Matthew Smith — Natural Gas: The Next Bottleneck - [Invest Like the Best, EP.483]
Episode
55 min
Read time
2 min
Topics
Relationships, Startups, Design & UX
AI-Generated Summary
Key Takeaways
- ✓Supply-Demand Gap: US natural gas production can realistically grow to 128–132 BCF/day maximum, but committed LNG exports alone will reach 35 BCF/day by 2030, consuming roughly 27% of total output. Adding ~5 BCF/day of credible AI compute demand at P50 probability creates a structural deficit starting in 2028 that storage cannot absorb.
- ✓Storage Depletion Timeline: US working gas storage sits at roughly 4 TCF total. Smith's modeling shows storage breaking below all historical ranges by mid-2028, dropping below any recorded level by 2029, and approaching near-zero by 2030. At that point, gas prices become structurally uncapped—not a weather spike but a permanent structural shortage driving electricity prices exponentially higher.
- ✓Equity Positioning: Expand Energy controls approximately 70% of remaining core Haynesville wells and trades at 4x forward EBITDA on a flat gas curve that ignores the coming deficit. Range Resources holds significant Appalachian upside. Solar yieldcos XPLR and Clearway Energy capture electricity price windfalls with zero incremental CapEx as gas-set marginal power prices rise.
- ✓Nuclear as the Only Structural Fix: Large-scale AP1000 reactors—Westinghouse's 1GW+ design, of which China is building 34—represent the only scalable solution. Cameco (49% Westinghouse owner) and BWXT are the primary equity beneficiaries. To matter by 2033–2034, government procurement commitments and loan guarantees must begin immediately to derisk supply chains and attract private capital.
- ✓Hyperscaler Cost Risk: Energy currently represents roughly 10% of hyperscaler operating costs, modeled on a flat ~$3.50/MCF gas forward curve. If gas doubles or triples structurally by 2029, energy becomes 20–40% of compute costs. Companies deploying gas-powered assets—fuel cells, simple-cycle turbines—should lock in physical gas supply contracts now, as counterparty risk in 2027–2028 will be severe.
What It Covers
Matthew Smith, founder of Cronometer Partners, presents well-level modeling of every US natural gas asset to argue that AI data center demand plus committed LNG exports totaling 35 BCF/day will exhaust US working gas storage by 2030, creating an unprecedented structural energy crisis with unbounded upside price risk.
Key Questions Answered
- •Supply-Demand Gap: US natural gas production can realistically grow to 128–132 BCF/day maximum, but committed LNG exports alone will reach 35 BCF/day by 2030, consuming roughly 27% of total output. Adding ~5 BCF/day of credible AI compute demand at P50 probability creates a structural deficit starting in 2028 that storage cannot absorb.
- •Storage Depletion Timeline: US working gas storage sits at roughly 4 TCF total. Smith's modeling shows storage breaking below all historical ranges by mid-2028, dropping below any recorded level by 2029, and approaching near-zero by 2030. At that point, gas prices become structurally uncapped—not a weather spike but a permanent structural shortage driving electricity prices exponentially higher.
- •Equity Positioning: Expand Energy controls approximately 70% of remaining core Haynesville wells and trades at 4x forward EBITDA on a flat gas curve that ignores the coming deficit. Range Resources holds significant Appalachian upside. Solar yieldcos XPLR and Clearway Energy capture electricity price windfalls with zero incremental CapEx as gas-set marginal power prices rise.
- •Nuclear as the Only Structural Fix: Large-scale AP1000 reactors—Westinghouse's 1GW+ design, of which China is building 34—represent the only scalable solution. Cameco (49% Westinghouse owner) and BWXT are the primary equity beneficiaries. To matter by 2033–2034, government procurement commitments and loan guarantees must begin immediately to derisk supply chains and attract private capital.
- •Hyperscaler Cost Risk: Energy currently represents roughly 10% of hyperscaler operating costs, modeled on a flat ~$3.50/MCF gas forward curve. If gas doubles or triples structurally by 2029, energy becomes 20–40% of compute costs. Companies deploying gas-powered assets—fuel cells, simple-cycle turbines—should lock in physical gas supply contracts now, as counterparty risk in 2027–2028 will be severe.
Notable Moment
Smith draws a direct parallel to the DRAM shortage: the natural gas market is repricing slowly, then all at once. He notes that Expand Energy stock has fallen sharply due to a CEO vacancy—while its underlying rock assets remain unchanged—creating what he views as a significant valuation disconnect.
Episode Transcript
Ramp is the only platform built to make your finance team leaner, faster, and better, saving businesses 5% annually on average so you can stay focused on growth. Ramp customers grew revenue 3.2 times faster than the average American business. Visa, Vercel, Cursor, Stripe, Notion, ElevenLab, Shopify, and 70,000 other businesses all run on Ramp. Mine does too and so should yours. Learn more at ramp.com/invest. Felix by Rogo is a personal finance agent that turns a single prompt into finished client ready work using your firm's own templates, context, and standards. Send Felix an email like, take these comments and turn them for me, or update my tracker with the context of these emails, or run the ability to pay math on this buyer and Felix sends back finished PowerPoint decks, Excel models, and sourced research. Felix works the way your team already does, delivering work quickly and accurately around the clock. Learn more at rogo.ai/felix. The best AI and software companies from OpenAI to Cursor to Perplexity use Work OS to become enterprise ready overnight, not in months. Visit workos.com to skip the unglamorous infrastructure work and focus on your product. Hello, and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and wanna go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Clients of positive sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. Our guest today is Matthew Smith. He's been on the show before many years ago, and I always love talking to him about energy markets where he's worked for twenty years. He's the founder and CIO of Cronometer Partners, which invests in energy, industrials, materials, power, and utilities, and related infrastructure. He and his team have modeled nearly every natural gas well, pipeline, and processing asset in The United States. He's reached a conclusion that most of the market does not share. Starting in 2028, AI data centers and LNG exports will need more gas than the country can produce and deliver. By his math, The US could exhaust its working natural gas storage by 2030 and could lead to a true energy crisis. In his words, the upside risk to prices becomes unbounded and convex. We talk about why this was set in motion long before AI arrived, why The US can't just turn off exports, who wins and loses …
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Products
company
“Cameco (49% Westinghouse owner) and BWXT are the primary equity beneficiaries”
“Range Resources holds significant Appalachian upside”
“Large-scale AP1000 reactors—Westinghouse's 1GW+ design, of which China is building 34”
“Cameco (49% Westinghouse owner) and BWXT are the primary equity beneficiaries”
- Cronometer PartnersBy guest
“Matthew Smith, founder of Cronometer Partners, presents well-level modeling of every US natural gas asset”
“Expand Energy controls approximately 70% of remaining core Haynesville wells and trades at 4x forward EBITDA”
“Solar yieldcos XPLR and Clearway Energy capture electricity price windfalls with zero incremental CapEx”
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