Natural Gas

   I told several people a few years ago that this was going to happen but they didn’t believe me then, now here is a little proof of what is going on around us. If I were to ask you to name the state with the fastest year-over-year natural gas production growth, which would you guess? Since most people may not know let’s get right to the answer. It's Pennsylvania. Marketed natural gas in the Keystone State grew an eye-popping 72% from 2011 to 2012. That moved it from the seventh- to the third-largest gas-producing state in the U.S.  The state of North Dakota is now number two just behind Texas as the largest oil producer in the U.S. and has more jobs available than people to work.

  Pennsylvania's gas is coming from the Marcellus Shale deposit, which runs through the central part of the state from north to south. Production in the Marcellus began only five years ago. But now it produces about 18% of all natural gas in the U.S. The fact is, as the U.S. Energy Information Administration (EIA) reports, "Marcellus production alone accounted for 75% of all production growth over the past year in the six basins covered in EIA's recently released Drilling Productivity Report (DPR), which highlights the latest regional trends in drilling, completion, and production from gas- and oil-producing wells."

  An even more amazing fact is that if Pennsylvania's Marcellus Shale field were a country, it would be the world's eighth-largest natural gas producer. Incredibly, it now out produces Saudi Arabia. The production at Marcellus has shocked experts like Sam Gorgen of the EIA and Terry Engelder, a Penn State University geologist. Engelder, a leading researcher of the formation, predicted that Marcellus production wouldn't hit the 12 Bcf/d rate until 2015. So much for that... the Marcellus is already there. Marcellus production has already surpassed 14 billion cubic feet per day (Bcf/d).

 At present the Marcellus' production is equivalent to about 550 million barrels of oil per year. The growth rate in new-well gas production per rig continues to rise, even as exploration and production (E&P) companies drill more of them. Why is this? With each well drilled, E&P companies gain a greater understanding of the underlying geology. They combine that knowledge with continually improving fracking techniques. The result: a continual rise in well production rates.  This growth in production rates is likely to continue in the future. That will mean a faster and higher rate of return on Marcellus wells. It also means drillers can make money even with natural gas prices at today's low levels.

  We have a couple of companies that we have in our portfolio that are involved in the movement and drilling for natural gas and we will be adding two more to our portfolio for our subscribers today.  Out of consideration to our paying subscribers I’m unable to reveal their names, however, the good news for you is that they are not the only ones drilling in that area or involved in the production of natural gas.  Being that it’s in your back yard don’t miss out on a great opportunity to cash in on it.

Disclaimer:  Suburban Trader is a publisher of financial news and opinions and NOT a securities broker/dealer or an investment adviser.  You are responsible for your own investment decisions.  All information contained in our newsletters or on our web site(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence.

Investment Idea

One of the biggest myths to me in investing is the old adage, buy low and sell high.  I’ve made money by always favoring the stocks that have rising prices.  While buying a stock at a lower price makes a lot of sense, it can still be misleading. I remember I had an opportunity to by Toyota from $30 a share up to it finally reaching $82 a share, I purchased it at $82 and some change about two years ago and it sets at around $114 a share today.  One of the reasons I don’t necessarily look for a stock when the price is at a low point is because you never know when the stock is going to hit its bottom.  When you purchase your stocks on the way down it lessens your chances of winning.  Most investors dream of buying a stock at its low point and riding it to the stars, that’s a fantastic desire but very seldom happens. Choosing stocks with rising prices not only obviates that problem but offers several advantages.  One of the main things is that in buying a stock that is rising in price is the fact that it is already doing what you want it to do; go up.  Also, a stock that is hitting new highs has essentially no overhead resistance.  In a book by Bart Diliddo, PHD “Stocks Strategies & Common Sense,” he teaches on buying stocks after they have hit their 52 week high.  It is at this time that the stocks have had plenty of time to consolidate, and are showing new signs of life.

Always, if you’re looking at doing this on your own, pick safe stocks and undervalued stocks with rising prices.  Here are some steps in his book that I’ve found to be helpful in finding great stock picks that you want to rise in share price and not necessarily looking for a dividend:

1. Look at the financial section of your local paper, the Wall Street Journal, Investors Business Daily Barrons, the internet.  Find the list of stocks that have just hit new 52 week highs.  All of these stocks are definitely rising in price.
2. Rank all these stocks in ascending order of Price to Earnings ratio, P/E ratio.  While this may take some work on your part.  Look for low P/E ratio stocks of course, they are undervalued.
3. Assess each stock for safety.  To do this look at Standard & Poor’s Stock Guide, Yahoo Finance.
4. Finally put all the information together in a logical, unemotional way.  Pick the ones you think are the safest, most undervalued and rising in price the fastest.

Common sense and simple logic dictate that picking safe, undervalued stocks rising in price should result in above average performance.  If you don’t have the time we can do it for you with a subscription to Suburban Trader; it is only $10.99 a month for our weekly and bi-weekly stock picks.

Happy Investing

Disclaimer:  Suburban Trader is a publisher of financial news and opinions and NOT a securities broker/dealer or an investment adviser.  You are responsible for your own investment decisions.  All information contained in our newsletters or on our web site(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence.