Jerry Jones Is Betting on Natural Gas. Should You?

Discussion in 'Commodity Futures' started by dealmaker, Jun 12, 2019.

  1. dealmaker

    dealmaker

    Jerry Jones Is Betting on Natural Gas. Should You?
    Dallas Cowboys owner is ponying up another $475 million for the fuel; ‘I believe in natural gas in a big way’
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    Jerry Jones was a veteran oilman when he purchased the Cowboys in 1989 for $140 million. Photo: Keith Birmingham/MediaNews Group/Pasadena Star-News/Getty Images
    By Ryan Dezember
    June 12, 2019 9:55 a.m. ET

    U.S. natural gas prices have fallen to three-year lows at a time of year when they should be rising. Shares of gas producers are in the pits. But Jerry Jones, the owner of the Dallas Cowboys, has bet more than $1 billion on the fuel.

    Mr. Jones said this week that he was putting up $475 million of his own money to help Comstock Resources Inc. buy a larger shale-gas rival, Covey Park Energy, for about $1.6 billion.


    The deal follows another last year in which Mr. Jones sold Comstock North Dakota oil wells valued at more than $600 million in exchange for a controlling stake in the public company. The latest deal brings to about $1.1 billion his wager on the prolific Haynesville Shale in Louisiana and East Texas where Comstock and Covey both drill.

    “I believe in natural gas in a big way,” Mr. Jones said Monday morning on a call with analysts and investors to discuss the deal. “I don’t know of any individuals…that have put the kind of money out as I’ve put in this thing.”

    The Texas billionaire isn’t the only deep-pocketed investor making big wagers on natural gas, of course. Blackstone Group LP has several billion dollars invested in U.S. gas assets, including producers, pipelines and a company that exports liquefied natural gas from two Gulf Coast terminals. Yet many investors have fled the sector.

    Gas prices are down 19% over the past year, with futures for July delivery settling at $2.399 a million British thermal units on Tuesday. That is the lowest price since the summer of 2016, and few forecast it rising meaningfully in the near future. Goldman Sachs Group Inc. has a price target of $2.75 over the next year. Raymond James analysts expect gas to average no more than $2.80 before 2021.

    Shares of gas producers have fared even worse, standing out for poor performance even in a broad slump in energy stocks. Antero Resources Corp . ’s shares have lost about two-thirds of their value over the past year. Range Resources Corp. is down 58%; EQT Corp. is off 44%; and Comstock, despite Mr. Jones’s endorsement, trades at about half of what it did a year ago.

    Some of the recent slump can be chalked up to uncooperative temperatures. Open-windows weather in many parts of the country has forestalled the usual summertime uptick in gas that is burned to power air conditioners.

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    But the big problem for gas bulls like Mr. Jones is that there is too much of the stuff. Even as demand has risen at power plants, chemical producers and export facilities, U.S. production has continued to rise. A record 2.77 trillion cubic feet were produced in March, the most recent month for which data are available, according to the U.S. Energy Information Administration.

    “We all know it’s soft out there,” Mr. Jones said. “If it hadn’t been soft, I’d never [have] bought the Cowboys. I bought it when everything was down and out. I got in the oil business back 40 years ago. It was a down and out time.”

    Mr. Jones was a veteran oilman when he purchased the Cowboys in 1989 for a now measly $140 million.

    When energy prices crashed a few years ago, Mr. Jones pumped $600 million into drilling operations in North Dakota’s Bakken Shale and profited greatly. His hunt led him to Comstock, a company based near his own office in Frisco, Texas. He swapped his Bakken oil wells for a controlling stake in the company.

    With the cash flowing from Mr. Jones’s North Dakota wells, Comstock was able to refinance and drill more in its Haynesville gas fields, where it can produce gas for less than $1 near big buyers like chemical plants and export terminals, said Roland Burns, Comstock’s finance chief.

    “We’re very profitable, but people don’t want to invest in this sector,” Mr. Burns said.

    Write to Ryan Dezember at ryan.dezember@wsj.com
     
  2. bone

    bone ET Sponsor

    Jerry Jones is betting on production - not price.
     
    bathrobe, trader99 and dealmaker like this.
  3. trader99

    trader99

    NG prices have been down for years on end. Then in late 2015, I got the smart idea that it's probably bottoming. I lost a pretty bundle betting big and holding in 2015 and some in 2016.

    2019 I'm making decent in NG but from TRADING and not holding.
     
    Last edited: Jun 12, 2019
    bone likes this.
  4. trader99

    trader99

    The highs were in 2008 in the $13s. Now it's in the 2s. You gotta trade that thing and not hold it.

    I was not trading anything back then.
     
    Stockolio likes this.
  5. Seen so many stock guys get absolutely destroyed trying to dip their toe into NG trading.
     
    FriskyCat likes this.
  6. trader99

    trader99

    I was not a stock guy per se. I was trading futures heavily in 2015. The error was that I let my beliefs determine the trade rather than the chart(technicals). With hindsight that was just pure stupidity.

    Wisdom comes from ashes of our mistakes. Clear downward trend with no reversal in sight for months.

    End of Dec 2015 was when it finally reversed. That's when I should have went long. The entire move from Oct to Dec 2015 was shouting short or at least stay out until it really bottoms and shows signs of a reversal.

    But this year I'm doing fine in NG trading in and out based purely on technicals rather than have my beliefs determine things.
     
    Last edited: Jun 12, 2019
    Clubber Lang likes this.
  7. RedDuke

    RedDuke

    Forget about stock guys, hedge funds lost billions trading it, you recall Amaranth Advisers.
     
    Clubber Lang and trader99 like this.
  8. Times

    Times

    Nat gas can't even beat inflation in the long run, But hell, so hasn't the S&P the past year so maybe he is on to something with betting on production :D
     
  9. LacesOut

    LacesOut

    How does one bet on production and not price?
    Clearly getting long NG futures over the last few years has taught players (and historically has always been) a painful lesson in contango.
     
  10. themickey

    themickey

     
    #10     Jun 15, 2019