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Page added on May 3, 2014
Gas: Rational Exuberance
Twenty-five years ago this month, the Hennessy Gas Utility Index Fund (GASFX) was established by the American Gas Association’s Finance Committee. During the past 25 years, GASFX has seen significant growth from $25 million in assets to $1.5 billion. Earnings per share and dividend returns have historically been between 3 and 5 percent and are now as high as 5 to 7 percent.
In this month’s cover story in American Gas magazine titled “Rational Exuberance,” portfolio managers and analysts discuss the current growth opportunity and how to increase investors’ interest. They emphasize the importance and urgency of modernizing and expanding infrastructure in order to help safely and reliably meet demand. Their message is to act now while abundant supply is keeping prices relatively stable and low, and their messages about the market align with what gas utilities are already doing.
To read the entire article, click here. To see more from the May edition of the magazine, click here.
3 Comments on "Gas: Rational Exuberance"
Davy, Hermann, MO on Sat, 3rd May 2014 7:58 am
Article said – Their message is to act now while abundant supply is keeping prices relatively stable and low, and their messages about the market align with what gas utilities are already doing.
I am very concerned with the gas hype and the market distortion created. Gas is of critical value to the US economy. We cannot afford these Wall Street pathological greed driven pushes to distort this position. There is way too much need by the general public for heat and industry for heat and feedstock. Agriculture relies on gas for corn fertilizer and herbicide inputs. We are gutting our nuk and coal capacities in the name of increased gas supplies. Gas is at low prices and high production but we see this dynamics changing. If we do not watch it we will find ourselves in a bind with no easy answers. You don’t just switch over different energy supplies overnight. Currently utilities have the ability to switch coal and gas but utilities are the problem. More and more areas are becoming dependent on gas for power generation. We saw how the cold winter massively drew down stored gas. What happens if this is the trend with climate change of erratic weather causing increased heat and A/C use? We need to keep our energy sources diversified to ensure one area of the decent is less volatile. We have so many predicaments and tipping points ahead with a decent rapidly advancing in a few short years. Market distorting greed driven speculation by Wall Street is the wrong direction.
Boat on Sat, 3rd May 2014 9:10 am
Unfortunately the market works on a just in time scenario and little margin for extra. That safety layer that doesn’t get used much is expensive with little return.
One downside to a capitalistic system.
I wonder if the storage of more Nat Gas is being addressed.
rockman on Sat, 3rd May 2014 5:44 pm
Boat – In general NG storage development is very expensive because there are limited suitable reservoirs to store in. Also, there’s the addition cost of the pipeline infrastructure to get from storage to end user. And occasionally local resistance. Recently a lot of protest in Boston over the construction of a new pipeline to the city. The main argument is they don’t want “frac’d NG. Does matter how much stored NG is available if it can’t be delivered at the necessary rate.
The best storage is salt caverns and depleted NG reservoirs. You can inject NG into any porous convention reservoir but you can never get 100% of it back: put $500 million of NG in and you may never recover $100 million of it.
Also NG storage is not a guaranteed money maker. There have been times when a higher price was paid for the injected NG then it was eventually sold for. As in the oil/NG production biz cash flow can take precedence over profit.
So unless the feds decide to spend many $billions I wouldn’t expect a major expansion of NG storage IMHO.
In the last 26 years total storage capacity has only increased from 8,124,067 million cubic feet to 8,993,335 million cubic feet. About 11%. During that same period NG consumption has increased 44%. So even without extreme weather patterns the storage system is being heavily taxed by growth in consumption.