Back in 2004, Pennsylvania wasn’t known for its natural gas production.
But that all changed when a tiny company called Range Resources decided to take one of its vertical wells a little deeper into the Marcellus formation.
The Renz well was located in the Mt. Pleasant Township. Rather than go with traditional fracturing operations, Range decided to use a slickwater frac that other producers like Mitchell Energy were having success with in the Barnett Shale in Texas.
I have a feeling that more than a few of you are acquainted with George Mitchell.
Soon, word leaked out, and Pennsylvania became a powerhouse in natural gas production.
Click Chart to Enlarge
Today, the Marcellus is responsible for producing an estimated 15.2 billion cubic feet of natural gas per day, and drillers like Range haven’t look back since the Renz 1 well struck pay dirt.
The Bullish Case for Natural Gas
Right now, we’re staring at what could be the last great buying opportunity of the year for natural gas.
Think about it…
Prices fell to a seven-month low around $3.85 per MMBtu yesterday. Nearly all the major weather forecasts are calling for average temperatures for the rest of the summer, and bearish sentiment is taking hold as production of marketed natural gas in the United States is expected to surge to more than 73 billion cubic feet per day.
Yet a bullish case for natural gas is also building as we speak. You just have to take the time to look for it.
I’m not just referring to the current war on coal being waged by the EPA, although that’s a good start. Not only will that battle intensify in the coming years, but coal’s share in power generation will inevitably fall as more natural gas power plants come online.
Last year alone, gas-fired plants were responsible for about 6.9 megawatts of capacity additions — more than every other source of energy combined!
But there’s a much more profitable short-term catalyst for your natural gas investments.
In fact, you were able to catch a glimpse of it in last week’s natural gas storage report released by the Energy Information Administration.
Despite the fact that the report showed an increase of 107 billion cubic feet in working gas storage (a surprise for analysts, who were only expecting an increase of 98 billion cubic feet), far too many people missed the other important data point…
That is, the fact that we’re nearly 26% below the five-year average and about 22% below last year’s storage level.
This time last year, our working gas storage was comfortably inside the five-year range, sitting at 2.7 trillion cubic feet.
In other words, there’s a very real chance that the United States won’t be able to rebuild stockpiles by the end of the injection season, which is at the end of October.
The magic amount of natural gas we need in storage by then is approximately 3.424 trillion cubic feet, but whether or not we reach it is a different matter.
It’s time to look ahead for your gas profits…
The Good, The Ugly, and the Downright Profitable
I once told my readers that not all natural gas investments were created equal. In any sector you come across, there’s the good, the ugly, and the downright profitable…
The natural gas industry is no exception.
So I offer you the good, the ugly, and the downright profitable investments in the U.S. shale gas boom:
If you bet on a surge in gas prices, you probably don’t want to be reminded of ETFs like the United States Natural Gas Fund, which is running for the title of the ugliest chart in the shale gas boom. This ETF even makes ExxonMobil look attractive.
As you know, ExxonMobil is one of the largest publicly traded natural gas companies on the planet, and it had to pony up $41 billion to get its foot into the U.S. shale gas boom by acquiring XTO Energy.
Still, neither of those two came close to the original Marcellus player: Range Resources.
And yet something else will surprise you about your natural gas investments: the best returns won’t necessarily come from the drillers.
That may seen like a departure from conventional thinking, but even the best drillers in the Marcellus shale may not outperform the players that are gearing up for a natural gas-fueled future in the U.S. One of my colleagues, Christian DeHaemer, has been on target with precisely these kinds of gas investments.
In fact, he’s carved out a string of winners that took full advantage of ultra-low natural gas prices.
And the smart investors are starting here.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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