Here is an update of my positioning at this point. I dropped UNG a bit early… And now I am quite lop sided long on UNL. I do feel like gas could run down a bit further, and if so, it would begin to become a bargain. I’m thinking about adding to UNL. It already feels as though this summer will be about price affecting power burn and power burn affecting price. The two are more tightly intertwined than they ever have, if I’m allowed to say so…
As long as LNG and the WhuFlu don’t cause major problems, then power burn will be the hot topic. Renewables will be thrown into the discussion, because that’s the biggest growth area right now. Anyway, as I said, if LNG or other anomalies don’t sideswipe the market, Coal to Gas switching will most likely play the biggest roll in gas this summer. That being said, it could make for a boring summer.
I am personally more interest to see if Appalachian production can sustain the break-neck flow rate, all the while continuing to kill Legacy gas production change.
Appalachia Region of the EIA.gov Drilling Productivity Report
Last time Appalachia drilling slowed (2016ish), production growth slowed, but never reversed course. Stunning! Then production went on as though it was only going to double total output. Wells in this region are YUGE! What I have my eyes on, is Legacy gas production change. The amount of gas will indeed decline with time and size of the gas fields. As you gain more total wells, you will gain more losses simply due to the number of wells. But!… If you aren’t drilling/completing more new wells, then there is plateau in there somewhere.
sad to say there is a lapse in completions data for 2016/2017… I don’t have time to find a fix… I am more interested in the last few year anyway.
So except for a surge in late 2018 to mid/late 2019, completions have been mostly under 100 wells/month. Total production has continued to grow while legacy production change continued to move backward, until late 2020? why the sudden drop in legacy change? Has Appalachian production growth capacity finally hit a brick wall? Did Legacy change improve during 2019/2020 because production was squeezing harder on legacy wells and it’s going to catch up to them now? Will the sudden drop in legacy production continue much further? I want to watch these things. Other regions have the same issues to deal with, it’s just that none have been so surprisingly strong as Appalachia on a per-well basis.
Then there’s Permian, which has plenty of room to out grow the market again, if Oil producers decide to start dumping gas again to sell oil. And then there are efficiency gains that continue to happen in drilling and completions; when will that plateau?
On that, I’m out of time. I want there to be a gas shortage in 2022, and to make millions on the move. I just don’t think that will happen. Mainly because I won’t take the risk, and two, the market isn’t going to get out of control in a bullish manner. Is it good to be bullish right now? I would think that depends on your scope of the market. I’ve backed up and become more macro. Maybe I’m just using that as an excuse to stay bullish. If I stay bullish long enough, eventually I’ll be right! If Appalachian production finally plateaus, I might just be in luck.
Oh, and I want to add to UNL today, but the market continues to see new lows, so maybe add 10 share of UNL today, if I can get them below $7.7/share. I don’t want to add more than this, as the market may go to $1.5 yet. Taking it slow and boring! Good luck