Friday, February 18, 2011

Natural Gas Self Inflicted Crisis: Wrath of Depressed Prices and EPA

Market Update: Natural Gas Producers in Full Crisis Mode

Mr. Miller is a major supporter and advocate for the natural gas industry.

However, the monumental failure of the Natural Gas producers in the U.S. has exceeded comprehension. Over the past twenty (20) years, the natural gas producers have brought multiple self inflicted crisis upon themselves, which have punished shareholders severely.

Once again, the Natural Gas Industry has imploded bringing upon itself severely depressed prices, which continue to decline, they have "failed to manage their risk to include political and most importantly, environmental risk".

It all starts with the failure of Executive Management and Boards of Directors of multiple natural gas producers to comprehend the operational, political and environmental risk they face. They also failed to comprehend the inevitable public backlash, particularly in the Eastern U.S. from the "Wildcat" mentality of unbridled drilling and operations.

To be clear, the U.S. Natural Gas producers are in full downward spiral and matters are going to get much worse before we can even begin to grapple with wholesale change in the Executive Management at the majority of the Producers and Pipeline Companies.

In on fell sweep, the industry managed to take what Mr. Miller and many other senior industry executives have worked decades to create; a stable political and environmental and financially stable natural gas industry, and turn it into the number one target of the EPA, Washington politicians, and more importantly, the general public.

Bottom Line: The U.S. Natural Gas Producers have brought long term and very serious problems upon themselves, their shareholders and the general public. The Sector is rated a "Sell" and we expect to see continued decline in wholesale prices, deterioration in credit quality, deterioration in cash flows, substantial environmental taxes imposed by the EPA/Federal Government, and outright banning of "fracking" in several Eastern States.

No comments:

Post a Comment