RE:RE:Race to Zero Just tired of the constant drone of Chicklen Little claiming the sky is falling. If you check previous posts. I feel Ive contributed numerous detailed analysis of the supply & demand equation of natural gas.
PNE is no TOU but the assets have value and the company has potential to be a cash cow if natural gas fundamentals come back to some normalcy.
The US fracking of oil & gas wells was undisciplined. Growth far exceeded what was required and has annoyed Saudi & Russia as the US repatriated market share of their own oil demand. Western Canada found itself in a similar situation as the US decreased its imports of Canadian gas while at the same time creating a LNG Export business and rapidly growing its Mexican Export Business via pipeline.
Going back to undiciplined drilling. The US painted a rosy picture of returns to investors in 2007-09 and rasied tremendous amount of equity. They put those investments into drilling and grew production from under 50 bcf/d to 78 bcf/d in 2015. The oversupply of gas (dry & oil associated gas) coupled with Saudi & Russia's flooding the market with oil brought a downturn of both US oil & natural gas prices starting in 2014-17. Instead of responding positively to Saudi and Russias reprimand.
The US companies gorged on debt and again promised big returns to shareholders. Fast forward to 2020, the US gas companies now have no ability to go to the equity markets & the debt burden was killing the US gas companies as most debt is due in 202-2022. Hence all we here from the gas companies (US & Canada) is that they are focused on repairing their balance sheets by maintaining production (so they don't apper to be in decline) and attempt to pay down debt. Hence we see companies merging to cut overhead costs and no substantive growth in production.
US demand continues to grow due to:
1) Reduced coal consumption for electricity,
2) Growth in gas generation converts from coal to wind solar and nat gas
3) New nat gas generation as back up for when the wind doesn't blow (or blows to hard) and when the sun doesnt shine.
4) Exports of LNG growing from 0 to 13 bcf/d (15% of dry supply)
5) Exports to Mexico growing from less than 1 bcf/dto 6 bcf/d (5% of US production)
European natural gas storage is at or below historic lows due to:
1) The early shutdown of Europes biggest gas field Groningen (Netherlands) due to tremors
2) The over 1 year delay of Nordstream twinning because the US is sanctioning anyone who builds, certifys or insures the project. The US aim is to get Germany's gas requiresments to be met with US LNG and not from Rssias Siberian fileds.
3) China and Europes suffered more in 2020 when the arctic osillation weakened due to sudden stratopheric warming which resulted in the release of bitterly cold arctic air to the northern hemisphere contries. We had only 1 occuraence which was the February Texas freeze.
The US storage levels are below the average for the last 5 years. We are in sholder season when nat gas is not needed for either heating or cooling. it is during these periods that the natural gas storage injections are at their greatest. Canadian sorage level declined to low levels in February as we exported huge volumes of Natural Gas to the US as their lines froze since they don't have heat tracing on their lines.
Canadian production has been in decline for the last 2 years and we may continue to see a muted response to production growth as past pricing and no US demand has left Canadian companies with tatered Balance Sheets which they are trying to repair.
Consumption of natural gas in the oil sands is rising. CNQ bought Painted Pony to gain access to essentually a feedstock aof natural gas at a distressed price. Suncor is bringing back production after a number of production challenges, CAPEX delays and equipment damaged by fire. Additional gatherling lines and expension of existing pipelines and the 2024 start up of the LNG terminal in Kitimat all bode well for the demand side of the equation.
The natural gas market is poised for higher prices in all of 2021 & into 2022 assuming undisciplined drilling doesn't return to the US shale oil and gas market.
TOU will grow production 5%. I expect PNE to invest in both paying down its first tranche of term debt in 2022 and to invest to grow its production in 2021 without additional debt.
What is Chicken Little's (mr T's) analysis:
PNE wrote down 500 million worth of gas property equity. The company never made money. The company is going broke... its racing to Zero.
Well he is wrong and playing the FUD card = sowing Fear Uncertainty and Doubt to the loyal shareholders of PNE and supporters of George Fink & Phil Hodge is merely verbal diarrhea.
Natural gas in Western Canada is a rising tide that will float all boats. PNE has good torque to AECO pricing which has narrowed the discount with Henry Hub. Chicken Little doesn't understand what a paper loss. A chicken has a small brain. The gas from written down assets is still in the ground, still owned by PNE and It is economic at current strip pricing. PNE is generating cash (the main metric for a companies of ability to survive & thrive).
I wish Chicken Little would simly move his clucking to another fieild/company. No need to waste oxygen with his costaint lament of "The sky is falling".
Chicken Little doesn't have he ability to formulate a good argument for either the natural