Good News for Investing in Natural Gas: U.S. Government Approves Sabine Pass Plant
That breeze gusting through the streets this morning isn't the sign of a coming storm.
That's a collective sigh of relief coming from those investing in natural gas companies after a torrid first quarter for the sector. Natural gas prices have collapsed below $2 per 1,000 cubic feet for the first time in a decade.
And that's not even adjusted for inflation…
But on Tuesday came the first positive sign in months.
The U.S. government approved the development of the Sabine Pass plant, the first natural gas export facility in the lower 48 states.
CNN Money reports:
"The Federal Energy Regulatory Commission [FERC] voted in favor of Texas-based Cheniere Energy's plan to build a giant natural gas liquefaction and export terminal at Sabine Pass, which straddles the Texas-Louisiana boarder just north of the Gulf of Mexico.
Although environmentalists have threatened to sue to stop the 500-acre, $10 billion project, Cheniere says it plans to start building before July."
T. Boone Pickens Loses "Big" in Alternative Energy
No, he didn't lose a donkey.
But T. Boone Pickens lost a synonym for the animal and a whole lot of money in the wind industry.
"I'm in the wind business…" said Pickens yesterday on MSNBC's Morning Joe. "I've lost my ass in the business."
Pickens didn't blame his own investment for the current situation. He acknowledged that the technological shift in shale oil and gas development has greatly changed the game for American energy, and has made drilling more practical and affordable.
But the statement was just a precursor to his observations that Washington has little priority to setting a national energy policy that is both sustainable and affordable to Americans.
On the show, Pickens hammered home the point that the current administration not only lacks an intelligent energy policy. "They don't have an energy policy."
Why this statement is shocking to anyone, especially the hosts, shouldn't confuse anyone.
The Keystone Pipeline Fallout: Canada Makes Over a Billion New Friends
"If you do not change direction, you may end up where you are heading." Lao Tzu
You can forget about energy independence for now.
Without Canadian oil it is nothing but the latest American pipe dream.
In the wake of the Keystone Pipeline decision, Canada has decided to play ball with China instead.
According to Canadian Prime Minister Stephen Harper, the U.S. reluctance to build the Keystone Pipeline has caused his nation to increase the flow of oil headed west.
Instead of flowing south into the U.S., the same oil is now going to be headed to China.
"Look, the very fact that a 'no' could even be said underscores to our country that we must diversify our energy export markets," Harper said last week, referring to the Keystone Pipeline decision.
"We cannot be, as a country, in a situation where our one, and in many cases, only energy partner could say no to our energy products. We just cannot be in that position," Harper said.
Considering that Canada is our No. 1 source of oil, Harper's decision could place a serious dent in the idea that the United States can become energy independent in the next two decades.
The Truth About $6 Gas, $200 Oil and the Quest for Energy Independence
No one needs to tell the average American about the impact of oil and gas prices. If they don't feel it in their wallets every day, they hear about it on the news every night.
But surprisingly, amid all the rhetoric, there have been no real answers to some of the key questions driving the energy debate… until now.
Is President Obama truly responsible for high gas prices, and can his opponents really bring them back down?
What role has Federal Reserve Chairman Ben Bernanke's loose monetary policy played in soaring energy costs?
Is more domestic drilling the answer?
Renowned energy expert Dr. Kent Moors answers all of these questions – and more – below.
Dr. Moors, an adviser to six of the world's top 10 oil companies and a consultant to governments around the world, also talks about the effect political turmoil in the Middle East could have on energy prices in the immediate term and how North America will gain energy independence in 15-20 years.
Here's what else Moors – a bona-fide energy expert – had to say…
Dr. Moors on Gas Prices
Can a U.S. President actually impact gas prices- at least enough to get gasoline back to $2.50 a gallon? Or is this just talk? I don't know whom to believe anymore…
The Natural Gas Act: Another Washington Boondoggle
With gasoline fast approaching $4 a gallon and heading toward $5 this summer, it's no surprise that politicians are panicking.
In Washington D.C., everything is an emergency. Legislation is always the antidote.
So now politicians are pushing the Natural Gas Act as a solution to high gas prices, rather than allowing the market to work.
Of course, none of them want to take the time to understand the true reasons why gas is going to $5 a gallon.
That would require a basic understanding of business or economics, something few in Congress seem to have.
Instead, what you can expect is the typical Washington response-a task force to investigate speculation in the oil futures markets.
