RE:Reshuffling....repricing & then fireworks!Post worth a bump.
mrmomo wrote: For those confused with the market reaction with regards to some ng ep's and why they haven't participated in the NG rally yet, please do not be alarmed or discouraged. Several things need to be sorted out and these things take time, therefore patience is required here. Lots of it.
For a brief recap of the events. As global oil demand in general was already in decline and was in trouble before the CoronaVirus hit, along with sentiment souring across the globe on oil consumption, partiallly due to eviromental concerns and the drive to alternative, greener solutions. Enter Ng. Though still considered a fossil fuel, it was more acceptable & tolerable by the increasing environmentalists movments and by the general public at large. Cheaper, more versatile, cleaner burn than oil and widely accessible, it was the obvious choice to replace petrole in many arenas.
Round Two. As infrastructure began to built around the commodity and demand began to outpace supply, the fuel experienced a brief shortage and prices began to rocket to obscene levels. Levels that started making Ng unattractive and costly for most consumers, but infrastucture continued to built around it and O&G companies pushed ahead with insane levels of new drilling & porduction never seen before. Encouraged & driven of course by the attractive margins and the riches it brought. Then the financial crisis hit.
Round three. With the economy in shambles and everyone just looking to survive, the picture for the demand/supply for both Ng & oil would drastically change over the next 10 years. Fueled by both high oil prices AND still high/decent ng pricing, the North American o&g e&p's went on a exploration, drilling, development AND production rampage that would not only last almost a decade but would also make the Americans energy indepedent & the largest oil producer in the entire world. Surplanting the Saudis as the King of oil. With this crown and newly found recognition, this achievment not only brought the Americans the power to control vital parts of global markets BUT it would also bring unattented consequences that would later come back to haunt them.
Final round, here we are. I guess you all know the story from here on, so no need to repeat what is still freshly in your minds. So after a decade of ng oversupply and so cheap that the stuff couldn't be given away......an unexpected event changed all that....a little virus. Who would have known that shutting down ALL the worlds top economies was the ingredient required to rebalance the supply/demand equation for natural gas? Don't know about you, but im sure we could have found a more feasible solution than requiring a complete global shutdown which will bring millions of bankrupcies including several hundred thousands dead. I guess Humans are completed creatures who require time & reflection, who knows.
My prediction. The message this post is trying to get across, is things rquire time. Imo, Ng prices have bottomed, the CoronaVirus blackswan event made sure of that. Once the rebalancing occurs and the excess supply currently in the system is depleted, is when the real action begins. the savvy traders know this and have ALREADY pushed up the stock prices of the American producers who stand to benefit the most from this. This was evident early on, as some very smart and perceptive investors/traders saw this from the early weeks into the epidemic and bought aggessively into those companies. For the last month or so, what we saw was secondary buying pushing up the big Canadian gas plays but only the biggest, well known names. You know Encana, Canadian Natural, Tourmaline and such. This recent action has now bled into the mid tier players but only the pure gassers like Peyto, Birchcliff & Arc. for the last two weeks or so.
Once Ng gas prices go over $2 AND the institutional & hedge begin to reshuffle/rebalance their portfolios and start diving into more leverage plays like PaintedPony, Crew, Nuvista ect THEN you are going to start to see some real gains into those smaller plays....... real Olympic style fireworks. That is when the hot momo money comes in and everyting goes balasltic. What we are seeing right now in these companies is major accumulation at current prices but no one willing to push up the prices toom much, becuase there;s no need to. So most of these smaller plays (some of the mid tiers also) are forming a nice solid base with an extremely tightly wound spring. The triggers being ng prices gpoing over $2 and weekly supply numbers.
Now......patience is key and a real virtue for anyone willing to wait.
Good luck to all