Chesapeake Energy Corp (CHK)

[ogbull]

milkman, I never place a put or call in my entire life. I can easily see natgas selling $3.50 in August but I don't yet feel $5. The prices I see for August depends on the continuation of the heat wave going on now and the number of hurricanes hitting the Gulf of Mexico.

Working gas in storage now is 3,041 Bcf (EIA estimates). This 704 Bcf above the five-year average of 2,337 Bcf. My calculation say current levels will drop ~800 Bcf by November putting us slightly below average going into the winter drawdown season. (By the way, I don't trust the EIA. Most government agencies can be bought for a song. The oil and gas industry has been buying government favors for 75 years!)

Here's the #1 problem: The number of natgas rigs working now is 86; a 50-year low. Of these 86 rigs working, we don't know how many are workover rigs cleaning DUCs and how many are tier 1 rigs. I have no reason to say this, but I believe most of the 300 pad-optimized tier 1 rigs available now are working on oil plays. If this "guess" is right, my thinking is that a hot, humid summer and 3-4 nasty hurricanes will drop natgas storage to near record lows.

I think we need to wait until mid-July to get a feeling of mid-August.