Money Morning Mailbag: Natural Gas Prices Present New Era of Energy Investing – But U.S. Government Not Up to Speed
Last week Money Morning Contributing Writer Jack Barnes explained how the delayed rebound in natural gas prices is offering investors a key opportunity in energy investing.
Spot prices for crude oil and liquefied natural gas, or LNG, have risen disproportionately to the low price of natural gas on the U.S. market.
"Why didn't natural gas bounce like its two other energy brethren?" Barnes asked. "That's easy. Once the United States discovered an abundant supply of natural gas in its shale basins, the fear that this country would run out of this critical source of energy basically disappeared. This new supply of natural gas is changing the way the United States views energy. In the past, we expected to have to use imports to meet our energy needs. But that may not be the case going forward."
How the U.S.-China Trade Spat is Jeopardizing Energy Sector Development
Usually, a government decision to subsidize clean energy alternatives would be applauded by others.
Not so when the government is Beijing, and Washington politicians halfway around the world are busy looking for votes.
This tiff could be filed away as just another tempest in a teapot... if it were not for the other important projects it could derail along the way. Those projects just happen to have a major impact for American natural gas technology and the companies likely to benefit from its foreign introduction.
If the two countries can get it together, it could mean profitable new opportunities for both.
To find out how the energy sector would benefit from U.S.-China cooperation, read on... Read More...
CNOOC Creates Biggest China-U.S. Oil Deal For Stake in Shale Gas Industry
China's state-owned energy company China National Offshore Oil Corp. (CNOOC) (NYSE ADR: CEO) late Sunday announced it would invest $2.16 billion in U.S.-based Chesapeake Energy Corp. (NYSE:CHK) to increase China's stake in unconventional gas resources like shale gas. It is the largest ever China-U.S. oil and gas deal.
CNOOC initially will pay $1.08 billion for a 33% stake in Chesapeake's Eagle Ford shale acreage in Southern Texas. China's third-largest oil company will invest an additional $1.08 billion by paying 75% of Chesapeake's drilling and completion costs in coming years, allowing Chesapeake to tap hard-to-extract shale gas deposits and boosting its weak balance sheet.
The deal highlights China's need to develop its shale-gas extraction techniques. The country has 26 trillion cubic meters of shale gas reserves that are largely unexplored due to a lack of drilling ability - and Chesapeake is a pioneer in the shale gas industry.
Cold-Weather Investing: Coal, Natural-Gas and Heating-Oil Investments Will Pack a Punch in January
The irony about cold-weather investing is that the biggest profits come to those who position their money during the hottest months of the year - even during the record heatwave Americans have been experiencing this year.
In short, now's the time to start thinking about such winter-related topics as heating bills, and such cold-weather investments as natural gas, heating oil and coal.
According to the American Petroleum Institute (API), natural gas provides heat for 55% of homes in the United States, followed by electricity, which warms 39%. Heating oil, propane and coal play only minor direct roles, although coal is used to fire 49% of America's electric generating plants, with another 20% fueled by natural gas.
That means natural gas is the natural choice of investors looking for winter-related profits - although Dr. Kent Moors, editor of Oil & Energy Investor newsletter and a frequent contributor to Money Morning, cautions that factors other than routine home-heating demand play a major role in setting prices.
This China Province Will Become a Global Oil-and-Gas Market Powerhouse
Like everything else, the balance of power in the global energy market is shifting toward China, where a little-known province is perfectly situated to become a global oil-and-gas market powerhouse.
Nestled in the far northwest of China, Xinjiang is the country's largest province and the primary domestic source for oil and gas. It is sparsely populated and as big as Western Europe. The name, Xinjiang, literally means "New Frontier." And recent decisions in Beijing are going to give that translation even more meaning - transforming this province into a "new frontier" for the global energy sector.
To understand how to profit from this development, please read on... Read More...
Hot Stocks: TECO Energy Inc. (NYSE: TE) Is Turning Investors On to Profit
TECO Energy Inc. (NYSE: TE) over the past year has been one of the best performing stocks in my Strategic Advantage StrataGem portfolio.
The stock has jumped 7.75% in just the past month, is up more than 30% in the past year, and it pays a generous 4.7% annual dividend.
So here's what it is all about.
TECO, which is based in Tampa, provides electricity to 667,000 customers and natural gas to 330,000 individuals in west central Florida. It also operates a coal mining operation in Kentucky and a small utility in Guatemala.
