natural gas investing Archive
Jim Cramer, You’re Right… Dow Chemical Will Shine in 2013
by Mike Kapsch, Investment U Research
Thursday, January 24, 2013
Jim Cramer has one of those personalities you love to hate.
He’s wildly entertaining. Yet he’s so manic that he talks faster than he can move his lips.
His show, however educational, is on television a lot… And he pumps too many stocks as a result. Despite having previously managed a hedge fund, Cramer seems to make a lot of bad calls.
It probably sounds harsh. But I’m not actually writing today to point out Cramer’s faults. Just the opposite, in fact.
You see, when it comes to stocks in 2013, regardless of any shortcomings, I believe Cramer will be spot on about one thing… Dow Chemical (NYSE: DOW) is going to have a great year.
Cramer says Dow is a “Buy” this year, because the company is taking advantage of cheap natural gas feedstock.
Simply put, natural gas isn’t just used for fuel. Companies like Dow also use it to make other products, such as plastics and fertilizers. Cheap gas prices today are making the production costs less expensive. And that’s leaving extra cash around for firms to reward shareholders.
Investment U readers may recall, I wrote about three industries that would thrive from cheap natural gas prices (plastics, methane and biofuels) back in January of last year.
To continue reading, please click here...Natural Gas: The Perfect Contrarian Investment
by Alexander Green, Investment U Chief Investment Strategist
Monday, May 28, 2012: Issue #1782
Many investors like to believe they are contrarians, investing against the crowd at key (and highly profitable) turning points. Yet in my experience, few actually do.
Here’s a simple test. Did you view the run-up in internet stocks in the nineties as absurd? Did you avoid speculating in real estate during the housing bubble? Did you buy high-quality stocks during the 2008 financial meltdown? Did you pick up gold back when it was under $300 an ounce? How about oil stocks when crude was less than $25 a barrel?
If you answered “yes” to any of these questions, you’re probably already looking at natural gas.
In mid-2008, natural gas traded above $10 per futures contract. Since then, prices have collapsed. Every day, the U.S. natural-gas market is flooded with an average of three billion cubic feet more than the nation consumes. Shares of most companies have taken a drubbing over the past year, even as the broad market has risen.
In sum, the news about natural gas has been almost uniformly awful. And that’s a good thing. As renowned investor Jeremy Grantham recently wrote, “Everyone who has a brain should be thinking of how to make money on this in the longer term.”
The shale gas revolution has cut the price of natural gas about 45% over the last year alone. New discoveries and innovative drilling techniques, along with recent mild weather, have led to a vast oversupply. According to the U.S. Energy Information Administration (EIA), national inventories have risen 56% over the past year.
The market is so awash in natural gas, by this fall there could be no space left to store the stuff in the entire United States unless demand surges or producers seal their wells. We may be creating a surplus that is beyond our capacity to store.
Needless to say, that has put heavy pressure on prices. Historically, natural gas has been 10 times cheaper than crude oil. As I write, it is approximately 35 times cheaper.
To continue reading, please click here...CNG: The Missing Link for Natural Gas Transportation
by Jeff Yastine, Investment U Research
Tuesday, May 15, 2012
Pity the poor North Slope of Alaska…
The region produces 600,000 barrels of oil a day, accruing millions of dollars for the state’s treasury as the crude is pumped through the Trans-Alaska Pipeline System. But its 35 trillion cubic feet in natural gas reserves are essentially a wasted resource.
For years, Alaskan authorities hoped a 1,700-mile natural gas pipeline, costing up to $40 billion by some estimates, might be the answer for tapping U.S. energy demand. Alas, gas in the Lower 48 is too cheap, and the pipeline too expensive. The overland-to-Alberta project was scrapped earlier this month. For now, the North Slope’s gas reserves remain in the ground, without a viable way to get to market.
It’s not just Alaska’s problem…
A 2007 EIA study concluded that, out of an estimated 6.1 trillion cubic feet of global natural gas reserves, roughly one-half is considered “stranded.” Remote and lightly populated regions like eastern Canada, northern Australia, Vietnam, Indonesia and parts of Russia’s Siberia are all mentioned as having massive reserves of stranded gas.
And then there’s the problem of “associated gas.” That’s the name drillers give for the stuff that comes up the pipe in oil drilling operations. In 2010, one French oil company estimated that 30% of its greenhouse gas emissions – about 15 million metric tons of “carbon equivalent” – were the result of flaring off associated gas at its drill sites. There just isn’t an economical and safe way to do anything else but burn it as a waste by-product.
