The list of advisors recommending that now is the time to buy natural gas stocks is growing as production growth starts to decline. Yes, there has been an over supply of natural gas in North America due to the increased production brought onto the market from shale gas resources in the United states and northern British Columbia’s Montney and Horn River basins.
This over supply coupled with the decrease in demand brought on by the slagging economy caused natural gas prices to drop. With this drop in price, natural gas companies reduced drilling plans and shut in existing production. The effects of which are starting to flow down stream and start to have an effect.
Calgary’s Tristone Capital Inc. published a lengthy report telling investors to pour cash into gas companies, and has maintained their price forecast of US$6.75/mcf on the New York Mercantile Exchange. According to the report:
“We expect U.S. supply will peak in the next two months and hit an inflection point of sequential monthly declines beginning in the month of August. The drop in supply will begin to accelerate as we enter the heating season, with our expectation that we are down nearly 4 [billion cubic feet per day] year-over-year by the start of winter and the supply shortfall grows to 5.5 bcf/day lower year-over-year by late [in the second quarter of 2010].”
John Zahary, Chief Executive Officer of Harvest Energy Trust, agreed that return of healthier gas prices is “inevitable,” and will likely occur in 2010. Lex Kerkovius, a fund manager and senior analyst at McLean & Partners Wealth Management Ltd., stated:
“Investors need to be looking at gas stocks now. You cannot wait for the commodity [price] to catch up.”
Financial Post: Canadian investors advised to look at gas stocks now