3 Ways to Play the Shale Boom: Kinder Morgan Energy Partners LP (KMP), Southwestern Energy Company (SWN), Hi-Crush Partners LP (HCLP)

Page 1 of 2

Kinder Morgan Inc (NYSE:KMI)Natural gas shale has been discovered left and right in the United States, making us a worldwide leader in production. This has provided oil and gas companies with plenty of opportunities to get their hands on as much as possible. There are several ways to play this shale boom, with the exploration and production companies, suppliers of products used in the drilling, or the pipelines used to transport the gas. Let’s take a look at three of the players in this sector.

The Producer

Southwestern Energy Company (NYSE:SWN) is a North American company focussed on exploration, development, and production of natural gas and oil. They currently operate in 7 major areas and have the potential to become the top natural gas producer in the United States.

The Fayetteville Shale contains their largest land holding, but they also have large holdings in the Marcellus Shale, Arkoma Basin, Brown Dense, Denver-Julesberg Basin, Overton Field, and rights to search for oil and gas in New Brunswick. In all of these areas, Southwestern Energy Company (NYSE:SWN) has over 4,700 gross producing wells.

The stock has been on the rise, gaining over 12.75% year-to-date. Here are some of the highlights from their fourth quarter 2012 earnings report released in February:

Earnings per share of $0.44, meeting analyst expectations
Oil and gas production increased 12% year-over-year
Operating income from midstream services increased 14.9%
Gas sales increased 4%
Oil sales increased 37.2%

Earnings per share for the year decreased by 23.6%, but will be on the rise over the next 3 years. Analysts project earnings to reach $2.24 in 2015, representing a 61.2% growth from 2012.

If natural gas prices are to rise, Southwestern could have more explosive earnings growth than the 61.2% expected. I think this will happen and propel the stock much higher. Southwestern Energy Company (NYSE:SWN) is a long-term investment worth making.

The Supplier

Hi-Crush Partners LP (NYSE:HCLP) is a leading producer of premium monocrystalline sand, which is a specialized mineral used as a “proppant” in hydraulic fracturing. Hydraulic fracturing, or “fracking,” is a process in which shale rock is drilled and injected with fluids at a high pressure to release natural gas located in the rock. The proppant enhances the recovery of hydrocarbons from oil and gas wells, making a more efficient process.

A huge positive for Hi-Crush Partners LP (NYSE:HCLP) is their rail infrastructure. They have a location with full access to Union Pacific’s mainline, which are able to reach all major shale basins in the United States. The ability to produce at low costs and ship directly to the customer on-site sets Hi-Crush Partners LP (NYSE:HCLP) apart from their competition.

They reported fourth quarter 2012 earnings on Jan. 31, which disappointed analysts, but was very positive overall. Here is a summary:

Earnings per share of $0.35 versus estimates of $0.47
Revenues increased 27.9% to $16.215 million
Gross profit increased 36.4% to $11.902 million
Net income increased 53.2% to $9.399 million

Management stated that, “increased drilling… combined with strong demand for premium proppants are all working in our long-term favor as we enter 2013.” Over the next 3 years, earnings are expected to be on the rise.
Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!