplies from new wells are declining at a faster rate than they were five years ago.
Demand, on the other hand, is expected to climb 3% over the next twelve months, mainly because of the increased power production needed to support an expanding economy.
So where does that leave us?
In short, natural gas prices bottomed out at the end of September and we're ready for a powerful upleg. We should be buying natural gas stocks now before the next spike in gas prices.
Below I've dug up some info on the components of the AMEX Natural Gas Index for you. Enjoy.
| Information on AMEX Natural Gas Index Companies with Significant Reserves | ||||||
| Company | Symbol | Price | Shares Outstanding | Market Cap (Billion) | Proved Reserves* (Tcfe)** | Mcf per share |
| Apache | APA | $65.24 | 329,240,307 | $21.48 | 12.656 | 38.440 |
| Anadarko Petroleum | APC | $45.24 | 459,467,915 | $20.79 | 14.500 | 31.558 |
| Devon Energy | DVN | $66.34 | 441,051,000 | $29.26 | 12.672 | 28.731 |
| EOG Resources | EOG | $66.31 | 242,609,724 | $16.09 | 6.194 | 25.531 |
| El Paso | EP | $13.63 | 695,949,316 | $9.48 | 2.400 | 3.449 |
| Noble Energy | NBL | $47.85 | 176,593,499 | $8.45 | 1.749 | 9.905 |
| XTO Energy | XTO | $44.15 | 365,731,275 | $16.15 | 7.626 | 20.853 |
| Pogo Producing | PPP | $45.69 | 58,032,847 | $2.65 | 2.042 | 35.187 |
| Questar | STR | $83.21 | 85,702,781 | $7.13 | 1.480 | 17.269 |
| Southwestern Energy | SWN | $31.66 | 168,165,220 | $5.33 | 0.826 | 4.917 |
| Williams Companies | WMB | $24.42 | 595,800,152 | $14.55 | 3.382 | 5,676 |
* As of December 31, 2005
** Trillion cubic feet of natural gas equivalent. (Natural gas equivalent is determined using the ratio of 1 barrel of oil, condensate, or natural gas liquids to 6,000 cubic feet of natural gas.)
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