But new transport and storage technologies for CNG might just offer new answers to these old problems…
Coselle ™ stands loosely for “coiled pipe in a carousel.” It’s being commercialized by Alberta-based Sea NG. What exactly is the system? Imagine a giant hexagonal-shaped garden hose reel, around 50 feet wide and 10 feet tall. Let’s fill that “reel” with 13 miles of tightly wrapped six-inch diameter steel pipe, capable of holding four million cubic feet of compressed natural gas. That’s “a Coselle.”
To continue reading, please click here...KBR: A Natural Gas Stock That’s Going Up [Video]
by Steve McDonald, Investment U Research
Monday, April 30, 2012
In focus this week: A natural gas stock that’s going up, your granny’s growth stocks, bond ladders and the SITFA.
There may seem to be no bottom to natural gas (NG), but there is. In fact, there are several gas stocks that can do quite well despite the industry suffering through near historic low prices.
But, according to Barron’s the bottom is already here for NG and several analysts are calling for higher prices by the end of the summer.
One way to play this turn around is liquefied natural gas (LNG) and the companies that service it. Barron’s mentioned KBR (NYSE: KBR).
KBR is an engineering and construction company whose projects are necessary for LNG infrastructure. They already have a pile of signed contracts for liquefaction facilities for LNG producers and Aaron Visse, of the Forward Global Infrastructure Fund, said in the Barron’s article that KBR is a stand out in what could be the reindustrialization of America.
LNG will be one of this country’s leading exports for many years to come. Producers are literally standing in line to get their liquefaction and export facilities up and running.
Citi Group says this stock should be trading at a multiple of 15, much higher than its current 10, and although the gas business is in price limbo now, it will change and KBR will be one of the big winners.
Definitely have this on your bogey board.
To continue reading, please click here...Play Low Natural Gas Prices With Bonds
by Steve McDonald, Investment U Research
Tuesday, April 17, 2012: Issue #1753
I love it when things are bad! A 300- point drop in the market makes me feel like a kid at Christmas. In fact, I’m to the point where I won’t buy anything unless we have some sort of major correction or setback.
But the “wait for a market dump” philosophy presents a few problems for a bond guy like me.
The one thing about the bond market is that it doesn’t have as many wild swings as the stock market. And since there just aren’t as many sell-offs in the bond market, it requires a lot more patience to take advantage of good buying opportunities.
But there’s a very good buying opportunity in bonds, right now… It’s in an industry that is absolutely essential to our economic well being, and you definitely need to be a part of it.
In case you don’t follow the energy markets, a glut of shale gas has driven NG prices to multi-year lows.
The Bakken, Eagle Ford, Utica and Marcellus shale gas fields are producing so much gas, developers have had to slow down and in some cases stop production. In many cases, drillers have shifted from gas drilling to shale oil drilling in the Bakken and the Utica areas.
There just isn’t the cash flow at the current market prices to justify further development of natural gas. And that’s the good news.
The slowdown in production and drop in revenue in natural gas have started showing up in the numbers of all gas developers, pipelines and sellers, and the bond and stock markets are reacting to them.
To continue reading, please click here...Clean Energy Fuels Corp (Nasdaq: CLNE): Good Time to Buy?
by Mike Kapsch, Investment U Research
Wednesday, April 11, 2012
Legendary energy tycoon T. Boone Pickens has been on his crusade for a switch to natural gas for some time now. And of course his company, Clean Energy Fuels Corp. (Nasdaq: CLNE), stands to benefit greatly if he can convince the mainstream to make the switch.
But Pickens may have made his most poignant and intriguing argument to date in a recent TED Talk:
It’s almost disgusting to imagine that the United States in all of its debt woes and spending dilemma has paid OPEC $700 billion since just 2008 and $7 Trillion since 1976 (Including the cost of military and oil both). And why is military included in that figure?
Because, as Pickens argues, this oil habit is creating the need for our country to “police the world.”
Pickens points out that, for instance, there are 12 aircraft carriers in the world. Of those 12, 11 belong to the United States. And as Pickens’ graphic shows, the majority of those 11 are protecting the major oil shipping lanes in the Middle East.
So how do we curb this expensive habit?
Pickens obviously advocated switching to much cheaper and slightly cleaner natural gas. And with natural gas at historic lows, it may be the best option we have.
To continue reading, please click here...Pennsylvania Leading the Shift to Natural Gas
by David Fessler, Investment U Senior Analyst
Thursday, November 17, 2011
Sometimes “luck is where you find it,” as the old saying goes. In my home state of Pennsylvania, it’s right under my feet.
We’re experiencing a natural gas boom here. Unemployment is below the national average, and dozens of companies have locked up the drilling rights on hundreds of thousands of acres.
