Natural gas prices in North America have been on a steady decline in recent months, fueled by high production in the US last year and a mild winter throughout the continent. However, now that the weather has taken a turn for the worse, severe temperatures on the East Coast are driving demand back up.
However, now that the weather has taken a turn for the worse, severe temperatures on the East Coast are driving demand back up — as of Friday at 12:52 p.m. EST, natural gas for April delivery was sitting at $2.734 per million British thermal units, up 1.4 percent, according to Bloomberg.
The harsh weather and frigid temperatures that hit the East Coast in February came as a shock after a relatively mild fall that lasted through to December and January. Considering that half of North American homes are heated with natural gas, the mild temperatures were likely the reason storage levels were reportedly higher in both Canada and the US in January compared to the previous year. Now that the cold has hit and people are reaching for the thermostat, those stocks are starting to get used up.
Indeed, the US Energy Information Administration reported last Thursday that the country’s natural gas supply is lower than expected, with total stocks declining to 1.938 trillion cubic feet as of February 20, 2015.
Low prices pushing juniors into debt
Oil and gas companies have high production costs, and being forced to sell at discounted prices can put juniors in bad financial situations, preventing them from making progress at their operations.
Today’s tough times have already worn on some companies, like Southern Pacific Resource (TSX:STP), which released a proposal on February 20 regarding restructuring, and Connacher Oil and Gas (TSX:CLL), which is trying to strike a deal with creditors to reduce its debt.
Kevin O’Leary, chairman of O’Leary Financial Group, told BNN back in December that Canadian junior companies that have accumulated financial burdens will likely face bankruptcy, as debts are coming due in the next 36 months.
That said, there are still companies out there with positive things happening. Here’s a look at three companies that recently reported annual and fourth quarter results:
- Northwest Natural Gas Company (NYSE:NWN) — results show net earnings of US$28.5 million in the fourth quarter and $58.7 million for the fiscal year.
- Santos (ASX:STO) — reported an underlying net profit of $533 million for 2014, an increase of 6 percent from the previous year.
- Vermilion Energy (TSE:VET) — saw a 21-percent increase in fund flows from operations in 2014 to $804.9 million ($7.63 per basic share), as compared to $667.5 million ($6.61 per basic share) in 2013.
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.