Natural Gas Undervalued

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Natural Gas is a strong buy as the annual Spring sell-off begins. Traditionally Natural Gas gets sold off as the end of winter approaches, however this tradition will come in for some big changes.

As with most of our investment decisions we are not looking at the short term, we are always looking to buy quality assets that have a good long term outlook. At the current prices, Natural Gas fits that criteria.

Nymex Natural gas prices fell yesterday as concentration switched from the expiring February contract to March. The Henry Hub March contract fell over 3% as warmer weather loomed in the Midwest in the latest short term forecasts. Gas opened at $4.796 and fell as low as $4.576 before the pit closed at $4.598. Support today is seen at $4.534 and $4.494 with resistance at $4.666 and $4.702.

Why Natural Gas be a long term winner?

World primary energy consumption grew by 45 percent over the past 20 years, and is likely to grow by 39 percent over the next 20 years. Global energy consumption growth averages 1.7 percent p.a. from 2010 to 2030, with growth decelerating gently beyond 2020, according to the BP Energy outlook 2030.

In 2009 the world's proven gas reserves amounted to 187.5 trillion cubic meters, which at current production levels will be sufficient for the period to 63 years.

As expected, natural gas by 2030 will be a fuel observing the most rapidly growing demand.

Asia will be the main source of production growth and demand for gas. China's share will amount to 56 percent growth in gas demand in the region.

The share of the Middle East, which is the second largest source of production growth and demand for gas in 2030, will comprise 17 percent of global demand for fuel compared to 12 percent in 2010. Its share in the growth of global gas production will increase from 15 percent in 2010 to 19 percent in 2030.

LNG imports will grow. Annual growth in LNG supply will amount to 4.4 percent by 2030. Its share in world gas supplies will increase from 9 percent in 2010 to 15 percent in 2030.

In Europe, the share of LNG in total imports will increase from 30 percent in 2010 to 42 percent in 2030.

HCM Pro Trader Chart UNG

HCM Pro Trader Chart UNG

United States Natural Gas Fund, LP NYSE:UNG, High Plains Gas Inc OTC:HPGS, Western Gas Partners, LP NYSE:WES

here are the best buys in natural gas NYSE:UNG, OTC:HPGS, NYSE:WES

United States Natural Gas Fund, LP (USNG) is a limited partnership. The Company is a commodity pool that issues limited partnership interests (units) traded on the NYSE Arca, Inc. (the NYSE Arca). The investment objective of USNG is for the changes in percentage terms of its units' net asset value ( NAV ) to reflect the changes in percentage terms of the spot price of natural gas delivered at the Henry Hub, Louisiana as measured by the changes in the Futures Contract on natural gas traded on the New York Mercantile Exchange (NYMEX) that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire. The Company's general partner is United States Commodity Funds LLC (the General Partner) and is responsible for the management of USNG.

High Plains Gas, Inc. Increases Gas Production OTC:HPGS

The Company's average production for previously producing wells increased 129%, as compared to those wells that had not underwent re-enhancement.

The re-enhancement program included well cleanouts, pump and blower changes and other activities to initiate and increase existing production. Of the total wells in the enhancement program, 10 wells with prior natural gas production had a net increase of 4,289 Mcf (thousand cubic feet) for the month after re-enhancement efforts, for an average increase of 129%.

The 12 wells that did not have gas production prior to February 2010 added 4,821 Mcf per month to High Plains natural gas output after restarting took place.
"We are very pleased that we were able to increase production of previously working wells by 129%, showcasing our great success with re-enhancement and refurbishment processes. As we continue with our re-enhancement programs in other fields, we plan to continue to increase our gas production capabilities," said Mark Hettinger, Chairman of High Plains Gas. "With our recent North and South Fairway acquisition of over 1,600 wells, we already have targeted over 600 wells for re-enhancement, which is expected to begin in early 2011."

About High Plains Gas, Inc.

High Plains Gas, Inc. is a Gillette, Wyoming based energy company actively engaged in the acquisition, development and production of natural gas primarily in the Powder River Basin. Through its wholly-owned subsidiary CEP - M Purchase LLC, the Company owns the former Marathon "North & South Fairway" assets. These assets consist of 1,614 Coal Bed Methane Wells with associated flow lines and over 155, 000 net acres. This combined with the Company's existing 92 natural gas wells gives the company a strong foundation in the natural gas industry. High Plains Gas will pursue expansion opportunities for the profitable production and transmission of natural gas. High Plains Gas believes it has unique expertise and experience in the refurbishment and reactivation of wells that produce natural gas from coal bed methane formations.

Western Gas Partners, LP NYSE:WES

Western Gas Partners, LP (Partnership) is a limited partnership organized by Anadarko Petroleum Corporation to own, operate, acquire and develop midstream energy assets. The Company is engaged in the business of gathering, compressing, treating, processing and transporting natural gas for Anadarko. As of December 31, 2009, its assets consist of nine gathering systems, six natural gas treating facilities, four gas processing facilities, one natural gas liquid (NGL) pipeline and one interstate pipeline. The Company's assets are located in East and West Texas, the Rocky Mountains and the Mid-Continent. In July 2009, the Company acquired a 51% interest in Chipeta Processing LLC (Chipeta).



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

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