Natty’s headlock on King Coal
The most important catalyst for a return of the coal sector is a normalization of the natural gas oversupply. Aubrey this morning on CHK’s conference call:
“Chesapeake’s projected 7% downward trend in gas production for 2013 will likely continue beyond that year (until)…gas prices rise to levels that make returns from drilling in our gas plays competitive with returns available from drilling in our liquids plays. In fact, by year-end 2013, we expect Chesapeake’s gas production rate to have declined by 430 million cubic feet per day or 14% from our peak rate of 3.4 Bcf per day in 2012. Including the production of our non-operating working interest owners and our royalty owners, the total decline in Chesapeake operated U.S. gas production is likely to be around 800 million 900 million cubic feet of gas per day. And based on the substantial gas drilling rig count declined the last week reached the 12 year low and the embedded high decline rate in the country of the existing natural gas production base, we believe it won’t be long until the EIA 914 data shows U.S. gas production on a confirmed downward trend.”