Natural gas deposit here, to use a baseball term, is something akin to a “double header.” The first “game,” which is well underway, is the Marcellus Shale formation. It’s generally located about 4,000 to 5,000 feet below the surface.
The second “game” is the Utica Shale. It’s below the Marcellus, but is about four times the size, covering eight states and part of Canada. A few wells have been drilled in Ohio in the liquid part of the Utica.
Here in Pennsylvania, it’s all but untapped. It could contain four or five times the amount of gas that the Marcellus, which is estimated to contain nearly 500 trillion cubic feet of natural gas.
The Big Switch is Underway
One hundred years ago, Pennsylvania anthracite coal had the title of the best coal in the world. Its BTU output per ton is higher than any other coal ever found in the world. It still is, although there’s very little of it left.
But trains, homes and power plants all ran on the stuff. As recently as 2001, coal accounted for 57 percent of Pennsylvania’s power generation. Not any more. Now natural gas is the fuel of choice. Take a look at the graph below from the EIA.
To continue reading, please click here...A Jobs Plan That Makes Sense… And It’s Already Working
by David Fessler, Investment U Senior Analyst
Tuesday, November 1, 2011
President Obama is great at making speeches.
You’ll get no argument from most Democrats and even some Republicans. Most of the time though, he’s talking about issues that have been problems for weeks or months.
But there’s been little in the way of action. The Administration and Washington’s Congressional cartel seems more preoccupied with finger pointing and getting re-elected than accomplishing anything of substance.
Take jobs, for instance.
In particular, the lack of new ones.
According to the Bureau of Labor Statistics’ most recent figures, there are 14 million unemployed Americans. That doesn’t include an estimated 3.5 million that are so discouraged they’ve given up looking. Our nation’s high level of unemployment is undoubtedly the most important issue facing America today.
Various solutions have been proffered. Jump-starting the housing business, massive infrastructure improvement spending and tax breaks for businesses have all been discussed as solutions.
Wanted: Jobs, Not Political Rhetoric
To continue reading, please click here...Little-Known Phenomenon Could Send Natural Gas Prices Skyrocketing
by David Fessler, Investment U Senior Analyst
Friday, October 21, 2011
Every summer and fall, oil and gas drillers, producers and traders have one eye on what they’re doing and the other one on something even more important: the weather.
They all know a major hurricane that tracks up through the Gulf of Mexico could have devastating effects on their operations.
And they have have plenty of reason to worry. Take a look at the graph below produced from data from the National Hurricane Center. It shows the tracks of all the hurricanes that formed between 1851 and 2005.
Plenty of them traversed the Gulf of Mexico, now a major offshore production region for oil and natural gas.
The most devastating of those were Hurricane Andrew in 1992, Katrina in 2005 and Ike in 2008. Together, they caused an estimated $137.1 billion in damages. A lot of that damage was to oil and natural gas infrastructure.
Hurricanes normally cause oil and natural gas production to be suspended until the weather system blows through. As a result, they all had an effect on the price of natural gas and oil, regardless of the amount actual damage
Higher Natural Gas Prices Coming? Depends on the Weather This Winter…
With the advent of more and more natural gas coming from onshore wells, the risks have shifted from summer hurricanes to winter chill. Let me explain.
To continue reading, please click here...A Natural Gas Pipeline to Profits
by David Fessler, Investment U Senior Analyst
Monday, September 26, 2011
California is a big state, and its appetite for energy is just as big. As you can see from the graph below from the EIA, California consumes 8.5 percent of all the energy used in the United States.
Increasingly, that energy is natural gas. The California Public Utilities Commission reports that it regulates utility gas service for about 10.7 million customers throughout the state.
Most of the natural gas used in California comes from out-of-state basins. As of 2008, the state received 46 percent of its gas supplies from the Southwest, 19 percent from Canada, 22 percent from the Rockies and 13 percent from in-state wells.
All of the out-of-state gas is delivered via the interstate pipeline system. Major pipelines providing gas to California are the Gas Transmission Northwest Pipeline, Kern River Pipeline, Transwestern Pipeline, El Paso Pipeline and Mojave Pipeline.
But there’s a major new interstate pipeline that just came online less that eight weeks ago, and it’s providing about 30 percent of northern California’s natural gas…
The Ruby Pipeline’s Natural Gas Flow
It’s called the Ruby Pipeline, a 680-mile, 42-inch line providing natural gas from Opal, Wyoming to interconnections near Malin, Oregon.
As you can see from the graph below, gas flows on the pipeline have rapidly ramped up since it was brought online at the end of July.
To continue reading, please click here...
