Fike, Yes Hummer is interesting by itself. For those who deny the AGW\CC, our energy requirements will need to rely on fossil fuels over the long term. We currently get about $4mill/ yr from US ops. If the second well is similar then we probably double it. Now everything I say below is not going to change the fact that Hummer will not build this company. All it will do is keep the company rolling along. But I suspect gas prices will increase - perhaps double!
With the 2nd Hummer well, PSA total revenue will depend on the price of oil and gas. The overall gas equation is that underground gas storage is made up of 4000 bcf Working gas sitting upon 8000 bcf of Base gas (See EIA graph). Each year most of the working gas is withdrawn during the USA winter and then re-injected. Now for some reason (hot summer, more gas turbines for electricity in place of coal etc ) current injections into storage are not going to see 3000bcf by the end of the injection season of Oct 31st.
One answer to the maximum working gas storage reducing down to the low 3000 bcf range is that Shale gas is unlimited. However future weather dynamics may see all this 3000 bcf working gas used up and hence Storage Gas price at US$2.90 will move upwards. I say this since last year was the first to see a massive withdrawal of 300+ bcf (359 bcf from memory) in one week. From my reckoning since 1992 their has only been about 15 weeks where a 200+ bcf withdrawal occurred. This is real change. This will be new ground for management of Working gas storage, since the old scheme as said above is removed and replaced by unlimited Shale gas. But they may not yet be ready meet such injection requirements lifting the price (maybe to sustain bigger profits).
PSA Price at posting:
15.0¢ Sentiment: Buy Disclosure: Held
