T. Boone Pickens Expects High Oil To Stay (CLNE)

247wallst — Tue, 09 Sep 2008 14:51:38 +0000

CNBC’s Maria Bartoromo interviewed oil magnate and billionaire T. Boone Pickens late this afternoon. Pickens noted that there is likely to be a demand increase if oil goes under $100, bue he doesn’t expect it to go too far under that level. Four dollar per gallon gas killed demand before. As far as an energy policy, there has been no energy plan for 40 years and cheap oil discouraged the country from ever developing one. Without a plan we’ll end up importing more oil.

He wants to get wind and solar started on the renewable side. The windpart is easy and can be developed. The only fuel to replace foreignoil is natural gas. He also wants to open the outer continentalshelf for drilling. As far as drilling in ANWAR and off Florida, he’s for it butsaid you have to consider the issue as we import 12 million barrels ofoil per day. He also said you cannot drive this problem away bydrilling alone.

Pickens said 30% of America’s fuel is for movinggoods in trucks. He wants the Feds to say all new trucks will benatural gas and wants incentives for the truckers to switch. Hebelieves the natural gas infrastructure can go into place rapidlyas the existing trucks get retired. He also noted we only have 142,000 cars running natural gas out of the 8 million in the world. Pickens’ Clean Energy Fuels Corp. (NASDAQ: CLNE) is the directbeneficiary if that plan takes off in natural gas, and as oil is downtoday its stock is down more than 6% at $18.15 right before the close.

Unfortunately, Pickens stating his opinion that oil would not fall too far was the only thing remotely new in today’s comments.

Jon C. Ogg
September 9, 2008

Upping Natural Gas Output Just In Time For Lower Prices (NFX, APA, APC, CHK, DVN)

247wallst — Tue, 09 Sep 2008 10:09:45 +0000

Exploration and production companies have been loading up on natural gas assets in the US for the past several years, and now it looks like that might not have been the best thing they could have done. Five years ago, natural gas prices were around their historical level relative to crude oil, about $1.00 for every $6.00 of the oil price. The ratio reflected the fact that a barrel of oil contains roughly six times more energy than a thousand cubic feet of natural gas. The most recent EIA natural gas report noted gas prices of $7.26/million BTUs, compared with crude oil prices of $18.90/million BTUs. So, what happened? And is it going to continue?

The questions arise from today’s announcement by Newfield Exploration(NYSE:NFX) that it is increasing the midpoint of its 2008 full-yearproduction guidance by 4 billion cubic feet equivalent. Newfield alsoincreased guidance for 2009 by 8%-13% over the new 2008 volumeprediction. The market is not impressed so far: the stock has fallenmore than 11% in early trading.

About 70% of Newfield’s assets are natural gas, mostly in the WoodfordShale play and in the Rocky Mountain region. Like every other gasproducer, Newfield increased its drilling program when gas pricesstarted to jump. Now, production is strong and demand has leveled off.Even the recent Gulf of Mexico shut-ins have not affected natural gasprices much.

As a result, companies like Newfield that predict increased gasproduction are not going to impress investors. An energy analyst atRaymond James has dropped his price forecast for the fourth quarter of2008 to $7.50/thousand cubic feet and to $6.75/thousand cubic feet for2009. The October contract on NYMEX this morning stands at$7.235/thousand cubic feet; NYMEX crude oil is trading at under$105/barrel. That’s a differential of nearly 15 times.

Newfield’s competitors Apache (NYSE:APA), Anadarko (NYSE:APC),Chesapeake (NYSE:CHK), and Devon (NYSE:DVN), among others, are alltrading lower this morning, down about 6%-7%. With the exception ofChesapeake, these competitors hold gas and oil assets in more nearlyequal proportion.

As long as energy prices keep falling, energy stocks are going alongfor the ride. But natural gas players could fall faster and harder.

Paul Ausick
September 9, 2008

24/7 Wall St. » natural gas

T. Boone Pickens Expects High Oil To Stay (CLNE)

Upping Natural Gas Output Just In Time For Lower Prices (NFX, APA, APC, CHK, DVN)