Since 2003, TECO - formerly called Tampa Electric - has reshaped itself into a regulated utility from a diversified energy company. It sold $4 billion of assets and reinvested the proceeds in regulated utility projects with attractive returns. The regulated units, Tampa Electric and Peoples Gas, now generate 90% of TECO's profits. TECO's $3.52 billion market cap and $3.40 billion in annual sales make the company one of the smaller utilities in the United States.
The BP Relief Wells … And the Two Nightmare Scenarios to Fear
Although the global energy sector is entering its most-promising stretch in decades - with more new technologies and more investment opportunities than ever before - I just can't seem to get away from BP PLC (NYSE ADR: BP) and its problems.
Take last Thursday, for instance. I began the day at FOX Business News, where the interviewer wanted me to explain what will happen if the BP relief wells fail. Then I spent an hour as the guest on a radio talk show from Johannesburg, South Africa, detailing what options are available to BP. Later still, I served as a consultant to a Wall Street investment crew - via conference call - once again on the status of the BP relief wells.
The BP relief wells are right now the dominant topic on everyone's mind. But there are two potential scenarios - of "nightmare proportions" - that investors need to know about.
Let me explain...
To understand the possible nightmares that BP faces in the months to come, please read on... Read More...
New 'Energy Advantage' Advisory Service Uncovers Top Energy-Sector Profit Opportunities
Oil prices will reach a record $150 a barrel in the next 12 months, sending gasoline prices to $3.80 a gallon. Commercial nuclear power will continue its comeback, but as small, sealed "mini-reactors" that can produce energy for up to 60 years - instead of as the hulking power plants of years gone by.
New global-warming regulations will turn air-pollution credits into financial assets that can trade like stocks or bonds. And a little-known U.S. pipeline and East Coast shipping terminal will transform the formerly fragmented U.S. natural-gas market into a fast-moving global marketplace - with profit opportunities to match .
To help investors profit from these global opportunities, Dr. Kent Moors - a career-energy-sector insider who is an advisor to six of the world's Top 10 oil companies and a consultant to some of the world's largest oil-producing nations - has launched the Energy Advantage advisory service.
The "New" Global Energy Sector: "The Profit Opportunity of Our Lifetime"
Oil prices will reach a record $150 a barrel, sending gasoline prices to $3.80 a gallon. Commercial nuclear power is making a comeback - but in "nuclear batteries," instead of in hulking power plants of the past. New global-warming regulations will turn air-pollution credits into financial assets that can trade like stocks or bonds. And China's zooming growth will turn the global energy sector upside down.
If this sounds like a view of the distant future - the global energy sector's own version of "Future Shock" - think again.
All of these "predictions" are becoming a reality, even as you read this. And while these transformative events will likely make the global energy sector more volatile and confusing than ever, they are also creating the largest wealth-creating opportunities that most investors will ever see, says Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world.
For all the details on Dr. Moor's energy-sector predictions, please read on... Read More...
Australia Reduces Mining "Super Tax," Reviving Profitability of Resource Sector
Australian mining companies declared a huge win today (Friday) when the government announced the proposed mining "super tax" would be reduced, prompting some companies to reactivate shelved projects and reopen merger and acquisition talks.
Australia's Prime Minister Julia Gillard agreed on a compromise plan that would reduce the planned tax to 30% of profits from iron ore and coal, and 40% tax on oil and natural gas, down from the originally proposed 40% tax on all resources. The new plan, called the mineral resource rent tax, would also raise the tax's trigger level to profits that exceed a 12% rate of return instead of 6%.
"The reduction in the headline rate is an amazing concession," John Robinson, chairman of Global Mining Investments Ltd., told Bloomberg. "It's certainly better than I had expected."
Money Morning Mailbag: Emergent Natural Gas Market Improves U.S. Fleet Vehicles
The global energy sector is shifting which means huge changes lay ahead for the U.S. natural gas market. Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world, says the United States' fragmented natural gas market is "about to become one global market, operating at the speed of light."
U.S. natural gas will play a major part in reducing greenhouse gas emissions by replacing older, inefficient coal plants. Its use is likely to double to 40% of the energy market over the next several decades, according to a study by the Massachusetts Institute of Technology.
The abundance of natural gas - especially shale gas, an unconventional source packed tightly in rock formations - in the United States has driven down natural gas prices, making the fuel more desirable. Shale gas has grown to 15%-20% of the U.S. natural gas output, and as companies design better drilling technology, shale gas reserves will be more easily attainable.
