A warm winter spells opportunity for natural gas investorshttps://michaela34.substack.com/p/a-warm-winter-spells-opportunity?utm_source=profile&utm_medium=reader2 As the leftist governments deluded by their “climate change” nonsense keep encouraging wind and solar and with energy demand growing unabated, the environment will see upward pressure on natural gas prices. Coal prices are already in the $100 to $200 range and coal use is limited to areas where natural gas is unavailable or already very costly - Europe and Asia primarily - and coal is being replaced by renewables in Europe although the high cost of both renewables and gas and limited supply of natural gas in Europe has seen a resurgence in coal use in Germany, for example.
There is no shortage of either coal or natural gas worldwide. The desire of leftist leaders to replace coal and gas with wind and solar is akin to forcing a square peg into a round hole and has driven electricity costs to nosebleed levels in Europe while sensible policies in China and India continue to rely on coal and import LNG to fuel their economies, not deluded enough to think there is any economic or environmental benefit to wind and solar alternatives.
I doubt we will see natural gas at $20 a gigajoule in North America any time soon despite the nonsensical policies of the Biden and Trudeau administrations since both seem doomed to extinction at the ballot box, but significant demand for LNG should see demand for gas continue to rise and eventually manifest itself in higher prices. What would $20 gas mean for natural gas players?
Here are my estimates of the value of some more or less pure natural gas players with gas prices at $20 a gigajoule for an extended period, should that occur.
Peyto Exploration - annual cash flow of CDN$5.8 billion and value of CDN$140 a share.
Spartan Delta - annual cash flow of CDN$1.4 billion and value of CDN$44 per share.
Birchcliff Energy - annual cash flow of CDN$2.9 billion and value of CDN$87 per share.
Tourmaline Oil - annual cash flow of CDN$17 billion and value of CDN$245 per share
I am not suggesting that Canadian natural gas prices will rise to $20 a gigajoule any time soon, but remind investors that prices north of $10 a gigajoule existed only a few short years ago and that natural gas prices in Europe hit as high as US$70 a gigajoule in 2022 (in part a result of curtailment of supplies arising from Ukraine war) and are currently over US$14 a gigajoule.