• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Energy

For Energy Shipping, This Is Historic

It's the first export to Europe of an Appalachian shale gas product.
By JIM COLLINS
Mar 29, 2016 | 04:00 PM EDT
Stocks quotes in this article: LNG, GLNG, TGP, NVGS, NAT

If you read my columns, you know I've been spending quite a bit of time analyzing the global shipping industry lately. Reading trade publications, watching the bounce-back in the Baltic Dry Index -- today's London afternoon fixing of 409 put the BDI a solid 41% above its Feb. 11 low -- and talking to as many managements as possible. In the midst of all this research, I occasionally check my LinkedIn newsfeed (feel free to Link In with me) and while doing that today I noticed a monumental event had occurred in energy shipping.

On March 9, a liquefied natural gas (LNG) tanker, the INEOS Intrepid, left the port of Marcus Hook just south of Philadelphia bound for INEOS' petrochemical facility in Rafnes, Norway. The Intrepid is carrying 27,500 cubic meters of ethane sourced from shale gas produced in the Marcellus formation and shipped across Pennsylvania on Sunoco Logistics' Mariner East pipeline system.

So it's the first export to Europe of an Appalachian shale gas product. While Cheniere's (LNG) Sabine Pass facility in Louisiana has gotten all the headlines with its initiation of LNG exports -- the first shipment from Sabine Pass reportedly went to Petrobras (PBR) -- the completion of the Mariner East pipeline has the potential to revolutionize the shale gas industry.

Ethane and associated natural gas liquids (NGLs) have been the poor stepchildren of the gas boom. As prices plummeted for natural gas and crude oil, NGL prices fell through the floor. While it's hard enough for natural gas E&Ps to turn a profit with $1.80 per million Btu gas pricing, I have heard many tales of gas producers having to pay pipelines to take the associated liquids with their gas production, i.e., the realized price was less than zero.

Shipping Marcellus gas byproducts like ethane and propane out of Marcus Hook should ease pressure on NGL pricing in Appalachia.

It's a classic arbitrage situation. While European natural gas prices have plummeted, the Dutch TTF spot price was recently quoted at 12.30 euros per megawatt-hour, which equates to about $3.75 per million Btu. So, while the spread has narrowed considerably from two years ago when European gas could fetch more than $10 per million Btu, European gas prices are still more than double what we're seeing in the U.S. So, an industrial user like INEOS wants to secure a cheap, reliable (Russia is, of course, Western Europe's largest supplier of natural gas) source of LNG for its chemical operations. INEOS will use the ethane as both a fuel and a feedstock, and Rafnes plans to begin shipments to a sister facility in Grangemouth, Scotland, later this year.

I'm not predicting an immediate uptick in Appalachian gas prices as a result of ethane shipments from Marcus Hook, but the incremental demand helps in an oversupplied market.

The true beneficiaries of increased LNG shipments will be the shipping companies themselves. Stocks of LNG players such as Golar LNG (GLNG), Teekay LNG (TGP) and Navigator Holdings (NVGS) were all punished late last year as LNG prices capitulated in the face of crude's price implosion. While share prices in the sector have recovered from February's lows, I believe there are still attractive values there.

I'll be looking to add LNG names to my clients' portfolios to go along with our current shipping holdings in dry bulk names like Navios Maritime (NM, the preferred series G is my Real Money top pick) and oil tanker companies like Scorpio Tankers (SLTB, SBNB) and Nordic American Tankers (NAT).

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins was long NM-G, SLTB and SBNB, although positions may change at any time.

TAGS: Investing | U.S. Equity | Energy

More from Energy

Oil, War and Inflation: Here's Where Prices Are Likely Headed

Carley Garner
May 18, 2022 1:00 PM EDT

Oil has a war and inflation hedge premium, but those aren't permanent.

Occidental Petroleum Continues to Target Higher Prices

Bruce Kamich
May 16, 2022 2:52 PM EDT

Here's our first price target and our long term objective.

Diamondback's FANGs Could Dull in the Short-Term

Bruce Kamich
May 13, 2022 9:30 AM EDT

Let's check out the charts of this oil producer.

Trading for a Bounce -- Not a Bottom

Peter Tchir
May 10, 2022 10:00 AM EDT

Here's my thinking on the Nasdaq, bonds, energy, commodities and crypto right now.

If You Insist on Trading This Brutal Market, Don't Get Lazy With Your Stops

Bob Byrne
May 10, 2022 8:30 AM EDT

That word of warning applies to ETFs and individual stocks such as Intercept Pharmaceuticals, which we outline a trading strategy for here.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • 07:14 PM EDT PAUL PRICE

    A New, Very Scary Movie

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login