The writing has been on the wall for the better part of a decade.
Lately, we’ve been seeing signs that natural gas is slowly taking over in U.S. energy consumption. Even after Obama outlined his strategy to combat climate change this week, new opportunities started to line up for us.
But the hype over renewable energy is starting to build back up again as well. Has it gotten ahead of itself?
Less than twenty-four hours after Obama delivered his speech, the International Energy Agency made a bold claim: Renewable energy will surpass natural gas for power generation – within three years!
Here in the United States, there’s a much different outlook. According to projections from the U.S. Department of Energy, these renewable sources will have a hard enough time accomplishing that feat in three decades.
In regards to the IEA’s prediction, however, the devil is in the details. Those of you waiting for a solar revolution to take place might want to have a seat in the corner, because the majority of this electricity comes directly from hydropower.
We’re still not buying into another overly optimistic report on how renewables will overtake natural gas in the next three years…
In fact, the only real pressure to natural gas we’ll see will come from higher prices making the fuel no longer competitive against other sources. Unfortunately for the IEA’s great green hope, we’re not going to see a similar price spike to the one in 2008.
And despite the fact that the spot price for natural gas at the Henry Hub has doubled during the last two years, you can see that hasn’t been the case since April (click chart to enlarge):
So where does this leave individual investors like us?
Sitting back and letting opportunities pass won’t fly… so what do we look for? What part of the natural gas industry stands to reap huge returns going forward?
Is Bigger Better?
The obvious course of action for investing in natural gas is through the companies supplying the 62 billion cubic feet of gas we’ll consume on a daily basis this summer. It shouldn’t come as a surprise that the five largest natural gas producers in the United States account for 20% of its supply.
You know these names well enough: ExxonMobil, Chesapeake Energy, Anadarko, Devon Energy, and BP. Together, they produced nearly 13 billion cubic feet per day at year-end.
In fact, every one of these players is heavily invested in North America’s unconventional gas boom.
For example, roughly 90% of BP’s gas operations in North America are located in tight, shale, or coal-bed methane plays. BP’s first move into U.S. shale took place in 2008 when the company entered the Woodford and Fayetteville shales.
In 2010, it cost ExxonMobil $35 billion – including $10 billion in debt – for XTO Energy to gain its first stake in the U.S. shale patch.
Perhaps a better question is how they would have performed for your portfolio since… but we’ll get to that part in just a minute.
Finding Your Profit Niche
What can possibly be more valuable to individual investors than the biggest and best natural gas producers in the country?
How about finding a unique play in the market that’s in a position to deliver tremendous value for shareholders?
These aren’t the companies driving a drill-bit into the dirt. They are the alternative investments solving the issues surrounding one of the most vital components to natural gas production – hydraulic fracturing.
Last month, I even mentioned some of the stocks tackling the huge water issues surrounding the ‘fracking’ process.
It’s companies like these that will continue to create value for shareholders.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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