Five Natural Gas Investments to Purchase for Income and Capital Appreciation
By: Paul Dykewicz,
Five natural gas investments to purchase for income and capital appreciation offer ways to dodge the worst effects of Russia’s invasion of bordering Ukraine as many countries either are banning or looking to trim their use of energy provided by the attacking nation.
The five natural gas investments to buy as energy prices climb offer opportunities to tap into growing demand for alternatives to energy sources that previously had been provided by Russia before it incurred economic sanctions for its invasion of Ukraine. The United States is among many countries that have chosen to stop importing Russia’s oil and natural gas, while Germany and other countries that lack immediate access to substitute sources of energy are seeking to scale back those imports that are funding a war against Ukraine initiated on Feb. 24 by Russia’s President Vladimir Putin, whose troops have shelled hospitals, schools, nuclear power plants, residential areas, churches, oil refineries and a theater used as a shelter.
U.S. natural gas prices have rocketed higher since mid-March by rising more than $4/MMBtu to $8.80/MMBtu. The latter level of production is the highest since 2008, according to a recent report by BofA Global Research. MMBtu, a standard unit of measurement for natural gas financial contracts, equals one million British Thermal Units.
U.S. Drilling Restrictions Contribute to Rising Energy Prices
President Joe Biden “aggravated the energy shortage” last week by canceling three oil & gas leasing sales in the Gulf of Mexico and off the coast of Alaska, removing millions of acres from possible drilling amid record-high gas prices, wrote Mark Skousen, PhD, to subscribers of his Forecasts & Strategies investment newsletter.
Not surprisingly, crude oil recovered after that move and is now back to $110 a barrel, boosting the share price for Houston-based pipeline and energy storage company Enterprise Products Partners (NYSE: EPD) to 52-week highs, wrote Skousen, a descendant of Benjamin Franklin. Aside from leading the Forecasts & Strategies newsletter, he also heads the Five Star Trader, Home Run Trader, TNT Trader and Fast Money Alert services.
EPD, offering a dividend yield of more than 7%, has been a stellar stock recommendation for Skousen during 2022 by rising more than 25.41% through Thursday, May 19. In contrast, the S&P 500 and the Dow Jones Industrial Average have plunged 18.16% and 13.99% during that time.
Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz in Philadelphia.
EPD Leads Five Natural Gas Investments to Purchase for Income and Capital Appreciation
Enterprise Products Partners is a large publicly traded partnership and a key North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals. The company’s services include natural gas gathering, treating, processing, transportation and storage.
In addition, Enterprise Products Partners provides NGL transportation, fractionation, storage and import and export terminals. It further engages in crude oil gathering, transportation, storage and terminals, along with petrochemical and refined products transportation, storage and terminals, as well as a marine transportation business.
I bought shares in Enterprise Products Partners shortly after the 2020 stock market crash when the stock began to rebound after the initial shock of the COVID-19 pandemic. At the market’s close on May 19, the stock had gained 2.78% for the past week, 1.29% for the last month, 15.26% for the past three months, 25.41% so far in 2022 and 18.95% for the last year.
Chart courtesy of www.stockcharts.com
XOM Makes List of Five Natural Gas Investments to Purchase for Income
Irving, Texas-based Exxon Mobil Corp. (NYSE: XOM) zoomed during its time as a recommendation in the Cash Machine newsletter between July 2021 and May 17, 2022, providing investors with exposure to liquefied natural gas (LNG), oil refining and strong returns. The company ranks as the world’s second-largest supplier of natural gas and jumped about 55% since its addition to the newsletter’s Safe Haven Portfolio.
Perry, leader of the Cash Machine investment newsletter, also heads the Premium Income, Quick Income Trader, Hi-Tech Trader and Breakout Options Alert advisory services, and explained he recommended the stock’s sale when the company’s dividend yield dipped below his 4% limit. With tight energy supply, Perry predicted XOM’s share price would remain well fueled by investors seeking an alternative to the sagging stock market so far in 2022, even if Exxon Mobil no longer fit his requirement for a high-yield dividend stock.
Paul Dykewicz interviews Bryan Perry, whose services include Quick Income Trader.
Exxon Mobil reported strong first-quarter adjusted earnings of $8.8 billion, up from $2.8 billion for the same period a year ago. Adjusted earnings excluded a $3.4 billion after-tax impairment charge stemming from Exxon Mobil’s Russia Sakhalin-1 operation, which the company intends to exit. Its earnings barely missed meeting analysts’ consensus estimates.
XOM has continued to shine amid the market’s slid. The company’s share price has soared 5.46% during the past week, 3.37% in the last month, 18.32% in the past three months, 51.02% thus far in 2022 and 55.82% for the last year.
