VNR, BBEP, LINE are some gas rich companies I know of. In their marketing materials and presentations, they often list their peer group and compare hedge ratios, gas/oil mix, and such. Would be a good place to look
cqh
PGF, PEY.TO, TOU.TO. All firms with substantial gas assets in the WCSB (which will benefit huge from LNG). None are pure play. Do your research here, markets are not efficient in this area and there are some value plays. I’m not particularly recommending any of those three, but its a starting point.
Just going to throw out another nat gas name, GasLog (GLOG or GLOP which is their MLP). This is a liquified natural gas shipping company. Depending on how the energy future plays out, there could be substantial amounts of nat gas imported to Japan and Europe. This stock has been very volatile lately, with a high of 32 and a low of 21 this morning, so certainly not a safe play.
How about Cheniere?
^Yes, Cheniere is the one pure play. I didn’t bring it up b/c I think if you weren’t already in you may have missed the boat. The stock has kind of gone parabolic in 2014 and that scares me. LNG has a $18.6B USD market cap right now, and it’s not going to be generating earnings or free cash flow for multiple years into the future. Considering its level of risk, there could be some real volatile swings.
I know the thought of LNG is popular right now in the U.S. and Canada, but…LNG projects are tremendously capital intensive, which will really lower returns on investment. Oil and gas companies view LNG projects as safer, steady returns (once operational), but the IRR’s are in the teens on these projects largely b/c the upfront capital costs are so huge. Also, there’s no guarantee these future LNG contracts will be oil-linked, and even if they are oil prices may be lower. Additionally, North America is not the only continent in the world that has shale gas reserves. There are significant reserves in China, Poland, France, South Africa, Argentina that may or may not be developed – I’d say China is most likely to develop their reserves of that group. LNG is all based on regional natural gas price differentials, and if 5-10 years from now China gets in on this it’ll change the LNG market b/c Japan/South Korea/China demand for natural gas is a strong underpinning of the LNG market. I understand LNG contracts are long-term, take-or-pay contracts in most cases but I still think its a big risk to this market.
Also, there’s a lot of construction risk here. There’s a lot of demand right now for LNG projects, and only so few E&C firms that are really good at these projects. I think the Cheniere project has a good E&C firm on the case, so that’s good but Cheniere’s stock price has a lot of positives baked into its market value right now.
I agree with the posters that said the best way to play it is the natural gas E&P’s.
If you want to get diluted to no end by executive compensation, it’s a good pick.
Natural gas E&Ps getting hammed today. I’m buying a bit here, cautiously.
^ I actually did, too. Good luck.
Pipelines all day long
^ Mmhmm. I’m pretty bullish on tolls if the trend continues that no new pipe can be built and railways keep having their oil loads explode and spill onto ducks and children.
Ha ha ha. What you think of the export ban bro? You think it will get lifted?
^ The export ban is one of the dumbest pieces of American law, and there are lots of dumb pieces of American law. I want to see the US export as much oil as possible, as it means they’ll import more from Canada (due to regional pricing dynamics).
commodities are one of the worst investments in terms of returns. The only thing they beat is inflation. when dollar is getting stronger, they are even worse. china bubble is what fueled the commodity price rise. I never thought over investing can be a problem, but in china’s case it is (diminishing marginal returns and all that). they already lowered their growth rates since then.
I agree that - aside from their benefits as inflation hedges - commodities have a lot of volatility that is not clearly compensated with real returns. We have run asset allocation models and we tend to sticking commodities in there because people keep asking “what about commodities” if they aren’t there, but the commodities allocation really has the weakest investment case going for it. Perhaps there are some diversifying qualities to commodities, but the real return may not be enough to justify the whippy ride.
For most commodities, people imagine prices going up in real terms when demand rises, but substitution and technology effects often end up neutralizing this over the long run, or people simply learn to do with less.
Individual commodities have their specific dynamics, but commodities in general really are a hard case to rationalize, unless you are worried about significant inflation or currency devaluation.
I love commodoties.
You get the same high return as treasuries, but get the low risk of small-cap equities. But hey–it’s uncorrelated to your existing portfolio, right?
And you get a K-1.
I don’t invest in commodities. In fact I don’t even invest in bonds either. My portfolio (all ETF index funds):
60% - S&P 500
30% - Intl Developed
10% - Emerging
^ If you have a 40 year time frame, why not!
60, 30, 10 is a good allocation, its real close to the market caps of all publicly traded crap. us centric :). its more 50 US / 40 International Developed/ 10 Emerging on real weightings. Funny shit though greenman. I told my boss your joke when we were talking about the end of the super commodity cycle. Major props :). Practically everyone fell for that correlation bit back then though. In hindsight, its very funny, since people did invest in it for silly things.