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Cheniere Energy, Inc. (LNG): Who’ll Be Part Of The Mix?

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A Deeper Look At China’s Commodity IndustryKirk Spano, columnist and founder of Bluemound Asset Management, LLC, recently opined that US natural gas exports were critical for the long-term stability of Europe. Specifically, he declared, “Without more self sufficiency long term and stable energy supplies intermediate term, Europe could be doomed to decades of instability. Which is where the U.S. comes in.“

“Doomed to decades of instability?” Oh please. As Michael Greenstone, professor of environmental economics at MIT pointed out recently,  “Suddenly, out of nowhere, the world seems to be awash with hydrocarbons.” Listen to Dr. Greenstone on this one. Loads of natural gas and oil will hit the world markets in the future, it won’t all be from the US, and Europe will not suffer decades of instability, at least not because of energy supplies.

Americans will be part of the mix
Cheniere Energy, Inc. (NYSEMKT:LNG) would certainly participate in natural gas exports to Europe. This company currently holds the only US export license for natural gas. That is, the only export license to countries that don’t have a Free Trade Agreement with the US. At its Sabine Pass gas port on coastal Louisiana, Cheniere Energy, Inc. (NYSEMKT:LNG), through its partial interest in Cheniere Energy Partners LP (NYSEMKT:CQP) owns liquefied natural gas tanks with a capacity of 17 billion cubic feet. Unfortunately, they’re empty. These tanks will be part of an export facility due to come online in 2016.

Cheniere Energy, Inc. (NYSEMKT:LNG) boasts a growing list of future customers for its LNG exports, but its losses are mounting and both Cheniere Energy, Inc. (NYSEMKT:LNG) and Cheniere Energy Partners LP (NYSEMKT:CQP) carry significant debt.

Granted, Cheniere Energy, Inc. (NYSEMKT:LNG) realizes revenue from its customers and venture capitalists, now totaling roughly $2.9 billion. However, it faces significant competition from other countries holding enough natural gas to export to Europe.

Mozambique the next Marcellus?
Anadarko Petroleum Corporation
(NYSE:APC) recently discovered two major natural gas fields off the coast of Mozambique. Recoverable reserves may be as much as 65 tcf. While production won’t begin until 2018, construction of onshore and offshore facilities, including a LNG export terminal, remain on schedule. I suspect Europe will be a destination for some of those LNG exports.

As an investment, Anadarko Petroleum Corporation (NYSE:APC) produced over $7 billion in discretionary cash flow and a 7% gain in earnings in 2012. A 28% increase in onshore oil sales drove this success. The future holds further promise as Anadarko Petroleum Corporation (NYSE:APC) develops not only its Mozambique natural gas plays, but its oil and gas plays off Ghana, Kenya and the Gulf of Mexico. These operations add to the stable portfolio of US onshore assets.

Two other Anadarko Petroleum Corporation (NYSE:APC) related investments include the midstream master limited partnership Western Gas Equity Partners LP (NYSE:WGP). This company, formed by Anadarko Petroleum Corporation (NYSE:APC), owns interests in Western Gas Partners, LP (NYSE:WES) also formed by Anadarko. Western Gas Equity Partners currently pays about a 2% dividend. Not impressive. However, the stock has moved from about $28 share in its December 2012 IPO to around $40 share in early May 2013. Western Gas Partners, LP (NYSE:WES) pays around a 3.7% dividend. The stock has moved from around $16 in December 2008 to almost $60 share in May 2013.

Then there’s Europe itself

While significant opposition to hydraulic fracturing exists in Germany, Spain and France, Poland and Romania view the technology as a source of cheap energy and economic growth. In one gas field alone, Poland may have 60 tcf of recoverable natural gas; not bad for a country that consumes about 600 bcf a year.

Halliburton Company (NYSE:HAL) is a known player in Poland. Halliburton Company (NYSE:HAL) currently focuses on shale geology to determine the most economical way to recover natural gas. Halliburton is also building a field facility in Poland to provide company products and services to all prospective shale plays in the country.

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