We recommend investors stop worrying about Tesla (TSLA) and Elon Musk's woes and put the money where the real growing opportunity is: exports of U.S. natural gas, natural gas-powered vehicles and natural gas-fueled petrochemicals. As Mr. Musk settled with the S.E.C. over the weekend, investors have a clear option to refocus on proven, management teams running solid business models and on growing platforms positioned to benefit from the increasing use of U.S.-sourced natural gas.
It is clear, after reading Andrew Ross Sorkin's article in New York Times, that the CEO of a public company failed to protect its shareholders by not taking a favorable deal earlier offered by the S.E.C., potentially exposing the company to a lengthy and expensive lawsuit at the detriment of shareholders.
Tesla is a $57 billion in enterprise value headache today with a very difficult path to traverse in light of recent events. The size of that ticket buys investors the equivalent of approximately: 3 times the market value of Cheniere Energy (LNG) , 26 times the value of Tellurian Inc. (TELL) , 20 times the value of Golar LNG (GLNG) , 12 times the value of Range Resources (RRC) , 1.4 times the value of LyondellBasel Industries (LYB) and 107 times the value of Clean Energy Fuels (CLNE) . With these stocks, I have given you a diversified portfolio of high-growth stocks, technology-oriented, world-focused enterprises for the price of one.
Natural gas is trading at $3 per million British thermal units (MMBtu) and the forward curve, or prices for physical delivery over the next 6 years, is trading in a narrow band between $2.40 and $2.90 MMbtu, providing a very comfortable range for natural gas-levered companies to take long-term decisions.
Natural gas-levered producers like Range Resources and Chesapeake (CHK) now have a strong export valve through new liquified natural gas (LNG) projects sponsored by companies like Tellurian and producing facilities like Cheniere. Even with all the negative geopolitical rhetoric, these companies are solidly positioned versus the still emerging market of electric cars.
For petrochemical companies like LyondellBassel, most have benefited in recent years from steady low feedstock natural gas prices, reducing their production costs, and a new petrochemical producing belt has been growing close to the gas producing regions in Texas and Louisiana.
Finally, we think the natural gas-fueled vehicle play is dramatically misunderstood, mainly because of the focus has been on covering flashy and expensive electric cars which still have a long way for universal adoption. Meanwhile, many states in the U.S. have begun to leverage cheap natural gas production and infrastructure to operate trucks and transportation fleets with natural gas-powered engines. The growth valve is primarily focused on the adoption of the necessary infrastructure.
We anticipate the major oil and gas companies in the world, like France-based Total (TOT) or ExxonMobil XOM, to be at the forefront of investment in natural gas vehicles and their respective infrastructure since, for over a century already, consumers worldwide have entrusted the delivery of end-user solutions at a reasonable price.
