Wednesday May 30, 2012
by Jim Powell, editor Global Changes & Opportunities Report
The sudden abundance of shale gas from fracking drove the price of natural gas down from over $10 per thousand cubic feet in 2005 towards $2.00 recently. Many producers are not even covering their costs on the gas they sell.
However, in our energy-hungry world there is no way the price of natural gas will stay on the floor very long.
Energy users in many industries are switching from coal and oil to cheap natural gas as fast as they can. That’s a layup shot for a big rebound in prices.
Final approval was recently given for the first liquefied natural gas (LNG) facility to be constructed in the lower 48 states in over 40 years.
The plant is attracting huge interest by foreign customers that are eager to get America’s low-cost shale gas. Together the importers will take 89% of the new plant’s capacity. We are seeing the start of a new industry.
As the builder of the new LNG plant, Cheniere Energy (LNG) has everything going its way, a happy situation that should continue for several years.
The stock is up 20.9% since my recommendation in March. I think it is still attractive, but if you can buy the stock during a correction, all the better.
I think long term investors should also consider buying more EnCana (ECA) a premier natural gas producer.
When NG prices plunged, so did EnCana’s stock price. The new level doesn’t even come close to reflecting the value of the company’s vast reserves.
I think EnCana will deliver top returns to investors who buy the stock at today’s bargain price. Once the recovery begins, EnCana should continue to generate profits for at least a decade.
Learn more about this financial newsletter at Jim Powell's Global Changes & Opportunities Report.