behemoth of hydocarbons, page-8

Gas prices can reach $10 mcf (I can remember oil being $10 a bbl!).

Adopting a two-pronged approach to the Canadian energy growth fund he manages, Glenn MacNeill, vice-president of investments at Toronto-based Sentry Select Capital Corp., still favours natural gas producers and emphasizes a basket approach to investing in international exploration plays.

MacNeill has been enthusiastic about natural gas for some time. This manager suggested in the Jan. 2 Buy and Sell column, that "patient investors should consider natural gas stocks which have been decidedly out of favour because of the low commodity price."

The gas price has moved off its lows of US$6-US$7 per thousand cubic feet (mcf ) and recently traded above US$9. In the January column, MacNeill predicted gas could recover to US$10 per mcf in 2008.

"It has risen faster than I anticipated, reflecting the better-than-expected fundamentals. The price is likely to stay high for some time."

The cold winter in Canada and the United States has boosted demand, he notes. "As a result, natural gas storage levels are back within their normal ranges."

On the supply side, Canadian gas production is expected to fall this year, and despite the doubling of rig activity in the United States over the past decade, "U.S. supply is expected to rise by only 2% this year."

Finally, "liquefied natural gas is not coming into North America as anticipated, given the strong demand from Europe and Japan."