Why T. Boone Pickens Likes These Natural Gas Companies

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Legendary investor T. Boone Pickens has been called the Warren Buffett of energy investing, and over the years he has built up quite a legacy.

From his days as a wildcatter drilling in unknown oilfields, Pickens went on to start his own oil company, Mesa Energy, take on the likes of Exxon Mobil Corp. (NYSE: XOM), and manage a hedge fund, BP Capital.

As the head of Mesa, Pickens became known as a corporate raider, caught up in the deal-crazy days of the 80s. His first deal was to purchase energy company Hugoton Production Co. – a move made famous by the fact the company was 30 times the size of his own.

And today, at age 84, Pickens is still buying up energy stocks.

When you analyze his current top 10 holdings, it becomes clear natural gas companies are among his favorites.

We here at Money Morning certainly agree natural gas companies are primed to profit from the surge in U.S. natural gas production, largely a result of fracking, which has dramatically changed our country's energy outlook.

Less than 10 years ago, it was estimated that as much as 15% of our domestic gas would have to be imported in liquefied natural gas (LNG) form by 2020.

But now, the U.S. is projected to be a net exporter of gas by 2020, accounting for 9%-12% of global LNG trade.

And by 2040, U.S. consumption of natural gas is projected to rise more than 25% from 2010 levels, and domestic natural gas production is expected to climb more than 45% during the same period, Exxon Mobil said in a recent energy outlook.

So how do investors best tap into this trend?

Investing in Natural Gas Companies

Money Morning Global Investing Strategist Kent Moors urges investors to focus on companies with a proven track record that are involved in both gas and oil.

"Focus on the producers and service providers who are able to work in both oil and gas, both on the conventional and unconventional sides of both," Moors said. "The oil prospects are improving more quickly and this allows increasing commitment to gas without becoming dependent on natural gas, which is still a sluggish environment."

Even though the natural gas boom is in its early stages, there are clues as to which companies will emerge as winners.

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