Chart courtesy of www.stockcharts.com
Pension Fund Chief Provides a Pick for the Five Natural Gas Investments to Purchase for Income
Bob Carlson, a pension fund chairman who also heads the Retirement Watch investment newsletter, recommended the Cohen & Steers MLP & Energy Opportunity Fund (MLOAX) to all the portfolios in his latest issue.
“Natural gas should continue to be a good investment, as long as Europe is looking for ways to reduce dependence on Russia,” Carlson counseled. “In addition, the natural gas drillers in the U.S. are focused on increasing cash flow and earnings. They’re not inclined to maximize drilling expenses in the short run to increase output.”
Good investment opportunities exist through companies that provide the pipelines, storage facilities and other infrastructure needed to supply customers with natural gas and other energy sources, Carlson continued.
“One of the attractive qualities of these investments is that their revenues are independent of the prices of the commodities,” Carlson told me. “The firms charge fees for their services, and the fees often are adjusted for inflation. Their revenues and earnings depend on the volume of commodities passing through their facilities, not the price of the commodity.”
“Leading” energy service companies provide total returns, aided by current income and price appreciation, through investments in energy-related master limited partnerships (MLPs) and securities of industry companies, Carlson said. Those businesses are expected to derive at least 50% of their revenues or operating income from exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, crude oil and other energy resources, he added.
Chart courtesy of www.stockcharts.com
Cohen & Steers Fund Finds Place Among Five Natural Gas Investments to Purchase for Income
The Cohen & Steers MLP & Energy Opportunity Fund recently held 53 positions and had 50% of the fund in the 10 largest positions. Top holdings of the fund were Enbridge (NYSE: ENB), Cheniere Energy (NYSEAMERICAN: LNG), Williams Companies (NYSE: WMB), TC Energy (NYSE: TRP) and Energy Transfer (NYSE: ET).
The fund has notched strong returns since April 2020. It is up 3.20% in the last week after dipping 2.89% in the past month. It also rose 13.47% in the last three months, 20.73% so far in 2022 and 29.08% in the last year.
Connell Chooses Two of Five Natural Gas Investments to Purchase for Income
U.S. LNG inventory is currently below its five-year average for this time of year by double-digit percentages, said Michelle Connell, CFA, president and owner of Portia Capital Management, of Dallas, Texas. A key issue for the U.S. LNG industry is that production of the energy source has never been profitable on its own, but it is as a byproduct of oil production, she added.
“There isn’t enough oil being produced,” Connell said. “Currently, only 11.6 million barrels/day are being produced. Pre-pandemic, we produced 13 million barrels/day.”
Rather than invest to expand capacity, oil companies have been focusing on hiking their dividends, Connell continued. If they pivot, these companies face a backlash from investors who could sell their shares, Connell added.
“Their market value could get crushed,” Connell said.
Former portfolio manager Michelle Connell, CEO, Portia Capital Management
EOG Resources Joins List of Five Natural Gas Investments to Purchase for Income
LNG companies cannot step up production quickly, Connell cautioned. It takes oil companies a minimum of six to eight months to increase their oil and LNG production, Connell counseled.
Production of oil via shale recently created the largest share of the America’s natural gas reserves, Connell continued. Unfortunately for proponents of increasing output to meet soaring demand, shale production has “decreased exponentially” since the pandemic began and the buildup of LNG reserves has declined, Connell explained.
However, Houston-based EOG Resources Inc. (NYSE: EOG) is producing substantial amounts of oil via shale, and thus considerable LNG. The company’s Chief Executive Officer Ezra Yacob called its recent financial results “outstanding” and said 2021 was a “tremendous year” for EOG with record earnings, record free cash flow and return of cash to shareholders that places it among industry leaders.
Income investors will appreciate that the company’s long-standing focus on free cash flow led to payment of another $1.00 per share special dividend, while also strengthening its balance sheet.
Chart courtesy of www.stockcharts.com
Reasons why Connell likes EOG include:
-Wall Street analysts at investment firms Wells Fargo and Raymond James continue to increase their future earnings estimates and target prices, despite the company’s strong performance of advancing more than 40% so far in 2022;
-Based on its fundamentals, the stock may have another 25% of 12-month upside;
-Its relatively new gas resource in the Gulf Coast could provide additional potential and cash flow for the company;
-Strong cash flow gains are expected for the foreseeable future, powering annualized cash flow growth in excess of 25% per year.
EOG Resources is up 1.06% in the past week and down 0.60% in the last month, after rising 11.39% during the past three months, 40.81% so far in 2022 and 55.36% in the past year.
