Hot Commodity Stocks: Cheniere Energy (LNG)

| June 28, 2013 | 0 Comments

LNGWithout question, the biggest news out of the oil and gas industry over the past few years has been the advancement of drilling technology- specifically fracking.

As you may know, fracking is the revolutionary technique that has allowed explorers to unlock vast quantities of energy here in the US.  In fact, the Potential Gas Committee (PGC), a non-profit group of energy industry experts, estimates there’s 1,898 trillion cubic feet (tcf) of gas trapped in tight shale formations under US soil.

According to the PGC, that’s enough to last the US around 80 years at current consumption rates. 

Of course, this newfound energy bounty had a devastating effect on the price of natural gas in recent years…

Natural Gas

As you can see from this long-term chart, natural gas fell to $2 mmBtu in early 2012… a 10-year low.  Only within the past year has this commodity recovered thanks to increasing demand, widespread dry-gas well shut-ins, and drilling slowdowns. 

As of last night’s close, natural gas was trading at $3.74- still low by historical standards.

But it’s certainly not this cheap overseas…

Natural gas prices remain alarmingly high in Asian countries like China, Japan, and South Korea.  In fact, Asian consumers are currently paying anywhere from $10- $16 mmBtu for natural gas… a huge premium over US prices. 

Due to this astounding difference, well-positioned companies are licking their chops at the thought of selling cheap American natural gas into expensive overseas markets.

One of them is Cheniere Energy (LNG)…

The Houston, Texas based company owns the Sabine Pass, Louisiana natural gas liquefaction facility.  Cheniere was the first company to win approval for exporting natural gas from the US to overseas countries. 

And as of today, only one other company, Freeport LNG, is approved for export status by the Federal Energy Regulatory Commission and US Department of Energy.

Take a look at a chart of LNG…


As you can see, shares of the soon-to-be natural gas exporter are surging.  In fact, the stock has doubled since this time last year.

And that’s an upward trend that will likely continue…

You see, once the facility is operational, they’ll produce 18 million metric tons of LNG per year.  And even though the company has yet to make a dime exporting natural gas (Sabine Pass is expected to begin exporting in 2015), they already have buyers in place. 

In fact, of that 18 million tons they’ll produce, 16 million of them have already been sold into 20-year contracts. 

That’s right, 90% of Cheniere’s future LNG production is already under contract!  The company estimates $2.8 billion in annual revenues will flow into the company once Sabine Pass is operational.

So if you’re looking for a way to invest in what will likely be one of the biggest energy trends in the world over the next few years -before its even started- take a serious look at Cheniere Energy!

Until Next Time,

Justin Bennett

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Category: Energy, Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.