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Mineral and Royalty Interest – Storage Deficit Decreasing

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With the storage deficit decreasing, natural gas prices have dipped back again to the $3.50/Mcf realm. A bad sign for mineral and royalty interest owners as they await development on non-producing acreage. The cause has been a combination of coal-to-gas switching, milder weather forecasts for the East Coast, and demand loss as nuclear facilities came back online. The expectation remains that storage inventories will be back to the ~3.8-3.9 Tcf level, assuming that the market runs around 4 Bcf/d through the remainder of summer. Given the mild weather forecasts in the next few weeks, this seems plausible. Though there will undoubtedly be some pricing gyrations with possible tropical storms or hurricanes the expectation remains that gas prices will hover around $4/Mcf to spur enough reverse coal-to-gas switching and replenish storage inventories by the end of injection season. That said, easing infrastructure constraints should also support gas prices at the $4/Mcf level through 2014. Given the above, owners of minerals and royalties interest may wish to sell all or a portion of their minerals and royalties, to cash in on a portion of their value today, while waiting for production to begin sometime in the future.

 

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