The U.S. is quickly becoming the Saudi Arabia of the 21st Century.
It's already a leading exporter of light sweet crude and diesel. It's a leading exporter of gasoline and natural gas liquids (NGLs).
And in one of most ironic twists in the oil patch, the shale boom will turn America from a perennial natural gas importer to one of the leading natural gas exporters.
This has huge implications for Americans as well as the companies that are involved in making it happen.
Although the U.S. is no longer the world's leading energy importer - China passed us for that ignominious title earlier this year - we still consume a lot of energy. Now that natural gas is more easily accessible domestically, it's revolutionizing the way we use energy in the U.S.
Cheap gas will force the shift from coal in many industrial and utility plants and gas will have greater use in the transport sector as well. Plus, gas prices don't suffer the vagaries of international politics or the instability of nations in other parts of the gas-producing world.
So this transition is going to be sustained and ongoing, which is great for the businesses involved.
The bigger game-changer is selling the natural gas and NGLs to all the nations that want them.
You see, while natural gas is cheap in the U.S. it's three times more expensive in Europe and five times more expensive in Japan and other parts of Asia. That's a lot of profits left on the table for U.S. producers.
The problem is, we can't get it there...yet. But the companies who make this possible will benefit immensely...
It's amazing to think that less than a decade ago industry experts were preparing for import demand to dramatically increase.
Now we have vast amounts of natural gas, oil, NGLs, you name it. But we can't get that gas to the countries that will pay us top dollar because we don't have the export facilities to ship it out.
But after sinking billions into natural gas import terminals - capital intensive, long-term projects - companies are reversing course.
However, import sites, like export sites, are capital intensive and take years to build. And you can't simply swap out an import facility for an export facility.
With all this pent up demand, the select few companies that have landed contracts for the first export facilities to be constructed have seen their stocks soar.
Yet there are numerous opportunities in this space, especially because there are more stocks that stand to benefit other than just the terminal operators.
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There is one way to play this massive global energy shift, with a simple, tax-advantaged investment vehicle that represents almost every worthwhile investment in the sector.
I've been recommending master limited partnerships (MLPs) to oil and gas investors for years now.
In fact, I track every single one of them. And several have become mainstays in both my Energy Advantage and Energy Inner Circle investment services.
Why do I love MLPs so much?
It's simple. They allow energy investors to win two ways: First with high income and second with their significant growth potential.
In today's markets, that's an unbeatable combination - especially since MLPs pay very high yields - typically 5% to 12%.
Just try to get that from your bank or favorite "Blue Chip."
From the tax advantages to their high-paying yields, it's hard to beat the returns of MLPs. I'll get to my favorite pick soon, as well as a few other lucrative plays.
But first, the good news for investors is that energy-based MLPs are heating up again.
You see, the shape and focus of these MLPs are changing fast and for the better - even though the changes haven't drawn much attention outside of these pages quite yet.
However, don't expect all of this to remain under-the-radar for too much longer.
In fact, new "MLP clones" are beginning to emerge that are going to hand us some interesting investment options in the coming months.
For MLP investors, what is about to hit is really something quite new...There's a "new breed" of MLPs about to hand out even more cash.
Currently, there are 48 of these partnerships providing an equity side through which you can participate. By law, MLPs must provide a pass through of the profits to directly to their partners. This avoids having to pay corporate taxes.
So when the general partners decide to float a portion as an equity offering, they're able to pay much higher dividends than the market average.
The growth side of the equation largely stems from the asset class upon which most MLPs are based. These are midstream in general and pipelines in particular. While natural gas, crude oil, natural gas liquids, and oil products are represented in these assets, gas still leads the list.
And as long as prices for gas and oil remain high enough and demand does not suffer a radical contraction, MLPs are a good offset for direct production and processing plays in an overall investment portfolio.
Today, the price side shows no signs of declining dramatically anytime soon, while demand is slowly building, especially on the gas side because of a range of increasing needs for volume extending from electricity generation, petrochemical feeder stock, to the advent of liquefied natural gas (LNG) export.
On the oil side, the rise in unconventional U.S. production has led to an acceleration in midstream requirements from basins like the Bakken and Eagle Ford with the Utica basin likely to shortly follow suit.
That means there will undoubtedly be additional demand for midstream products, increasing the revenue potential for MLPs.
The important point to remember in all of this revolves around the price of the raw material.
MLPs no longer are making money simply because the market price of crude or gas is rising. The widening end user applications and diverse basin sourcing means midstream services are now in greater demand.
So long as the demand side remains constant and basically in balance with new supply, MLP profitability isn't dependent merely on prices rising. Range pricing is sufficient.
What we're beginning to witness on the oil side is a dimension already well experienced with gas. There, MLPs make money whether operating companies need to move or store production.
For some time now, a majority of pipeline capacity in many areas of the country are actually used for storage rather than transit of produced gas. Now the same development is taking place in oil.
Here, MLPs are increasing capacity by an apparently inefficient approach. They're putting loops in pipelines. This does increase the length of pipe through which transmitted volume must pass, which seems counterintuitive. Unless, of course, you consider how much capacity is available for storage.
Both sides of the issue - transport and storage - are now requiring an absolute quickening of new midstream asset construction. That bodes well for MLPs.
My favorites in the space include Cheniere Energy Inc. (NYSE: LNG) and its MLP, Cheniere Energy Partners LP (NYSE: CQP).
Also equipment companies like Schlumberger Ltd. (NYSE: SLB) and Halliburton Co. (NYSE: HAL) will benefit from the new boom but they're such global giants, they're more of a play for increasing global demand than just a domestic winner. But they're still great buys.
One thing is clear: The New Energy Age is upon us and there will be plenty of excellent investing opportunities.
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