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Natural Gas Stocks Benefit From Export Boom


Energy stocks have been battered this year, down 13% through June 30 based on an index of 34 companies, as oil prices sank because of a worldwide glut. But investors are largely overlooking a patch of the energy sector that should see no shortage of demand for the next decade and beyond—US natural-gas exports.

The boom in hydraulic fracturing (fracking) has made the US the world’s top producer of natural gas and the US also is expected to become one of the world’s largest exporters.

Natural gas fetches prices two to four times higher in Europe and Asia, where it’s replacing coal in the production of electricity as countries work to meet commitments to reduce greenhouse gas emissions. Recently, the US and China crafted a natural-gas trade agreement that could open up Chinese markets and generate $26 billion in ­annual revenue for US suppliers. At the same time, countries in northern and central Europe see the purchase of US natural gas as a way to alleviate over-dependence on Russian natural gas.

My favorite stocks likely to benefit from US natural-gas exports…

Cheniere Energy (LNG), whose stock price jumped 28% over the past year, has facilities in Texas and Louisiana that convert natural gas to liquid form for more cost-effective transport. It’s currently shipping to 18 countries on five continents.

Kinder Morgan (KMI) is the leading natural-gas processing and storage company in North America, with 70,000 miles of pipeline and 155 terminals.

Range Resources (RRC), whose stock price dropped 47% over the past year as gross profit margins suffered temporarily, is at a bargain price. The company is one of the largest domestic producers of natural gas, controlling nearly one million acres in the Marcellus shale basin in Pennsylvania.

Source: Michael Roomberg, CFA, manager of the Miller/­Howard Drill Bit to Burner Tip Fund (DBBDX), Woodstock, New York. Date: August 15, 2017
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