"Natural gas is becoming sexy again, with all this new technology to get the gas out of the shale," Kim Hill, director of the Sustainable Transportation and Communities group for the nonprofit Center for Automotive Research told The New York Times.
The 'New' Energy Sector: Windfall Profits for Investors, Energy Independence for the U.S. Economy
The BP PLC (NYSE ADR: BP) oil spill has been a wakeup call for energy-sector regulators.
But it's been an even bigger wakeup call for investors.
Years from now, investors will look back at this period as a turning point - the start of the greatest profit opportunity of this generation. And that's not all. The post-oil-spill period will go down in history as the period during which the United States was finally able to break its dependence on foreign oil, says Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world.
Investors who understand the energy-sector shifts that are taking place "will make more money in energy investments over the next several years than in any other sector during any other period in their lifetimes," says Dr. Moors, who is also the editor of the Oil & Energy Investor newsletter. With the changes he's currently projecting, "a large measure of energy independence for the U.S. becomes possible. And I'm not just talking about a mere economic 'recovery' here. We'd be looking at a standard of living that's 60% higher, an economy expanding at 5% to 7% a year and - most important of all - a future that we could dictate."
To understand the top trends unfolding in the new energy sector, please read on... Read More...
Shell Grabs Crucial Shale Gas Deposits With $4.7 Billion Deal
Royal Dutch Shell PLC (NYSE ADR: RDS.A, RDS.B) announced Friday it would pay $4.7 billion in cash for U.S.-based East Resources, Inc. to obtain a sizeable stake of "high-potential" North American shale gas acreage.
Shell, Europe's largest energy producer, gets 1.05 million acres of gas properties in the northeastern United States and Texas. About 650,000 acres gained in the acquisition are part of the crucial Marcellus Shale, a tight gas property with shale formations estimated to hold up to 262 trillion cubic feet of recoverable gas.
The remaining acres are part of the Eagle Ford Shale area in South Texas. The deal brings Shell's total U.S. tight gas acreage up to 3.6 million acres.
"The opportunity now is to consolidate our tight gas portfolio, divest from non-core positions across North America, and to invest for profitable growth," Peter Voser, chief executive of Shell, told The New York Times.
Decline in U.S. Natural Gas Imports is Causing Panic in Leading Exporting Nations
The world 's biggest natural gas exporters met today (Monday) in Algeria and agreed to index gas prices to oil as shrinking U.S. natural gas imports are causing a global supply glut.
"All ministers agreed and supported that we continue our efforts to achieve indexing gas to oil," said Russian Energy Minister Sergei Shmatko.
The Gas Exporting Countries Forum (GECF) members include Russia, Iran, Qatar and eight other nations that hold two-thirds of the world 's gas reserves. They 've watched gas prices fall nearly 50% in the past two years. Current gas prices of $4 per million British thermal unit (BTU) are about 20 times lower than oil, but are usually around 10 times lower than oil.
U.S. natural gas prices have fallen 28% since December as an increase in the U.S. shale rock gas supply has reduced the need for U.S. natural gas imports. Shale rock gas is retrieved from tight rock formations and its U.S. boom led the country to extract more gas than Russia last year for the first time since 2001.
Russia 's energy giant Gazprom has a five-year plan to take 10% of the U.S. natural gas market share, but U.S. shale gas exploration has put a damper on that goal.
"The influence of shale gas raises the prospect of change on gas markets," Russian Natural Resources Minister Yuri Trutnev told Reuters. "We have a problem with shale gas. This is not only my position, but the position of Gazprom as well."
As the United States becomes a less reliable consumer, gas suppliers aren 't having much luck replacing the lost business.
SandRidge Energy Buys Oil Developer to Reduce Its Reliance on Suffering Natural Gas
SandRidge Energy, Inc. (NYSE: SD) on Sunday announced it would pay $1.6 billion for Arena Resources, Inc. (NYSE: ARD) to develop a more oil-focused business, as natural gas prices remain low.
SandRidge will pay $2.50 in cash and 4.78 SandRidge shares for each Arena share - a 17% premium to Arena's $34.26 Thursday closing price. The combined company will be valued at around $6.2 billion.
This purchase makes SandRidge one of the largest producers of conventional oil and gas in West Texas. It's the second acquisition for the company since November, when it paid $800 million for Forest Oil Corp. (NYSE: FST) properties.