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Potential Natural Gas Supply Crunch
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A foolproof way to profit
I have to apologize, but I
wouldn’t be doing my job if I didn’t sound the alarm for natural gas. I realize I’ve been banging the table for natural gas for three articles in a row now, but I’m here to help you make money, so that’s
what I’m going to do. My apologies, but this opportunity is too
good to ignore.
And today’s article isn’t by
any means a re-run. There’s some good
news that makes me even more bullish about natural gas, if that’s possible.
Yesterday
the Wall Street Journal reported that the Energy Department will be making
sweeping changes to how it reports natural gas production in the United States. In short, the Energy Information
Administration (EIA) – the data-gathering offshoot of the Energy Department –
believes that it might be over-reporting production of natural gas.
Independent analyst Ben Dell
with global wealth management firm Sanford C. Bernstein says
the EIA might over-report by as much as 12%.
That’s extremely good news
for shareholders of natural gas companies. Even better news is that it’s not too late to become a shareholder. From the Wall Street Journal article:
“On April 30, the EIA is scheduled to release
its natural-gas monthly report for February. In the report, the agency will use
the new methods to estimate gas supply and revise its January numbers.“
I expect
the price of natural gas to rise in the meantime, but if the EIA’s numbers get
adjusted significantly downwards on April 30, it could potentially make natural
gas prices skyrocket.
I can’t emphasize this
enough: we’re looking at something of a perfect bottom for natural gas
companies right now. This type of
situation does not come along very frequently. We have a potential supply crunch coupled with 6 month lows. I couldn’t script a better entry point.
Take a look at this chart,
using the EIA’s supply data going back to 2006. (MCF is 1000 cubic feet)
It shows that the United States
currently has some 1.6 trillion MCF of natural gas inventory. A downwards correction of 12% would bring
that number closer to April 2008 levels.
Back in April 2008, natural
gas prices were $9 per MCF – on their way to $11.50 per MCF in July of that
year. Today, natural gas cost just $4.30
per MCF.
Will natural gas prices move
up to $9 or $11.50 if the IEA’s numbers bring supply down to April 2008 levels?
I don’t know. But as I said, any adjustments lower from their
previous numbers would certainly push prices higher.
This news alone has already
helped natural gas companies.
That includes companies like
my favorite natural gas royalty trust, Hugoton (NYSE: HGT). It’s up over 3% this
week. Like I said yesterday and last
Thursday, Hugoton is a speculative play on rising natural gas prices. They collect royalties from big natural gas
producers like XTO Energy (NYSE: XTO). Hugoton also pays a nice 10.1% dividend.
I expect
both of these companies to do well with any increase in natural gas
prices. But I’m still super-excited
about Ian Wyatt’s best of breed natural gas producer that he recently added to
the Energy
World Profits portfolio.
It’s the second biggest
natural gas producer in the United
States with four major domestic production sites. They’re also trading at less than 8 times
forward earnings. That’s cheaper than
any other energy company I know of. It’s
bargain basement territory. With natural
gas prices as low as they’ve been, this company’s shares are extremely beaten
up. Any increase in natural gas prices
will make shareholders very, very happy.
If you’re interested in
getting in near a true bottom in natural gas prices, this company is the best
way to invest. I encourage you to find
out more about Energy World Profits by clicking here. Every subscription comes with a 90-day money
back guarantee. If I’m wrong about
natural gas prices, or the EIA supply adjustment on April 30th, you
can cancel, and get a full refund. It’s
win-win.
Good investing,
Kevin McElroy
Editor
Resource Prospector