Miller/Howard Investments
Miller/Howard Podcast Series
Baby, It's Cold Outside
Michael Roomberg, Portfolio Manager  |  Full Bio (PDF)
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Transcript (January 11, 2018):

This is Michael Roomberg, Portfolio Manager and Analyst with Miller/Howard Investments.

According to the National Weather Service, the 10-day stretch ended January 6th was the 3rd coldest 10-day stretch in New York State history. So if you are not living in NY, or have been enjoying vacation somewhere warm, congratulations!

According to the EIA, US natural gas consumption totaled 151 billion cubic feet on January 1st, 2018—surpassing the previous single day record from 2014. Despite this demand shock, natural gas prices remain well below $3.00/mmbtu for most of the United States. In part due to prolific shale production, there is plenty of affordable gas, propane, and electricity for many of those that need it– unless you happen to reside in Massachusetts, New Hampshire, Rhode Island, or Connecticut.

In contrast to the $2.90/mmbtu NYMEX natural gas price contract, as of this week, gas for delivery into New England's homes and electric power plants has recently been priced as much as $100/mmbtu.

Among the biggest drivers of this price discrepancy are the rejection of several natural gas pipeline projects due to environmental and other regional concerns in New England, in recent years—which has caused a shortage of gas pipelines that are needed to transport cheap Marcellus and Utica natural gas into the demand centers of New England, particularly during periods of heavy consumption. But even outside of these extreme events, natural gas in New England is routinely more expensive than it would otherwise be if there was sufficient infrastructure. In part as a consequence of all this, energy and electric bills in New England are much higher than they are in the rest of the country.

This situation highlights to us the importance of high-quality, responsibly-managed, sufficient and safe infrastructure. For over two decades Miller/Howard Investments has actively managed our portfolios with respect to environmental risks, but also continues to serve as an activist, using our seat at the table to encourage the companies we invest in—some of which include fossil fuel companies—to improve their transparency, systems, and policies. Pipelines that deliver natural gas are critical to staying warm right now, and Miller/Howard works with companies year-round to encourage them to do so as safely, efficiently, and responsibly as possible.

Sources: National Weather Service; EIA; Bloomberg; MHI Research and Analysis

Note: Heating Degree Days is defined as the number of degrees that a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius), the temperature below which buildings need to be heated.

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