Will You Buy At the Bottom?
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
