TD upgrade from Hold to Buy $10 target this morning!
The rally in North American natural gas prices has materially exceeded what was already an optimistic outlook. This strength, even in the shorter shoulder season, has been driven by a host of factors, including continued producer capital restraint (both for dry gas and associated gas plays), strong LNG export demand, and resilient domestic demand. More recently, the NOAA indicated that it expects warmer-than-normal temperatures (and robust demand) throughout the summer across the U.S. Northeast. Further, infrastructure is currently constrained, with Enbridge's TETCO having notified customers that its 30" pipeline carrying gas from the Marcellus to the Gulf Coast would be operating at a 20% pressure reduction through Q3/21 (but nearly a 50% or 1 bcf/d reduction on volume). These factors combined will likely result in lower inventories this winter and should support pricing through 2022.