Oil to Gas Price Ratio
  • Before shale took off oil to gas prices averaged 8 to 1 – close to their energy equivalence ratio.
  • Since 2013 this ratio has averaged 20 to 1.
  • Outside of North America the ratio is 3 to 1.
  • In other words, US gas is priced at an energy-equivalent discount of 56% to world oil and a 77% discount to world gas. In our 35 years investing in global energy markets, we have never seen such a wide disparity.
  • Source (link has analysis on why it might revert back).
  • $SWN
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$SWN Update
$SWN is trading slightly higher than my last trade when I scaled out. It approached near my first target (see older post), so it's always good to lock in profit. I am still holding the remaining position for a more significant move toward my last target. Typically, I would roll my gain to my LT portfolio/ETFs, but for now, I will reserve as much capital for a potential market correction.

Diff note: I have been pretty quiet lately since I'm out on business travel. I am heading back home today and will post more charts!
Margin of Safety in Hydrocarbons
Factors Putting A Floor In Hydrocarbons
  1. Global Energy Demand
  2. WTI Crude Oil Curve
  3. Financing Standards
  4. Emission Scenarios - Demand Divergence
  5. Lack of Demand Destruction
  6. Demand (In)Elasticity

Midstream & Deepwater Drilling
  1. Energy Transfer ($ET)
  2. Transocean ($RIG)

This post was published on March 26, 2022. Appreciate your sign ups on Substack (the newsletter is free and aims to optimize for time spent and knowledge acquired when reading Andermatt's research.)
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