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Finally-encouraging news for beaten down natural gas stocks.
The fossil fuel welcomed words from the International Energy Agency (IEA) Tuesday that gushed about the boom in unconventional natural gas over the next two decades. The agency said the incoming supply increase would let the United States and other countries enjoy cheaper energy and shift the export reliance away from the Middle East.
IEA Chief Economist Faith Birol told Reuters that growth in shale and other new available forms of natural gas could mirror gains made in conventional gas in Russia, the Middle East and North Africa combined.
"Unconventional natural gas will fracture the status quo and will be a complete game changer with major geopolitical implications," Birol said.
Over the past years, high natural gas prices were a driving force behind new ventures into previously unavailable, unconventional gas reserves including tight-gas, shale gas and coal-bed methane resources.
But recently, ample stores and waning demand have weighed on natural gas prices, taking the commodity down to record low levels.
However, things are about to change.
Forecasts differ as for when the natural gas price channels will start churning and push domestic prices higher, but the tide will turn as the fuel becomes more widely used.
Jim Brick, macro-energy analyst at research consultant Wood Mackenzie, told Forbes he believes the U.S. could start exporting 3.2 billion cubic feet of LNG a day by 2030, as America moves away from its reliance on foreign energy sources and takes on a more advanced role as a worldwide energy supplier.
And as surplus domestic supplies begin to dwindle, natural gas prices will take off.
Mike Breard of Hodges Capital deems the chance of natural gas doubling in five years is better than the odds of oil doubling over the same period. The jump, according to Breard, could be sudden.
Natural Gas Stocks
Industry analysts say the price-change wait will definitely weigh on smaller, less-established natural gas companies, but several names in the industry are poised to benefit.
A name that frequently appears on recommended lists is Cheniere Energy Partners (NYSE: CQP). The company is set to begin commercial operations of a unique $10 billion liquefied natural gas (LNG) export plant in Sabine Pass, LA in 2016.
Forbes reported heavy hitter private equity group Blackstone has already plowed $2 billion towards the construction project.
What makes Cheniere so attractive is that overseas demand for LNG is expected to explode and Cheniere will be well positioned to move it there. Also, demand for natural gas to fuel power generators and natural gas vehicles should already be in place by 2016, and Cheniere will be ready to transport it.
In the meantime, a handful of companies are benefiting from the rise in oil while balanced with natural gas.
Leading gas companies with a sizable position in the currently more profitable oil space, which also acts as cushion to the record low natural gas prices, are Chesapeake Energy (NYSE: CHK) and Devon Energy (NYSE: DVN).
Chesapeake has had a troubled past, but it remains a favorite natural gas play. Morningstar analysts cite Chesapeake, one the largest U.S. natural gas producers, as "resilient if nothing else."
In a recent note Morningstar wrote, "The firm managed to survive near collapses in the 1990s and 2008 in part through its knack for creative fundraising. We expect Chesapeake to employ similar financing methods to help fund operations going forward."
On Tuesday shares of Chesapeake rose nearly 3.4% after storied investor Carl Icahn took a 7.6% stake in Chesapeake and lobbied for a major board shake-up.
As for Devon, Morningstar penned the company's superior footing should help the firm weather the current low gas-price environment and provide flexibility to both aggressively develop existing inventory and capture acreage in emerging plays.
And then there is SandRidge Energy (NYSE: SD), one of the first natural gas companies to move into oil. Anticipating the risk of falling natural gas prices, SandRidge was ahead of the decline and began moving into oil more than three years ago. Now it has proven to be at the head of the class in transitioning to oil, while still maintaining a prominent position in natural gas.
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