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Hello, again.
My former expertise lay in options upon Brent Crude prices, so not so relevant for gas.
Although it is open to buyers and sellers of gas to purchase call options or put options, what I am certain that DEC does is to sell forward, as Mr. Jackson says.
Here is a current snapshot of the monthly forward prices for Henry Hub. It's relevance to DEC is probably limited to selling forward much of the newly purchased production. However, in my Brent options days I traded forward as far as seven years, so 2-4 should be possible for DEC, if they like the numbers they see.
GLA
https://www.cmegroup.com/markets/energy/natural-gas/natural-gas.quotes.html
Mr. Jackson,
Thank you for your well thought out posts. I concur that DEC seems remarkably good value. I'm interested because DEC represents my largest holding of income-generating shares at 260,000. Although I'm about 19p a share under water on sp, it only matters if/when I sell them and the income stream is very welcome.
I did some research and found that there are several projects in the early stages to create more infrastructure to export gas from the USA. For this to make sense, the presumption must be that gas prices outside the USA will remain firm.
If I were involved in any of these I would consider trying to lock in the arbitrage between US and European pricing, effectively taking the opposite position to DEC on Henry Hub.
There seems to me to be little doubt that gas export projects in the US will support Henry Hub prices to a higher level that they would otherwise be, without having any opinion on what those levels might be.
I don't know as much as I would like about the LNG / LPG markets as I would like, as the only project I was involved with didn't come on stream until 4 years after I retired.
A couple of weeks ago I was invited to a reunion of the company from which I retired nearly 9 years ago.
I took the opportunity to ask the gas marketing expert about the current disconnect between Henry Hub and UK gas prices.
e.g. today Henry Hub prices are $2.243 vs UK £12.21.
He commented that the fact that there was so little capacity for export that those who could manage it were charging at least $5, which is more than double the base cost in the USA. Also, shipping costs were about $300,000 per day for gas carriers and the high price caused premia of $1M - 3M to jump the queue for the Panama Canal.
So, we need Freeport fully functioning and more gas consumption in the USA to start the process of equalising the transatlantic skew. Of course, that won't do much to lower gas carrier prices.
GLA
The trend on the LSE boards for most shares seems to be focussed upon more or less instant gratification.
A more Buffett-like approach is to try to identify undervalued companies with significant upside potential and to back your judgement. GDR is one such, IMO.
Of course, I was completely wrong about DDDD! Fortunately, losses there were much less than gains on the winners.
GLA
Interactive Investor. The 1M was 0.6848 once I strip out the commission.
The 700K was 0.6847 w/o commission.
I set limit buys at 0.685 and they went through a couple of hours after I set them.
I'm counting upon the EG seeing sense in due course.
Total holding now 15.7M
GLA