It looks like the natural gas price rally that started in 2012 is fading. The best indicator is clearly the price of natural gas itself. NG spot prices on AECO are currently below $3 closing at $2.86 yesterday. Natural gas supplies are still 11% above the 5 year average as of yesterday.
The problem with natural gas is the lack of infrastructure for exporting this resource out of North America. The glut in supply persists despite a record low US dry gas rig count which rose by 8 last week to 439, according to Baker Hughes. Blame the mild winter weather again across US consuming regions.
On a different note, according to National Bank E&P spending is looking flat in 2013. They track 31 companies of which 16 showed increases in the budget. That’s still going to be around $20 billion in spending for 2013.
However, these quick movements in commodity prices could undermine capital expenditure plans. Heavy Oil prices are knocked out and natural gas prices can’t seem to set a floor at $3. Light oil prices (including condensate & synthetic) based off WTI are the ones generating the cash flow for now. E&P producers are pretty much standing on 1 leg these days, a sign another anaemic year is in the making.
The next set of posts will cover dividend paying oil and gas stocks since there’s a good chance we might see more dividend cuts this year a la BNP. If you have a particular stock you are interested in having analysed, do not hesitate to point it out by leaving a comment.
What are your feelings towards the sector for 2013?
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Have a Great Weekend!