January 2023 Natural Gas Update from Pine Cliff... The following is an e-mail update from Phil Hodge today.
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Happy New Year. I hope you and your families are well and enjoyed the holiday break.
I typically do not send out emails to our distribution list except at the time of Pine Cliff’s quarterly financial releases, but since our annual results will not be out until March 7th, and I have been receiving several emails regarding gas prices, I thought you might not mind an update. Also, Martin King of RBN Energy just published an article this week on the Canadian Gas Market (attached below) that also may answer some of your questions and give you some additional insight into the Canadian gas markets.
There has been downward pressure on global natural gas prices in the past month, and most of this trading movement seems to have focused on the recent warmer weather in the US and Europe, along with some disappointment that the Freeport LNG facility is still not back online Freeport LNG Update.
It is easy to get caught up in watching the NYMEX price since that is the gas commodity quote that many of you see or hear about the most, but in Western Canada, where Pine Cliff sells 90% of our gas, December Alberta storage withdrawal was 64 BCF, whereas the historical December withdrawal average is only 40 BCF. Storage is now well below five-year levels as we enter 2023.
These high storage withdrawal numbers have been driven by record Western Canada natural gas exports and intra-Alberta demand as reflected by the NBC charts below and reinforced by Mr. King’s article.
Most investors (or Canadians for that matter) are not aware that Alberta has become Canada’s largest gas consumer. The Alberta oil sands projects, petrochemical industry, and electricity generation (since we moved our Province off coal) drive this demand. in 2020 Alberta used over half the natural gas in Canada, 6.4 bcf/day or 56% of Canadian demand. Alberta’s “industrial sector” (including the oil sands) required 5.4 BCF/day, 84% of the total.
The AECO 5a natural gas price for December came in at $6.03/MCF, although gas production numbers were reduced because of freeze-offs that month. This morning AECO is at CDN$3.85/MCF and NYMEX Henry Hub is at US$3.71/MMBtu. And as can be seen in this comparison chart by our newest research analyst, Mike Mueller at Canaccord Genuity, Pine Cliff cash flow does well when AECO is performing well.
Hopefully, you found this brief update of some use. If you want to discuss any of this further, please don’t hesitate to email or call me.
Stay safe and warm,
Phil