U.S. President Barack Obama announced one last week without recognizing the futures markets actually improve liquidity and oil production certainty.
It's how Washington works. The Natural Gas Act is just more of the same.
The "Sweet Spot": Goldman Sachs Bullish on Oil and Gas Pipeline Companies
But last week, Goldman Sachs reminded us that they are bullish on the oil and gas pipeline sector by upgrading a number of portfolio stocks that have been prominent features of our portfolios and discussion on the sector.
Goldman analysts made headlines last week by adding a number of pipeline firms to their "Conviction Buy" list. The company added Williams Companies (NYSE: WMB) while dropping Buckeye Partners L.P. Nonetheless, Goldman still rates Buckeye as a "Buy."
Goldman also raised a number of additional stocks to the buy list, including Plains All American Pipeline LP (NYSE: PAA), and maintained its "Buy" ratings on Enterprise Products Partners (NYSE: EPD), and Enduro Royalty Trust (NYSE: NDRO), and Magellan Midstream Partners (NYSE: MMP).
The reason for these moves shouldn't be a surprise to anyone who follows us at Oil and Energy Investor.
The Sweet Spot in Oil and Gas Pipeline Companies
It's not surprising that Goldman Sachs is so bullish on the pipeline industry. After all, my colleague Dr. Kent Moors has been touting the best known secret on the markets for more than a year.
If you want to make money in energy investing, you want to park yourself right in the middle of the supply chain. By doing so, you're far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels.
Midstream companies, those that connect the upstream exploration and production companies to the downstream retail, refining and marketing channels, provide vital services in transportation, storage, and processing.
Simply put, this is the "Sweet Spot" of energy investing.
Why Energy Investors Will Get Crushed If They Fail to Look Towards Dubai
The way I see it, U.S. and European energy traders will be lucky if the door doesn't hit them in the backsides as everybody heads for the doors.
Like so many Western investors, they still have their blinders on.
They think that if demand in the U.S. and the European Union (EU) begins to slide that oil prices will fall into the toilet right along with it.
But what they don't see is that Asian oil demand is what actually "drives" the global oil market.
This is why today's investors need to adopt an energy investment strategy focused on what is happening on the other side of the Pacific.
Because what happens there is critical to higher prices and profits here.
First, consider Asian demand.
In the fourth quarter alone, Asian demand increased by 400,000 barrels per day even as consumption in the rest of the world fell by 700,000 barrels a day, according to the International Energy Agency (IEA).
Meanwhile, Chinese demand in particular is so strong that the Red Dragon is set to import more oil than the United States within two years, according to my projections.
And don't take my word for it. Goldman Sachs Group Inc. (NYSE: GS) thinks the U.S. will be overtaken by China this year, while the IEA believes it will happen in 2020.
I think that's splitting hairs frankly.
What matters is that Asian oil demand growth is likely to represent a staggering 70% of the world's total oil demand growth this year. Or more depending on which studies you believe.
Four Natural Gas Companies Investors Can Buy Right Now
Natural gas companies are hurting – there's no doubt about it. But that doesn't mean natural gas companies are bad investments.
In fact, some of these companies are currently on the bargain rack. You just have to know where to look.
Take EOG Resources Inc. (NYSE: EOG), for instance.
Traditionally known as a natural gas producer, EOG has reinvented itself as a major oil producer.
It's still heavily involved in the natural gas market, but the company also has managed to increase its total liquid oil production by 49% to 130,000 barrels per day.
Chief Executive Officer Mark G. Papa said he expects to reach 200,000 barrels per day this year. That would make EOG the second- or third-largest oil producer in the United States.
The effects of this transformation are evident in the company's earnings.
After taking a third-quarter loss of $70.9 million in 2010, EOG reported net income of $541 million for the third quarter of 2011.
That's not all. EOG's potential for growth is outstanding, since it has huge oil shale reserves. The company is the largest oil producer in both North Dakota's Bakken Shale and the Eagle Ford Shale in South Texas.
These two shale oil fields have played a key role in ramping up U.S. oil production over the past few years. They each have an estimated 4 billion barrels of recoverable reserves.
Earlier this month, analysts from Goldman Sachs Group Inc. (NYSE: GS) raised their EOG share price target to $118, while RBC Capital Markets (NYSE: RY) analysts set their target at $119. Those targets estimates represent a 13% to 14% premium from yesterday's (Tuesday's) closing price of $104.55.
And that's just one natural gas company with a strong investment pedigree.
Here are three others… To continue reading, please click here…