Exxon Mobil Corporation (XOM), Imperial Oil Limited (USA) (IMO), Chevron Corporation (CVX): LNG Is More Than a Sideshow

Page 1 of 2

It is surprising just how much more money natural gas still fetches overseas. Henry Hub selling under $4 per MMBtu, while the price of Japanese liquefied natural gas (LNG) is around $16 per MMBtu. The U.S. government is hesitant to approve LNG export facilities on American soil due to energy security concerns. The best bet to save North America from its natural gas glut is to head north, where a number of LNG projects are moving forward.



Henry Hub Natural Gas Spot Price data by YCharts

The Canadian Situation

Canada is stuck between a rock and a hard place. The boom in U.S. natural gas production has sent inventories through the roof and filled up precious pipeline space. Now, Canada is stuck exporting less natural gas into the U.S. and importing more U.S. natural gas into Canada. Major U.S. producers like Exxon Mobil Corporation (NYSE:XOM) have realized that it can improve its Canadian bottom-line by liquefying natural gas and sending it to Asia.

Exxon Mobil Corporation (NYSE:XOM)Follow the Money

Building LNG export facilities is expensive, time consuming and politically complicated. These qualities form strong barriers to entry and make LNG export facilities attractive investments for long term investors.

Exxon Mobil Corporation (NYSE:XOM) and Imperial Oil Limited (USA) (NYSEMKT:IMO) recently announced that they are planning to build a LNG export facility in British Columbia (B.C.). Imperial Oil Limited (USA) (NYSEMKT:IMO) is a Canadian firm, and its market cap is less than 10% of Exxon Mobil Corporation (NYSE:XOM)’s. Imperial Oil Limited (USA) (NYSEMKT:IMO)’s journey into the LNG export market will help the company to further diversify out of the volatile North American market.

Exxon Mobil Corporation (NYSE:XOM) needs all of the growth it can find. The firm is drilling off the coast of Africa and trying to bring new fields online, but it struggles to find investments that are secure and profitable. It is in this context that Canada is an attractive option. New LNG export facilities will help to fuel Asian power plants, while Exxon Mobil Corporation (NYSE:XOM) continues to look at Arctic exploration. After being kicked out of Venezuela, it is not hard to see why a stable nation like Canada is an attractive investment location.

Don’t Forget Kitimat 

Chevron Corporation (NYSE:CVX)  and Apache Corporation (NYSE:APA) paved the way for Canadian LNG projects when they recently announced agreements with First Nation’s groups to build a pipeline to bring natural gas from Alberta to B.C. For Chevron Corporation (NYSE:CVX)’s LNG project to go forward, pleasing First Nation’s groups is critical. They hold political sway in B.C. and their support helps to allay environmental fears.

Now, Chevron Corporation (NYSE:CVX)’s and Apache Corporation (NYSE:APA)’s LNG project is facing more competition from Exxon Mobil Corporation (NYSE:XOM) and Imperial Oil Limited (USA) (NYSEMKT:IMO), but it should not be overestimated. LNG facilities are complicated and few are likely to be built on North America’s western coast.

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

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

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!