2015SummerNatGas

Natural Gas Production, North America (BI NGASN)
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Overview > U.S. Summer Natural Gas Needs Help From Heat Mizer >> Exhibit 1 of 16
Summer Natural Gas May Get No Reprieve Without Help From Heat
Analysts: Vincent G Piazza & Gurpal Dosanjh
Apr 2, 2015
U.S. summer natural gas prices
will likely fall to about $2 per million
British thermal units given elevated
output and lower Canadian imports,
partially offset by higher power
generation demand and pipeline
exports. The shoulder season
lull has begun with storage levels
65% above last year. Marketed
production growth will average
about 5.5% from April through
August vs. the prior year, yet slow
later in the year and into 2016.
Cyclical cooling demand and the
shift to gas-fired power could aid
prices longer-term.
Key Points (5 of 16):
* U.S. Natural Gas Market 'Long' in Summer, Throughout Year
* Coal Retirements, Gas Capacity Adds Likely Won't Aid Summer
Gas
* Power-Plant Retirements Pose Structural Coal Hurdle (Correct)
* PRB Coal Price Pressures to Linger as Utility Buying Subsides
* Northeast Gas Prices May Stay Subdued Until Pipes Come to
Rescue
Natural Gas Production Team
Bloomberg Intelligence


Natural Gas Output to Remain Ebullient, Keep Prices Contained
Apr 2, 2015
U.S. natural gas imbalances will
maintain pressure on benchmark
prices this summer and likely into
4Q. Volume growth may average
5% yet output should rise at a
slower pace toward the end of
2015. Prices in the Northeast, areas
seeing prodigious output growth and
takeaway bottlenecks, are trading
well below $2 per million Btu and
below cash costs, driving operators
to limit activity. Should seasonal
demand rise, wells drilled but not
completed, known as DUCs, act as
just-in-time-inventory and suppress
prices.

Natural Gas Production Team For interactive exhibit on Bloomberg, run:
Bloomberg Intelligence BI NGASN FLEXP |40-2-W|WL54||USD|L29<GO>


U.S. Natural Gas Market 'Long' in Summer, Throughout Year
Apr 2, 2015
The structure of the U.S. natural
gas market will remain long through
2016. While incremental coal-
to-gas switching, retiring coal-
fired power generation, increased
pipeline exports to Mexico and
LNG export potential will likely
boost 2015 and 2016 natural gas
demand above expected levels, the
pace of output will probably exceed
near-term expectations and outrun
consumption. The demand-supply
imbalance should tighten in 2016 as
output growth slows while structural
shifts in natural gas demand take
hold.

Bloomberg Intelligence BI NGASN STEO |1535-2-Q-UNITS|ML48||USD|S122,132<GO>


U.S. Gas Storage May Kick Off Next Winter Near Five-Year Highs
Apr 2, 2015
U.S. natural gas storage will start
the next winter season near a five-
year high, assuming injections
through October are close to the 2.1
trillion cubic feet added in the prior
five years. Storage would top 3.6
trillion cubic feet when the heating
season begins Nov. 1. This may be
conservative, with March marketed
production 8% above last year,
2015 output possibly growing 5%
and inventory 65% higher than last
year. Without a warmer summer
and incremental power generation
demand, benchmark prices may be
pressured.

Bloomberg Intelligence MMDL 165454696<GO>


Switching, Retirements, Additions to Tighten U.S. Gas Market?
Analysts: Vincent G Piazza & Andrew Cosgrove
Apr 2, 2015
Price is the primary driver of
coal to gas fuel switching, though
pipeline capacity, maintaining
system redundancy and minimizing
transmission congestion also are
considerations. With natural gas
output elevated, U.S. benchmark
natural gas prices sustained below
the existing $2.64 per MMbtu level
may further pressure Appalachian
and western coal demand dynamics.
Switching of 15 million to 20 million
tons of coal to gas may yield 1
billion to 1.3 billion cubic feet of
additional gas demand per day.

Bloomberg Intelligence G BI2 1825<GO>

Natural Gas Production, North America (BI EGENN)

Much of U.S. Coal-to-Gas Switching May Have Already Occurred
Analyst: Kit Konolige
Apr 2, 2015
The planned retirement of 19
gigawatts of U.S. coal generation
this year involves older, smaller
plants that run at an average
capacity factor of 25%, or only at
peak times. The surviving coal
plants have a high capacity factor
of 60%, indicating positive cash
flows even with low gas prices.
Regional considerations suppress
gas switching, such as the scarcity
of pipelines into New England and
the Southeast. Regulated coal
plants, which account for 75% of
all coal, are relatively insensitive to
market signals.

Bloomberg Intelligence BI EGENN OTHRI |1087-2-A-DATA|A11||USD|S106,107<GO>


Natural Gas Price Drives Switch From Coal, Question Is How Much
Apr 2, 2015
Gas price drops should drive
more generation to gas, yet the
question is how much. Seasonality,
transmission constraints and
more renewables complicate the
analysis. After years of coal plant
retirements, many remaining units
are super-critical machines that
are not vulnerable, even to $3 gas.
Super-critical coal plants have a
cash production cost of about $22/
mwh, new gas plants about $25 at
$3 gas, and sub-critical coal about
$35. Even with prices at 13-year
lows since 2012, gas's share has
not risen materially.



