Gas Investing News

By Duncan Sutherland - Exclusive to Gas Investing News

Market news

A mild rebound for hard-hit natural gas futures has developed over the past few days.

Like the Dow Jones, oil prices and the Asian market indices, natural gas futures are also in a state of flux. The instability is fairly easy to source: investors are scared, confused and reactive. Each new political drama in the United States is a source of jubilation or abject terror. The Senate’s effort to resuscitate the executive’s financial sector rescue plan is restoring confidence, hence the rebound.

Through this lens, it is apparent that Tuesday and Wednesday’s rebounds are the product of the “dead cat bounce”. This rather morbid but splendidly explanatory term indicates that a rapid drop in value will be followed by a ricochet upward from the floor.

Linguistic oddities aside, the party is over for natural gas and commodities in general. The Philadelphia Oil Service Sector Index lost a huge portion of its value (roughly 15 per cent) over September and nearly 30 per cent since July.

Carrie Tait of the National Post has a useful article outlining which natural gas projects were most at risk from the price slump. The short version is that exploration budgets as a whole will be smaller and unconventional projects (read shale gas) will be under much greater cost pressures and may be suspended.

Company news

A subsidiary of Chesapeake Energy, (NYSE:CHK), one of the players which Tait specifically mentions in the above article, has signed a 10-year transport contract with the Fayetteville Express Pipeline being built by Kinder Morgan Energy Partners and Energy Transfer Partners. BP America (NYSE:BP) will have a 25 per cent stake, too.

South Parse is a little late coming to this news but One Exploration Inc (TSX.V:OE.A) is to acquire Cruiser Oil & Gas (TSX.V:COG) at a share price of US$1.15 for a total of US$14.8 ml. Consolidation and acquisition are likely to ramp up in the coming months if prices do not dramatically turn around. If you are of a speculative bent, keep an ear to the ground for rumours, especially those concerning ventures. Just like smart investors, well-managed companies like to buy on the downturn. With stocks and spot prices in a similar slump, now is the time to acquire new properties and reserves.

International news

Lots of stuff happening internationally the past weeks. The usual “petro-rascals” (Iran and Russia) and general basket cases (Nigeria and Venezuela) have all been active.

Nigeria’s government has mercifully begun to implement a privatization plan for Pipeline Products and Marketing Co. and Nigeria Gas Co, two subsidiaries of Nigerian National Petroleum Corp. Currently, both are wholly owned subsidiaries, but it remains unclear how much privatization will be allowed to occur.

South Korea has concluded negotiations with Russia to import some 10 billion cubic meters of gas per year from 2015-2045. The significance of this deal is threefold. First, this quantity approximates one fifth of the country’s projected demand for natural gas, potentially cornering South Korea into Europe’s Gazprom problem. Second, the pipeline will traverse the Democratic People’s Republic of Korea, giving that country a potentially huge leverage point over its neighbours. The deal also signifies the return of active Russian involvement in Northeast Asia, which China will not particularly like.

Venezuela’s erratic energy policies were restored a modicum of order when PDVSA, the Venezuelan energy company received some $19.6 billion in foreign investment into natural gas projects. Companies involved included Chevron (NYSE:CVX) Gazprom, Eni SpA (NYSE:ENI).

Iran is trying to build a multi-billion dollar gas pipeline to Europe. Though Iran is politically problematic, Europe is desperate to reduce its reliance on Gazprom and Russia. South Parse will track the story as it develops.