October 17, 2012
With winter approaching, and the general consensus being that it will be colder than last, natural gas prices will be sure to rise due to greater demand. However, estimates of natural gas prices differ significantly depending on the source. The U.S. Energy Information Administration, or EIA, recently released its "Short-Term Energy and Winter Fuels Outlook," in which it estimates that gas prices will reach $3.35 per MMBtu in 2013.
However, other estimates are much higher; for example, analysts at Morgan Stanley envision scenarios where the price of gas could run up to $5 per MMBtu next year. The realized price will greatly influence a number of natural gas producers, including Ultra Petroleum, which currently has a breakeven price of $3.10-$3.20 per MMBtu. If the prices are closer to the EIA's estimates, a company like Ultra can continue to brave the headwinds. On the other hand, if Morgan Stanley is right, this company could be set to feast on outsized profits similar to 2008 and 2009 when the company was trading around twice its current value.
In this edition, energy analyst Joel South discusses the outlook for Ultra Petroleum as well as other companies that could rise as natural gas prices start moving north.
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