Coal Retirements, Gas Capacity Adds Likely Won't Aid Summer Gas
Analysts: Vincent G Piazza & Andrew Cosgrove
Apr 2, 2015
Support for summer natural gas
prices in the U.S. from additional
demand sources may not be as
prevalent given the strength of
output growth in 2015. Yet slower
volume growth in 2016 and heating
demand next winter may help
support medium-term prices. Also,
more than 15 gigawatts of gas-fired
capacity demand could be added in
2015 and 2016. This year, 19 GW
of U.S. coal-fired generation is set
to retire, with utilization of just 25%,
limiting the gas demand increase to
less than 1 billion cubic feet a day.



Will LNG Exports Starting in 2015 Truly Provide a Secular Boost?
Analysts: Vincent G Piazza & Syarifa Galeb
Apr 6, 2015
Longer-term U.S. LNG export
opportunities may be more muted
than expected if the drop in oil
benchmark prices is sustained,
restraining the competitiveness
of future U.S. capacity. The first
LNG export flows from the lower
48 states are expected in late 2015
from the 2.7 billion cubic-feet-a-day
Sabine Pass terminal, one of five
facilities with 9.2 bcfd of approved
capacity. Global LNG demand may
grow at a more subdued pace and
global supply trends might restrain
margins, offering less of a boost to
U.S. exporters.

Bloomberg Intelligence BI NGASN 1098 |1098-2-Q-UNITS|M48||USD|
S169,211,212,213,215,216<GO>

Natural Gas Production, North America (BI COALN)

Natural Gas Weakness May Pose Contract Risk for U.S. Coal Miners
Analysts: Andrew Cosgrove & William Foiles
Mar 17, 2015
If natural gas prices drift lower in
2Q and remain subdued into 3Q,
the pace of contract signings for
2016 coal tons may slow materially
as buying power shifts away from
miners. On average, U.S. coal
producers are only 50% contracted
for 2016 thermal coal volumes,
leaving many exposed to reductions
in realized pricing. Foresight has
the highest percentage (76%) of
2016 shipments committed and
priced while Hallador (34%) and
Arch (37%) have the lowest.



Gas Share of U.S. Power Generation at Record Rate as Coal Falls
Apr 2, 2015
The natural gas percentage of total
U.S. power generation is running at
a record pace year-to-date, reaching
28% in January vs. 24% the prior
year. Gas capacity has continued
to rise and coal to fall, albeit slowly.
Gas already has substantially more
capacity than coal, so there may
be more room for gas to grow as
electricity demand increases. The
Energy Information Administration
expects additions of 8 gigawatts of
gas in 2014-15, followed by 10 GWs
in 2016.



Power-Plant Retirements Pose Structural Coal Hurdle (Correct)
Mar 18, 2015
As falling natural gas prices present
a cyclical demand challenge for
U.S. coal in 2015, a more structural
challenge will come in the form of
coal-fired power-plant retirements.
About 19 gigawatts of coal-fired
generation capacity is set to retire
this year, removing at least 25
million tons of coal demand. While
some projected retirements may be
delayed into 2016 and 2017, the
first compliance deadline is in April,
when all companies must provide
details on their strategies. (Corrects
amount to be retired.)



PRB Coal Price Pressures to Linger as Utility Buying Subsides
Mar 9, 2015
Powder River Basin coal prices
may stay under pressure during the
next few quarters, given that utilities
have little incentive to buy more
than they've already contracted.
As a result, days-of-burn, or the
forward-looking estimate of coal
supply, may remain tame as utilities
get more comfortable with holding
less inventory. Sub-bituminous
coal stockpiles, made up mainly
of PRB coal, have risen 32% from
August lows as rail bottlenecks have
subsided.



Northeast Gas Prices May Stay Subdued Until Pipes Come to Rescue
Apr 2, 2015
Prodigious domestic natural gas
output will continue to constrain
not only benchmark prices but
also regional trading hubs, hurting
gas-levered operators. Northeast
natural gas price differentials
will remain more constrained
relative to benchmarks and
other trading hubs in the near-
term given that production in the
Marcellus and Utica is growing
faster than infrastructure. Reversing
legacy systems and adding new
infrastructure to push flows to other
regions will support prices.



Appalachia E&P Valuations May Fall on Natural Gas Injections
Analysts: Gurpal Dosanjh & Vincent G Piazza
Apr 2, 2015
Appalachia E&Ps may see relative
valuations to U.S. peers decline if
robust natural gas injections and
capacity constraints pressure prices.
Inventory levels have recovered,
and are 65% higher than a year
ago. Production will likely continue
to grow in the Marcellus and
Utica shale plays. This will further
pressure existing infrastructure and
lead to lower realized prices for
companies without firm takeaway
capacity commitments to higher-
value markets away from the
Northeast, where prices may fall
below $2.

Bloomberg Intelligence BI NGASN VALU |113-3-RATIO-14646||#14646|USD<GO>


Texas, PJM Add the Most Gas, Aiding NRG, Dynegy, Exelon Margins
Apr 2, 2015
As one of the few regions with
material load growth, the Texas
grid (Ercot) is actually adding total
generation capacity -- much of it
gas and renewables. This ensures
that incremental Texas demand will
be fueled with natural gas, though
it doesn't replace much existing
coal. The other major region for
gas additions is the mid-Atlantic
(PJM), where merchant builders are
taking advantage of relatively higher
capacity prices. The biggest users of
gas in 2013 were Texas, Florida and
California.

Bloomberg Intelligence BI EGENN OTHRI |1087-2-M-DATA|M12||USD|B62<GO>

2015SummerNatGas

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