Natural gas prices have rebounded due to prolonged periods of cold in the Northeast. The amount of gas in storage is now below last year and approaching the five year average. As we approach the five year average, I believe Dry Gas prices will rise to about $4.00 per million BTU’s. Currently dry gas futures prices are in the $4.15 per million BTU range.
This price range is still great for utilities, chemical companies, fertilizer manufacturers and manufacturing in general which use natural gas as a fuel or feedstock. The expansion along the Gulf Coast is proceeding on schedule and expanded capacity of ethylene will start coming online this quarter and continue into 2015. In my opinion, this will add to employment and increase exports reducing our balance of trade deficit.
BSG&L has a long term investment horizon. We still believe industrials, including manufacturing and chemicals, are the place to be. We like chemical companies, fertilizer manufacturers, small to mid cap E&P companies that are increasing reserves and production year over year and manufacturing companies.
Two E&P companies we like are Continental Resources (CLR) and EOG Resources (EOG). They have dramatically increased production year over year. Two smaller companies that have had very large reserve and production increases are Whiting Petroleum (WLL) and Oasis Petroleum (OAS).In the Master Limited Partnership space, we like Enterprise Products (EPD) and Kinder Morgan Partners (KMP). They are less sensitive to commodity prices, since they transport, store, and process oil and natural gas without taking ownership. In my opinion, these two MLP companies have nice dividends and have shown an ability to increase quarterly distributions for some time As share prices have pulled back, the stronger mid-stream gas companies are using their abundant cash positions to acquire smaller rivals.