“The price of natural gas continues to wallow around and not do much,” Chris Mayer tells his Capital & Crisis readers, “but there are two long-term, seemingly relentless natural gas trends that bode well for those invested in the industry.
Price movement like this is making many natgas stocks “move around sluggishly like fat dogs in the noonday sun.”
“The first is the decline in productivity per well. In 1999, productivity per well was nearly 4 billion cubic feet of gas. Today, that productivity is about only 1 billion cubic feet per gas well — a 75% decline (according to the EIA and Baker Hughes).
“Second, drilling intensity is rising. In 1999, total wells drilled every month couldn’t top 400. That figure was over 1,500 last year — yet domestic natural gas production did not increase. It seems clear the natgas industry is running on a treadmill that’s getting faster. New natural gas is getting more expensive and harder to find. This is good for drillers, as well as companies loaded with proven reserves and that have the ability to grow production. The demand for natural gas should also intensify the search for new wells.”