NEW YORK (
) -- I've been searching for ways to expand my exposure to natural gas.
It's just a no-brainer for our energy future, even if Washington has been slow to see it. Recently, a restructuring of one of the "original" big natural gas companies,
has looked mighty appealing and become an interesting opportunity.
. The story just won't go away. While oil continues to trade close to $80 and pushes over $200 billion of American money overseas, natural gas remains a completely domestic, cheap and plentiful fuel. We have the technology now to extract it in ways that were lacking only a few short years ago, making the huge deposits in shale in the Barnett and Marcellus regions available. The U.S. has become the Saudi Arabia of natural gas.
While Washington has so far managed to ignore creating a consolidated energy policy with natural gas as its cornerstone, the logic of it will not be denied forever. Whether I scream at the top of my lungs or not, or even if Washington never gets on the natural gas bandwagon, the shift from traditional crude oil to natural gas is inevitable. It will begin with trucks and buses, and move rapidly to cars as is already happening in China.
And we have recommended all three sectors related to natural gas for 2010 -- transport and storage, oil service and E&P companies -- and seen outsized moves from all three. The trend is clearly in place, and you just can't have enough exposure to natural gas this year. I believe it is the energy opportunity of the year, if not the decade.
And now I have one more recommendation to add: Williams.
Williams has announced a $12 billion restructuring program designed to separate the E&P portions of the company from the transport pieces. It is also combining one of its smaller MLPs (master limited partnerships),
Williams Pipeline Partners
into its larger
MLP Williams Partners LP
. Cash is moving to the parent company as well with the largest pipeline asset moving to the MLP.
It's a complicated deal but a good one for all involved. It brings cash back to the parent company and consolidates the transport assets into the MLP. The market has approved of all these moves. At midday Tuesday, WMB was up 8% while WPZ was up close to 15%!
Despite Tuesday's big move, I believe there is value in both stocks.
on the need to own MLPs as part of your energy portfolio, and WPZ, with its new acquisition of the 10,500-mile transcontinental system that runs through the Marcellus shale area, will be a cash cow for decades to come. Even with its move Tuesday, the distribution is a tidy 8.2%
And Williams will be a great conduit for betting on the underlying price and increased demand I expect from natural gas throughout 2010 and beyond.
I cannot believe that this country will not embrace natural gas for the energy savior it clearly is. We will maybe slowly but surely move to an economy much more reliant on natural gas than the crude barrel, and it will make companies like Williams look cheap today.
You cannot have too much exposure to natural gas. It is the trade of the new decade.
At the time of publication, Dicker has no positions in any of the equities mentioned.
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.