Extract from: Sam Wahab: Coal And Natural Gas Stocks That Could Profit In A Topsy-Turvy Global Market http://m.seekingalpha.com/article/1108201
Sam Wahab: Gas exploration in the U.S., especially of the unconventional type, has resulted in diminishing Henry Hub spot prices. Nevertheless, gas exploration on a global scale remains strong. The key reason is that gas prices in Europe and Asia are underpinned by robust consumer demand and the need for energy security.
A clear example is in Central and Eastern Europe, where Gazprom (OGZRY.OB) has a strong monopoly on gas supply despite a plethora of untapped resources. Many of the governments in these countries [Poland, Romania, Ukraine, etc.] are now incentivizing junior domestic players through undemanding fiscal terms to prove up these resources to secure energy self-sufficiency. In return, these junior companies enjoy gas prices far in excess of the Henry Hub, which is about $3 per thousand cubic feet [Mcf].
The Romanian gas market is slated to deregulate its gas prices next year. That should bring it inside the European average of $8-13/Mcf. We have a Buy recommendation on Hawkley Oil & Gas Ltd., an Australia-listed company that owns and operates Ukrainian assets. It was getting $11.80/Mcf, which is a fourfold multiple to the Henry Hub. Our target price for Hawkley is $0.72/share. Other beneficiaries of this type of price movement in Europe include Zeta Petroleum Plc, Aurelian Oil & Gas Plc (AROGF.OB) and San Leon Energy Plc (SLGYF.PK), which is merging into Aurelian.
HOG Price at posting:
13.5¢ Sentiment: Buy Disclosure: Held