Pioneer Natural Resources May Be Worth Purchasing After a Share Price Pullback
Pioneer Natural Resources Co. (NYSE: PXD), a hydrocarbon exploration company headquartered in Irving, Texas, has soared in recent weeks, causing Connell to reconsider her recommendation of the stock due to its increased share price. The company has a market capitalization of $61.72 billion, offers a dividend and has never missed paying a dividend, she added.
In addition, Pioneer Natural Resources has produced an earnings yield of 3.25%, an adjusted cash earnings yield of 7.48% and a five-year average return on equity of 6.61%, Connell said. At the end of 2021, Pioneer Natural Resources had compiled 2.22 billion barrels of oil equivalent, with 44% of its proved reserves from petroleum, 30% natural gas liquid and 16% natural gas.
At PXD’s current price, Connell no longer calls it a buy, but she still spoke positively about the company. The stock has jumped 8.55% in the past week, 5.61% in the last month, 17.77% for the past three months, 51.12% so far this year and 77.51 in the past 12 months.
Chart courtesy of www.stockcharts.com
Supply Chains Woes May Subside as China Lowers COVID Curbs
China has begun to ease its COVID-19 restrictions during the past week, potentially signaling goods produced in that country may start to flow normally again in the weeks ahead to smooth out supply chain snags. Lockdowns in China have affected at least 373 million people, including roughly 40% of the country’s gross domestic product (GDP). Worldwide supply chain disruptions have slowed the delivery of products such as rice, oil and natural gas.
Shanghai, home to the world’s largest port and 25 million residents, has strained to unload cargo due to strict regulations that have caused shipping containers to stack up. Some Shanghai residents posted videos online to complain about needing food. Government officials sought to block dissemination of such expressions of frustration.
Chinese authorities also drew public scorn for forcibly separating young children with COVID-19 from their parents. The country’s leaders prioritized stopping the spread of a new, contagious subvariant of Omicron, BA.2. The variant also has been causing new infections in European nations such as Germany, the Netherlands and Switzerland.
Russia’s sustained attack of Ukraine not only has caused massive destruction but a humanitarian crisis in which the United Nation estimates more than 12 million people in the embattled country have fled their homes since Putin ordered the attack to begin on Feb. 24. That timing coincided with peak COVID-19 cases in Ukraine from the Omicron variant of the virus. Poland has accepted 3,418,077 refugees who have fled Ukraine to escape Putin’s war through May 17, according to the United Nations, with Romania ranking a distant second by becoming a safe haven for 937,082 people seeking to escape the onslaught of Russian troops.
President Biden, U.K. Prime Minister Boris Johnson and others have called for the investigation and potential prosecution of Russian troops and their leaders for war crimes of rape, torture and outright executions of Ukrainian civilians. The United States, the United Kingdom, the European Union, Canada, Japan, Australia, South Korea and many other countries have united to place economic sanctions on Russia in response to Putin’s brutal treatment of his neighboring nation, violation its sovereign borders and more than 10,000 alleged war crimes against its people.
U.S. COVID Deaths Surmount 1-Million Milestone
U.S. COVID-19 deaths topped 1 million, with the number of lives claimed by the virus reaching 1,001,609 as of May 19, according to Johns Hopkins University. Cases in the United States, also as of May 19, hit 83,060,963. America retains the dubious distinction as the nation with the most COVID-19 deaths and cases.
COVID-19 deaths worldwide totaled 6,273,201 on May 19, according to Johns Hopkins, with cases across the globe numbering 523,949,956.
Roughly 77.7% of the U.S. population, or 258,074,668, have obtained at least one dose of a COVID-19 vaccine, as of May 19, the CDC reported. Fully vaccinated people total 220,811,434 or 66.5% of the U.S. population, according to the CDC. America also has provided at least one COVID-19 booster vaccine to 102.5 million people.
New York City Reaches “High” COVID-19 Alert; Mask Wearing Encouraged by Its Officials
New York City leaders reported reaching a “high” COVID-19 alert, indicating a growing spread in the area that is straining the health care system. The city’s health department urged people to wear high-quality masks in public, indoor settings and crowded outdoor gatherings.
U.S. households now can order an additional eight “free” COVID testing kits to use at home. COVIDTests.gov has increased the total number of tests available to each household for free to 16 since the start of the program, White House officials said.
The five natural gas investments to purchase offer an opportunity to profit from rising energy prices. The market’s drop earlier this week reduced valuations of many positions and any further pullbacks may give investors a chance to buy natural gas investments at less lofty valuations as hedges against the growing risks of inflation, of the Fed’s plan for further interest rate hikes to combat climbing consumer and producer prices and of increased federal deficit spending.