Buy Natural Gas NOW

When I was a kid in 1970s Richmond, Virginia, the lake across the street from my house froze over every winter. We skated and played hockey almost daily during the three-week span it was cold enough.

I still have a scar on the bridge of my nose from the time I took a high stick between the eyes after a slap shot…

Last winter, as the polar vortex was wreaking havoc across much of the U.S., a couple of rare events occurred. For one, that lake froze again — for the first time in probably 30 years.

And natural gas prices just about doubled, from $3.50 per mmBtu in early November to over $6 at the start of February.

By the time spring finally came, natural gas supplies had fallen to levels not seen since 2003. Not only did the U.S consumer burn record amounts of gas to keep warm, but the frigid temperatures also curtailed production as far south as Texas.

In fact, natural gas supplies got so low that there would have been no way to replenish them in an average summer…

But it wasn’t an average summer. Temperatures across the nation were far below average. And so natural gas producers were able to replenish natural gas supplies at a faster rate than had been expected. Still, the ready supply of gas is 15% below where it was at this time last year.

Now, we have taken the oversupply in natural gas for granted for so long that many investors missed the chance to make boatloads of money as natural gas prices skyrocketed.

But the opportunity at this point should be obvious: The conditions are ripe for a strong surge in natural gas prices over the next few months.

All we need is another winter of cold temperatures like the one we had last year…

Pigs and Sticks

The Farmer’s Almanac says you know it’s going to be a cold and snowy winter when you see pigs gathering sticks. You can also check to see if muskrats are burrowing higher in the riverbank and if spiderwebs are bigger than usual.

I hate to admit it, but I actually haven’t noticed if pigs are collecting sticks. You just don’t see too many pigs in Baltimore…

But I guess they must be doing it, because the Farmer’s Almanac is calling for another winter of below-average temperatures across the U.S.

Now, I can’t tell you how accurate the Farmer’s Almanac is. I know its prognosticators were calling for a cold one last year, and they were right on the money. And El Niño is in play this winter, which means there should be more snow as moisture from the Gulf of Mexico is pulled up over the country.

But even if we don’t get another blast of polar vortex this winter, the case for higher natural gas prices is pretty strong:

• Low natural gas prices have encouraged utilities and manufacturers to convert power plants to natural gas.
• Compressed natural gas (CNG) as a transportation fuel is gaining traction. Strings of CNG fueling stations are cropping up everywhere. One of my favorite investors, T. Boone Pickens, is pushing adoption.
• Liquefied natural gas (LNG) exports are coming soon.

Of all these catalysts, the potential for LNG exports is huge. The U.S. has an incredible supply of gas. And international prices are quite high.

Move Over, Russia…

Cheniere’s (NYSE: LNG) Sabine Pass facility will have the capacity to send 4 billion cubic feet of gas a day to the international markets. The facility will start exporting in 2015 — right around the corner.

And just a couple weeks ago, two more LNG export facilities were given the green light.

Sempra Energy (NYSE: SRE) won approval for the Cameron LNG Terminal in Cameron Parish, Louisiana. That facility will be authorized to export up to the equivalent of 1.7 billion cubic feet per day of natural gas for a period of 20 years. Construction is expected to be complete by 2018.

Meanwhile, another company — Carib Energy — will be able to export 40 million cubic feet per day from its proposed liquefaction facility in Martin County, Florida.

Industry groups like the American Petroleum Institute have argued exports could add as much as $31 billion to the economies of natural gas states and as many as 155,000 jobs.

In light of the situation between Russia and EU, where Russia may be considering cutting off natural gas exports to the West, the potential for natural gas exports from the U.S. should not be ignored.

Many Ways to Play

There are several ways you can make money off natural gas…

One way is through Teekay LNG Partners (NYSE: TGP). As the second-largest independent owner of LNG carriers in the world, Teekay LNG owns 67 vessels, 29 of which carry LNG and are contracted to major oil producers across the globe.

Customers include: Repsol YPF, Union Fenosa, RasGas, Cheniere, ConocoPhillips, Skaugen, Total, Centrofin Management Inc., and Caltex.

Teekay’s entire LNG fleet is currently under fixed-rate contracts. The recent deals have pushed the average contract duration up to 14 years and increased forward fee-based revenues to $11 billion from $6.9 billion.

Teekay pays a 6.4% dividend, and my Wealth Advisory subscribers have an 11% profit on this stock.

You could also go for a leveraged ETF like the ProShares Ultra Nat Gas ETF (NYSE: BOIL). This ETF ran from ~$28 to over $60 a share last winter.

Or you could try one of the small natural gas producers that could make a fortune on higher natural gas prices. I’ve recommended one $4.50 natural gas producer to my Wealth Advisory readers that pays a healthy 5% dividend and could easily move ~50% if we get a cold winter.

Seems like a pretty good bet to me…

Until next time,

Until next time,

Briton Ryle

@BritonRyle on Twitter

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.