The Juggernaut that Can't Be Stopped

Keith Schaefer's picture

LNG spending in North America will be one of the biggest tailwinds for stocks in the energy sector for the next 10 years.
In the US, approvals for LNG exports (Liquid Natural Gas) are coming on a regular basis—on the east coast, the west coast and the Gulf Coast.

Nothing can stop this. Canadian energy expert Peter Tertzakian says the world now consumes 320 bcf/d of gas and that’s growing at 2.2% a year, or 7 bcf/d.

This is almost TWICE the size of the recent Russian-China gas deal—the world needs TWO of these deals EVERY YEAR. So don’t worry about North America missing the boat, pardon the pun.

The big LNG spending this decade will come in Canada however, because it’s starting from scratch—the industry calls that greenfield projects. The US energy complex has already spent $100 billion in the last decade building LNG import terminals that are now just being tweaked to become export terminals.

The industry calls these brownfield projects.

It costs about $7.5 billion to build 1 bcf/d (billion cubic feet per day) of export capacity. Canada has 14 proposals totaling over 13 bcf/d—that’s all the natural gas Canada now produces! Less than half that will get built in the next 10 years, which still equals $50 billion in spending.

LNG development off Canada’s west coast is not happening as fast as retail investors would like, but lots of things are happening that show it WILL become a reality. The most recent:

1. Sinopec signing on with Petronas, who will be the first group to say YES to BC LNG
2. Apache and Chevron sign commitments this week with pipeline company TransCanada to send gas down from northern British Columbia (BC).

The spending spree is a juggernaut that is already happening. My guess is that close to $2 billion will get spent this year alone.

But not all that spending is going to happen at the same time. Who benefits first? The Upstream part of the business. The industry is upstream (oil and gas producers), midstream (pipelines) and downstream (refineries and retail gas stations).

The money to be made RIGHT NOW in LNG—is in the service companies supporting all the producers who are drilling to delineate 20 years of gas reserves in western Canada.
I think the $2 billion this year could quickly ramp up to as much $5 billion a year —once the first LNG group says they’re going ahead.

The group headed by Petronas, the Malaysian National Oil Company, is expected to be first. Even before their official commitment, they are spending a lot of money now drilling up their huge land position in western Canada to prepare for their LNG exports.

I’ve found the best way for investors to benefit from this initial push in spending. It’s a company getting a disproportionate amount of business in the upstream sector—for the same reasons all businesses succeed. They are incredible innovative, and they execute flawlessly.

This company has been able to introduce new products and services into the drilling sector that is saving producers an incredible amount of time and money in their work. They are allowing wells to get drilled faster and more efficiently than ever before.

As a result, they are growing very quickly. And they are profitable while they are growing so fast! That’s very rare—to show big growth in cash flow and profits while you grow top line revenue quickly as well.

The future for this company is very, very bright. I’ve just updated my full report on them, so you can understand in very simple language the incredible opportunity I see with this stock.

I love this kind of company—one that has a multi-year catalyst in front of it. It’s what I call a “Sleep at Night” stock; both management and their business plan are so solid I never have to worry about it.

In my report, you’ll read about a second catalyst, happening within the next six weeks, that could turbo-charge even my estimates for the company