More Plays on the U.S. Energy Boom

 | Jan 13, 2014 | 9:00 AM EST
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The huge oil and gas production boom going on throughout the country has been a consistent topic of mine throughout my two years as a columnist at This continuing development is having impacts throughout American industry and the economy.

It will continue to be a story I cover. Although the production boom and its associated impacts are getting more coverage in the press these days, this ongoing development does not get the attention in the mainstream media that it deserves.

This boom is vastly increasing the nation's competiveness, raising the country's attractiveness for foreign investment, lowering the energy bill for industry and improving our trade balance. It is also one of the few consistent drivers of high- paying jobs over the past five years. This boom is a key reason why North Dakota, Texas and South Dakota have some of the lowest unemployment rates in the nation while most of the economy continues to struggle through the worst postwar recovery on record.

This huge and ongoing production growth also is why I believe we are at the dawn of the rebirth of American manufacturing. It seems that almost every week there is news that a foreign chemical company like BASF is going to spend billions to build a new plant along the Gulf coast. Or a manufacturer like Volkswagen is going to spend yet more billions to expand its manufacturing presence in the U.S. A key driver of these decisions is access to the lowest energy costs in the developed world.

What is really exciting is that we are just getting started in getting the permits and building the huge facilities needed to start to export some of our energy bounty. This build out will create tens of thousands of high-paying jobs and yield many good investment opportunities as well.

Jim Cramer has also done a great job covering this story over the years and has provided insights from his interviews with the CEO of Cheniere Energy (LNG) . Cheniere is one of the leading players in building the infrastructure to export natural gas. A good portion of natural gas production currently gets 'flared off' as there is not the storage or transportation infrastructure present to capture all of the natural gas production happening in the country.

Chicago Bridge & Iron (CBI) has been another winner driven by this infrastructure build out. The stock is up some 70% since I wrote about it as an energy infrastructure play around this time last year.. Although not as undervalued as it was last January, the stock still sells for around the same forward earnings market multiple as the overall market and should see earnings growth of 25% in 2014.

Foster Wheeler (FWLT), a major domestic & international construction firm in the energy space, was also profiled in that piece. This morning it was announced that U.K. engineering company AMEC had provisionally agreed to acquire Foster Wheeler.

KBR Inc. (KBR) which constructs liquefied natural gas and gas-to-liquids facilities also seems well positioned to be a winner within this theme. KBR is cheaper than the other two plays above at just over 11x forward earnings, but is also growing at a lesser rate. It has a solid balance sheet with approximately $900mm of net cash on the books. This equates to around 20% of its market capitalization.

As we enter 2014, I see no reason not to continue to invest and profit from the build out of domestic energy infrastructure which is in the early innings of a long- term story.

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