The Natural Gas Boom Means Opportunity for Energy Investors
A Flood Tide Leads To Fortune But There Is No Tide Table
Stock Market Video
In Case You Missed It
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When it comes to the energy industry, it’s increasingly common to talk about one of only two things: the price of oil and alternative, or green, energy sources. Today, however, I’m not interested in either of those topics. No, this time I want to discuss an energy sector that enjoyed some big news this week--natural gas.
The Environmental Protection Agency on Wednesday outlined the very first rules to deal with air pollution as it relates to hydraulic fracturing, or fracking, the practice that companies use to release natural gas and oil from shale formations. In brief, the rules force companies that use fracking to include a technology known as “green completions” in the first few days after a well is tapped but before it begins production.
A green completion forces the drilling company to trap the initial burst of gas out of the well, which can include methane, in tanks and then ship it off to be turned into fuel. The new law, which doesn’t address any other concern about fracking, including possible groundwater pollution, isn’t due to take effect until 2015 ... a delay that industry groups predictably pushed for. A previous version said 60 days.
Environmental critics think the regulation doesn’t go far enough to address all the concerns associated with the practice. On the other side, a New York Times article quoted one industry group as suggesting the new regulations will make exploring in new areas cost-prohibitive and slow the boom in domestic natural gas production. The problem with this argument is that about half of all natural gas wells already use green completion, and one company told Bloomberg news that the systems don’t cost any more than simply venting the gas into the atmosphere.
The way I see it, new regulations like this present an opportunity for forward-thinking companies. If EPA numbers are to be believed, companies who use the green completion technology could make $11 million to $19 million more per year by capturing methane gas (which is now burned off) and turning that into more fuel to be sold to refineries.
More fuel is, of course, a good thing because it can supply a growing demand for energy--specifically natural gas--in the U.S. and abroad. Natural gas is a lot cheaper than oil right now, with both West Texas Intermediate and Brent crude oil trading at above $100 a barrel. And technology exists that can convert passenger and commercial vehicles from using gasoline to running on natural gas.
An increased supply of natural gas also means the chemical industry is growing. Dow Chemical (DOW) recently announced a new $1.7 billion plant to be built on the Southeast Texas coast. Other companies are also looking to expand operations in order to take advantage of the boom in natural gas production. Some experts even predict U.S. producers of natural gas will eventually run out of places to use it ... that’s how big the supply is growing.
My point in all this is that intelligent companies like Westport Innovations (WPRT) are taking this natural gas surplus and running with it in entirely new directions. Westport is making millions from its system that converts trucks and cars to use natural gas instead of gasoline. Westport, by the way, was recently recommended in Cabot Global Energy Investor. Subscribers who bought the stock in October 2011, when it was first recommended, gained up to 40% and that isn’t the first time Editor Lou Gagliardi picked a winner. If you’re interested in seeing more of Lou’s recommendations, I encourage you to click here.
As a result of all this growth, the opportunity for the savvy investor to get in on the natural gas boom is still wide open. Especially when you consider the fact that the energy industry is one of the few areas where true global interdependence plays out.
Think about it. Foreign companies who ship oil to the United States control production, which in turn means gas prices at the pump in Boston or Tulsa, Oklahoma, rise or fall depending on the decisions of a government official sitting in Riyadh, Saudi Arabia, or Moscow, Russia.
Now imagine that natural gas produced in the United States is used to make products shipped all over the world. And that passenger cars in 10 years run solely on natural gas freed from rock formations in Pennsylvania instead of oil drilled somewhere far away.
Wouldn’t that future be even better if you made a fortune from it too?
Here’s this week’s Contrary Opinion Button. Remember, you can always view all of the buttons by clicking here.
A Flood Tide Leads To Fortune
But There Is No Tide Table
The flood tide is the major market trend in a bull market. In the 1990s it was technology and Internet stocks. In the 2000s it was Chinese and other emerging markets stocks. Every one of these major trends goes to extremes, persisting far longer than observers expect. But there is no schedule that can predict these major trends, and thus the only sure system is the one that observes the trend and stays in synch with it.
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In this week’s Stock Market Video, Cabot Top Ten Trader Editor Mike Cintolo says not much has changed in the market over the past week. You should expect some short-term pain, Mike says, but the long-term trend is still up. Stocks discussed: Apple (AAPL), Priceline (PCLN), SXC Health Solutions (SXCI), Salesforce.com (CRM), GNC Holdings (GNC), Las Vegas Sands (LVS), Equinix (EQIX) and Coinstar (CSTR). Click below to watch the video!
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 4/16/12 -- Stocks Breaking Out to New Highs are Your Best Bet
On Monday, Cabot Publisher Timothy Lutts wrote about the benefit of going off the beaten path when it comes to both travel and investing. Tim also discussed how stocks breaking out to new highs are typically your best bet for banking gains in the market. Featured stocks: Intuitive Surgical (ISRG), Chipotle Mexican Grill (CMG), Tractor Supply Company (TSCO), Liquidity Services (LQDT), Ubiquiti Networks (UBNT), and Annie’s (BNNY).
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Cabot Wealth Advisory 4/19/12 -- What I Really Think About Investing in Apple
On Thursday, Cabot Publisher Timothy Lutts wrote about the logic of declining insurance on rental cars, as well as his view--from two different perspectives--on whether to invest in Apple at its current high price. Featured stock: Sourcefire (FIRE).
Happy Investing,
Matt Delman
Editor, Cabot Wealth Advisory
Editor’s note: There’s profit to be had with increasing energy demand around the world, and Cabot Global Energy Investor can make that happen for YOU. It doesn’t matter if you’ve got only $1,000 to invest either.