Wednesday, February 8, 2012

I still like Progress Energy (PRQ)

Progress Energy, nearly a pure natural gas play, is still on my like-to-buy list. As the price of natural gas tumbles it is dragging the price of stock in companies like Progress Energy down into the basement. I'm feeling hopeful that I will get a chance to pick up some PRQ for $10 or less.

If it drops that low, the yield will be a tidy 4 percent. The big question is: Can PRQ hold the dividend or may the yield have to be cut? If the dividend suffers a 25 percent chop, it will still be paying 3 percent. I can live with that yield if I believe there is a lot of capital gain to made --- and I do.

If I were much younger, and I was still saving for retirement, I'd put $5000 or $10,000 into Progress Energy and the wait. Read the article After the gold rush: A perspective on future U.S. natural gas supply and price.

If Arthur Berman is correct, President Obama is grossly overestimating the American natural gas supplies. Rather that a hundred years worth of gas, Berman argues there may be a quarter of that. Even if there is more, it isn't going to hit the century mark. Berman writes:

"The notion of long-term natural gas abundance and cheap gas [is] an illusion. The good news is that this . . . will lead to higher gas prices in a future less distant than most believe."

I'm with Berman and I'm willing to put my money where my keyboard fingers are taking me, to a greater exposure to PRQ and natural gas production in the Canadian West.

For another article on the situation for natural gas producers, see this linked story in The Globe and Mail.

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