Corporate Strategic Finance



Corporate Strategic Finance

Current Scenario of Natural Gas

Natural gas is an important source if fuel across the world. This commodity is either used for power generation power steam and main source for Fuel i.e. CGN/Gas. According to news, natural gas prices have increase more than 50% during August and many natural gas producer expectations has increased with respect of expansion and increase in revenue.

2012-2013 Natural Gas Price Forecast

From last five years, prices of natural gas have been fluctuating either increasing or decreasing.

New Houses by Heating Fuel Type 2000 - 2007

Source: EIA - U.S. Natural Gas Markets: Mid-Term Prospects for Natural Gas Supply - 2008

Previously, natural gas is 10 times less expensive than crude oil. But in reality it is 35 times less expensive. But according to the investors, they suggest not to miss-out contrarian investment for natural gas i.e. investing next to the mob at key turning points i.e. high profitability. This should be noted that anybody avoided speculating in real estate throughout housing bubble?, Did anybody purchase high quality stock during financial crisis 2008. Did any person purchased gold when it was under $300 ounce? Leave all these, anybody consider buying oils stock when crude oil was just less than $ 25 barrel? If anyone agrees with any one of the above question i.e. saying yes, then that person is already considering investment in natural gas.

During 2008 natural gas was trading above $10 per future contract and after that prices started to decline. Natural Gas market at international level was flooding with an average of three billion cubic feet which was much higher that what was consuming. Natural gas companies share price was decreasing even if the market was performing well. Natural gas news has been consistently unpleasant and this was best news for those that purchase assets when prices are low and unpredictable looking at the similar assets class trend (Aegent Energy Advisors Inc, 2013).

According to re-owned investor Jeremy Grantham currently stated that

“Everyone who has a brain should be thinking of how to make money on this in the longer term.”

The revolution shale gas has reduced natural gas prices up to 45% from last year. Due to new invention and discoveries i.e. innovative drilling techniques has resulted in huge natural gas oversupply. In accordance with the U.S. Energy Information Administration - EIA, inventories has increased to 56% from last year.

Why it is advice to invest in Natural gas is due to the fact that discount in natural gas is not only enormous but at the same time it is unsustainable. Natural Gas is preferred over coal and other fossil fuels since it is much clean while burning, it is easy to transport and most importantly it is affordable. It is expected that in near future, free market would turn natural gas for the problems that would be taking place in future in different countries (Summer Energy Outlook, 2013).

Investment Opportunity

Lower price of natural gas give hug opportunity for investors to ...