Saturday, June 7, 2014
Regular readers understand the massive amount of natural gas being produced domestically thanks to the shale boom. We're producing so much natural gas that some companies are burning it at the well ("flaring it off") rather than capturing it.
Why would companies spend money to waste a valuable asset like natural gas? Natural gas is often found alongside oil in shale. So despite the low price (around $4.60 per thousand cubic feet, or mcf) of gas, these companies are still producing it as a byproduct of oil drilling. We have more of the resource than we can use... And we can't export natural gas... yet. (More on this in a moment.)
Cheap natural gas is leading to an industrial renaissance in the U.S. More and more companies are building factories in the U.S. to take advantage of low natural gas prices. And we're building a network of compressed natural gas (CNG) filling stations to cater to the growing number of natural-gas-powered trucks.
We'll also retire around 13% of our nation's coal-fired power plants, replacing them with natural-gas-powered plants (which burn much cleaner).
But the greatest use of our massive natural gas resources is exporting. And the first company that will be able to legally export natural gas is Cheniere Energy (LNG).
The government granted Cheniere's Sabine Pass, Louisiana facility approval to export in 2011. The company expects to begin exporting in 2015.
Porter predicts new domestic demand and the expansion in export capacity will cause the price of natural gas in the U.S. to hit around $10 per mcf. When that happens, he says, U.S. natural gas producers will be "some of the most profitable businesses in the world."
To ship natural gas, you have to liquefy it and send it in ships across the globe... That process can add an extra $6 per mcf to its costs. But at current prices, it's still far cheaper than the $16 per mcf Japan currently pays... And it's in line with the roughly $10.50 per mcf most of Europe pays.
And Europe, it seems, is thirstier than ever for our gas...
This week, Cheniere Energy signed a 20-year deal to provide liquefied natural gas (LNG) to Spanish utility Iberdrola. It's the first customer to sign up for future deliveries from a new liquefaction and purification facility in Corpus Christi, Texas. Iberdrola will initially purchase 400,000 metric tons, and that will double to 800,000 in 2019.
Think about it... The Spanish utility signed a 20-year deal to purchase our natural gas before Cheniere will even be able to export it. As we said above, exporting natural gas will be a boon for domestic producers.
Cheniere's stock increased 14% on the news to a new high.
Cheniere's lock on U.S. exports of natural gas is one of the reasons the company landed on the Stansberry's Investment Advisory Trophy Asset Monitor. The Trophy Asset Monitor tracks the stocks that control some of the highest-quality assets in the world. Porter's team uses it to identify opportunities to buy these stocks when they trade at steep discounts (25% or more) to the value of their assets.
And what's Cheniere's trophy asset? Cheniere operates and develops natural gas liquefaction and export facilities in Louisiana and Texas. Essentially, it controls a toll station between an ocean of American natural gas and foreign demand. Yes, other companies are winning federal licenses to export, too. But Cheniere's five-year head start is a huge advantage... It makes those facilities very valuable.
Our Editor in Chief, Brian Hunt, wrote a great essay in DailyWealth this week explaining an asset he says is a better inflation hedge than gold... It's a controversial, but important idea. You can read the full essay here...
In a recent Phase 1 issue, Frank Curzio made one of his most controversial recommendations ever...
On January 1 of this year, Colorado became the first state in the country to allow the recreational sale of marijuana.
Today, the legalization of marijuana is on the ballot of another 13 states... It's only a matter of time before this drug is legal nationwide.
A few weeks ago, Florida passed a bill allowing limited use of medical marijuana. Portland, Maine has also voted to legalize it within their city limits. And the governor of Maryland just signed a bill decriminalizing marijuana possession in the state.
Why are states suddenly warming up to marijuana? In short, they're broke... And they need the tax revenue.
Marijuana is the third-most-popular recreational drug in America, after alcohol and tobacco. Alcohol has grown to a $200 billion market in the U.S. Tobacco is an $80 billion-a-year industry.
Early estimates suggest marijuana could become an $8 billion-a-year industry by 2018... But we think those estimates are low.
The investment world is already catching on to the huge profit potential in marijuana stocks. (Yes, there are several publicly traded ways to profit from this trend.)
As Curzio wrote:
Frank is taking advantage of the massive selloff to get into our country's next multibillion-dollar industry at a bargain-basement price.
He found one of the most conservative ways to play the marijuana trend. It's essentially a royalty company (one of our favorite business models in the world). And this company is invested in what we think is one of the best ways to play the burgeoning marijuana business in America.
It's a backdoor way to gain exposure to this market... And it's much more conservative than buying one of these marijuana companies outright.
Frank wrote a report explaining the entire situation for Phase 1 readers... It's an incredible story. You can learn more here...
Date Range:5/29/2014 to 6/5/2014
Date Range:5/29/2014 to 6/5/2014