Here at Energy and Capital, we came up with a simple (if boring) idea to make you lots of money without hardly trying…
Buy stocks that benefit from the abundance and low cost of natural gas.
Many of the companies I’ve recommended in my Crisis and Opportunity advisory have done very well over the past year based on this simple prognosis.
Companies like Navistar (NAV: NYSE) returned 47% in less than seven months.
Other winers in this space are up 43.52%, 9.87%, and my latest energy pick is up 38% in less than a week!
I expect that all of these stocks will continue to beat the market.
Here’s why…
Production of shale gas just keeps going up.
In fact, the United States has so much natural gas that companies have cut back on the number of drilling rigs.
Take a look at this chart (HH is the Henry Hub spot price):
The number of drilling rigs has dropped dramatically, but some of this can be attributed to new types of rigs. The new fracking rigs can have eight or twelve drills on a single rig.
Obviously, going from 1,400 rigs to 354 in a few years’ time means there will be a slowdown in production and a jump in price, as we have already seen.
Still, natural gas remains very cheap in the U.S. compared to what others are paying. The import price in Japan is $15.25 MMBtu, but it sells for $4.16 in the States.
On the storage front, the amount is right in the middle of the five-year average, but they are declining. Storage levels are 664 Bcf below year-ago levels.
Obama Approves NG for Export
The big news in recent weeks is that Obama and the EPA have approved the second liquefied natural gas export terminal (of 24 pending).
The name of this terminal is Freeport LNG. It is owned by ConocoPhillips (NYSE: COP) and located in Freeport, Texas, an hour south of Houston. (The first one is the Sabine Pass terminal, owned by Cheniere (NYSE: LNG) and located in Sabine Pass, Louisiana.)
Freeport will export 1.4 billion cubic feet of gas a year.
Expanding LNG exports could increase prices of NG in the United States over the long term, as NG seeks price discovery on the world stage.
At some point, LNG will be fungible like crude oil…
That said, this trend will be a positive for the companies that build infrastructure, as well as those companies that produce it.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
