Exxon Mobil's (XOM) - Get Report planned acquisition of XTO Energy (XTO) for $41 billion is a fantastic deal for Exxon that proves just how important the natural gas space is destined to be in the near future in the world of energy.
Both Jim Cramer and I have been beating the drum about natural gas for the past few months. It's clear that Exxon gets it with the 25% premium it is paying for XTO, one of the larger dedicated natural gas companies.
Exxon realizes that natural gas represents the energy future for this country. It's clean, it's domestic and it's cheap -- at least right now.
No matter what hopes there are for alternative and sustainable energy in the future, whether that's solar or wind or geothermal or biofuels, anyone with any knowledge of the realities of the energy space know that fossil fuels will still hold the key to the next 20 years, if only as a transition.
Best Natural Gas Investment
And natural gas is obviously the only intelligent way to go. With Marcellus Shale deposits and the newest fracking technologies, we now have the skill to get more gas out of every well, and new exploration is uncovering amazing stockpiles of this domestic fuel.
Unlike crude, we don't pay overseas for supplies, giving $200 billion a year to increase the sovereign wealth funds of countries that hate us. No, natural gas is entirely domestic -- it's
energy source, and when we pay for it, we enhance the revenue and growth of
And the price differential between nat gas and crude has been the cherry on top of this energy cake.
Historically, the differential between nat gas and crude has hovered between 6 and 10. But not recently. We've seen the price of crude balloon while nat gas has plummeted, reaching an astounding 28 times differential. With nat gas around $5 and crude around $70, that's still a healthy 14 times differential -- and Exxon knows it.
That price disconnect will turn around in 2010 - it's why a nat gas company -
, is my top stock pick for 2010, and nat gas has been my choice for investment in the energy space -- a much better value than the integrated stocks.
Exxon gets it -- now you get it. Buy some nat gas stocks. If not CHK, then
-- but not XTO, which used to be the fifth of my five great nat gas stocks to buy. No, that one's off the table, courtesy of Exxon.
At the time of publication, Dicker was long Chesapeake Energy.
Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 20 years' experience. He is a licensed commodities trade adviser. Dan's recognized energy market expertise includes active trading in crude oil, natural gas, unleaded gasoline and heating oil futures contracts; fundamental analysis including supply and demand statistics (DOE, EIA), CFTC trade reportage, volume and open interest; technical analysis including trend analysis, stochastics, Bollinger Bands, Elliot Wave theory, bar and tick charting and Japanese candlesticks; and trading expertise in outright, intermarket and intramarket spreads and cracks.
Dan also designed and supervised the introduction of the new Nymex PJM electricity futures contract, launched in April 2003, which cleared more than 600,000 contracts last year alone. Its launch has been the basis of Nymex's resurgence in the clearing of power market contracts over the last three years.
Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts as an analyst of the oil markets on CNBC, Bloomberg US and UK and CNNfn. Dan is the author of many energy articles published in Nymex and other trade journals.
Dan obtained a bachelor of arts degree from the State University of New York at Stony Brook in 1982.