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OIL better do some serious moving, otherwise WPL will be in trouble...

 

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Howdy,

 

As a long term fan of WPL I just have a little exercise for you all.

WPL's main assets in terms of reserves are Natural gas.

 

In reality around 70% of all its resevres are made up by natural gas.

 

Get a chart for Natural gas prices and then a chart for WPL.

 

Since early December Natural gas prices has crashed and at US$7.73 implies an oil price of around US$46.38 per barrel of oil. It has halved in 8 weeks !!

 

Even allowing for the discount historically that natural gas trades to oil at the price right now is the lowest it has been for 12 months and well below the average for 2005 ... well below.

 

In the meantime what did we see when natural gas prices halved since early December ... WPL managed to peak at a price 30% higher than its price in December and still sits around 15% higher.

 

All this with its main product hitting 12 month lows and at best looking still sick.

 

Priced here it is allowing for all the new expansions coming on line I suppose but for myself

frankly it is no bargain here.

 

Glad WPL doesn't produce natural gas ... quite frankly given the massive fundamental shift in WPL's main asset I am amazed at the goings on over the last 6 weeks in terms of WPL's share price ..... Natural gas prices halve ... lowest in 12 months .... WPL share price goes nuts !!

 

I sold too early .... on the way up but even here ?

 

Not a fan till WPl shows at least some correction back to sane levels.

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G'day Maurice, bet you didnt get out as early as me DOH! I got out at $35 odd due to a combination of 2 things, 1. I think WPL's PE is too high, I can see in the next 5 to 10 years the will have the earnings to justify the high price but not just yet & 2. I didnt like them selling HDR for such a low price which to me = poor management. Didnt realise gas prices were so low so now you've given me reason # 3. I believe we'll see this back down in low 30's again; may not be for a long time but I believe it'll get back down there.

 

Cheers

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Hi Guys ...

 

Oldgolfer ... price of Natural gas has gone from US$15.50 to US$7.73 ... in fact broke $7- the other day a low not seen since oil itself was US$40- a barrel.

If this doesn't make you twitchy then nothing will.

 

Markets current mypotic focus is on buying resource stocks and nothing else. But when the underlying product a company has assets in and derives income from halves in 8 weeks ....

 

Swan

Yep as to selling too early .... been guilty of that a few times .... sold too early at $34- it went to 36 ... bought back near the low ... to sell out again ... then decided it was going up only to sell a massive margin below that nutty $47.87 ....

 

Right now thankfully lower than my exit and my short term trade hoping they were honest on reserves was in and out around here.

 

Still scratching my head on the rally the other day ... the same day natural gas hit a 12 month low ..... WPL bounced back above $43-.

 

Rose coloured glasses off ...

 

Earnings on Gas production will be lower than 2005 per unit of production. No way around it unless gas bounces in a big way. I strongly suspect the price of oil follows gas lower short term but for WPL earnings to a large extent are dependant on gas ... not oil but gas.

Even more so looking forward which the market is factoring into the current price here.

Pluto is a gas deposits and the expansion of NWS produces GAS not oil.

 

Its all very nice to assume future earnings into a share price as they have done with WPL

but I wonder what would happen to BHP and RIO if the price of gold halved in 8 weeks ?

One would assume they would not go up despite positive outlooks on earnings in 2006/7/8.

Wonder what price OXR would be ? Or if Zinc took a tumble ... ZFX ... eeek

 

The market makers in WPL's price are just playing .... today undoubtably they are trying to get it up .... fundamentals and underlying prices of a companies product lead me to believe WPL priced here ... the 50% retracement in natural gas prices will see analyists eventually becoming aware of the fact and downgrading.

 

Sure maybe its just a short term thing ... but to ignore totally ... it is interesting.

 

 

All the best ... either way ... myself waiting for the eventual correction.

Pretending natural gas has not gone down 50% in recent weeks is most amusing.

 

cheers

 

 

 

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figure the price of nat. gas is already factored in so it's irrelevent. the market is looking at <where to next> for gas prices. besides i'm not aware of the company selling into the spot market.

 

 

commitment of traders 14 feb 06 NYME

----------------------------------------------

 

commercial long 271947 commercial short 271505

non-commercial long 54085 non-commercial short 93072

 

figure nat. gas has bottomed and next move is up.

 

woodside may well be establishing a higher bottom today.

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Spot ... who knows ...

 

Suspect its more a case of no one looking.

 

Not suggesting they sell into the spot market but the current natural gas price implies to me oil is going to fall as well and fall hard.

 

Market does use the price of oil as a guide stick for WPL share price as we all know.

 

Doesn't matter as have no posi ... just sharing a view. No interest till WPL sub $35- either way.

 

Cheers

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