Warren Buffett's Investing in Natural Gas: Here's How You Can Too

The recent move by Berkshire Hathaway to acquire a stake in natural gas transport and storage operations has brought renewed interest to the natural gas sector. Several MoneyShow.com contributors review this acquisition and a variety of related ideas from gas utilities, processing, storage and shipping. Rich Moroney, Dow Theory Forecasts Citing regulatory delays, Duke Energy and Dominion Energy scrapped plans to build an $8 billion pipeline to transport natural gas 600 miles along the Atlantic Coast. Duke and Dominion first proposed the pipeline project in 2014. Seeking to narrow its focus to electric and natural-gas utilities, Dominion also agreed to sell its natural-gas transmission and storage business to Berkshire Hathaway for $9.7 billion including debt. Following the announcement, Duke raised its quarterly dividend 2% to $0.965 per share, payable Sept. 16. Dominion plans to slash its quarterly dividend 33% to $0.63 per share in the December quarter, reflecting its smaller asset base from the sale to Berkshire. Starting in 2022, Dominion plans to raise its dividend 6% annually, up from its previous long-term target of 2.5% growth. Management targets a payout ratio of 65%. Shares of both Duke and Dominion fell on the news. The Atlantic Coast Pipeline would have supplied a growth kicker, while diversifying the companies beyond traditional regulated utilities. But the project had been in trouble for years, plagued by rising cost projections and legal challenges. Although more near-term weakness is possible, operations for both utilities now appear more stable than they likely would have been after pursuing a massive project in a severe recession. Duke and Dominion remain members of our Top 15 Utilities Portfolio. Sean Broderick, Wealth Megatrends Cheniere Energy Partners L.P. is a master limited partnership (MLP) with a market cap of $17.44 billion; it's a subsidiary of Cheniere Energy Inc. . Both companies process and ship natural gas around the world. Why are we recommending CQP over LNG? Because the parent company doesn't pay a dividend. Cheniere Energy Partners raised its quarterly dividend by one cent in April, to 64 cents. And CQP's dividend is projected to grow 3.1% per year for the next three years. The hefty distribution now yields 6.8%. That's solid compensation while you wait for what I believe will be significantly higher oil and gas prices by the end of 2020. That's its second one-cent increase this year. Contrast that to the nearly half of midstream companies that cut their dividend payouts in the first quarter. To support that dividend, Cheniere Energy Partners signs contracts with long-term customers who don't depend on short-term price for business sustainability. Cheniere Energy Partners ships liquefied natural gas from a special export terminal, Sabine Pass LNG, in Louisiana. Sabine Pass is located less than four miles from the Gulf of Mexico. The company also has an export plant in in Corpus Christi, Texas. It also owns a pipeline that keeps the supply of gas flowing to the terminal. The company operates five natural gas liquefaction facilities, or trains, and is building a sixth that should be operational in 2023. First-quarter earnings nearly doubled from a year earlier and easily topped estimates, while revenues rose nearly 20% year over year to $2.7 billion. Management noted it has seen a rise in the number of canceled liquified natural gas cargoes. But the company added this shouldn't impact its full-year financials since customers remain obligated to pay fixed fees. So, it's a rock-solid business with a growing dividend. Cheniere Energy Partners is a great addition to your portfolio. Roger Conrad, Conrad's Utility Investor Stock price volatility at Sempra Energy contrasts sharply with the steady business performance of the diversified utility and midstream energy firm, including the robust 8% dividend boost this spring. The stock has traded as high as $162 and as low as $88 this year. At the height of the market meltdown in March, Sempra management affirmed previous 2020 earnings per share guidance range of $6.70 to $7.50. It also repeated guidance for calendar year 2021, while issuing a unit-by-unit breakdown of its $32 billion five-year CAPEX plan. And the company provided assurance of funding sources as well, including proceeds of pending sales of South American assets. The shares plunged again in early April on worries about LNG export facilities and Moody's announcement it may cut the company's credit rating. But Sempra continued to prove its resistance to Covid-19 fallout, affirming multi-year guidance once again as it reported a 60% lift in first-quarter earnings. Impressively, all five of the company's operating segments reported higher earnings. That included a 15-fold gain at Sempra LNG, as the Cameron facility in Louisiana ramped up contracted production. Challenges to Sempra's outlook the rest of the year include how well its grid and California's new insurance arrangement hold up to upcoming fire season. The company has delayed a decision on a new U.S. Gulf Coast LNG export facility, as Saudi Aramco apparently backed out. But if Sempra has proven anything this year, it's that all of its business lines are still growing regulated and fee-based contract income even under extreme circumstances. That's the best possible assurance steady CAPEX will keep lifting earnings in line with guidance. Investors should expect more share price volatility so long as energy prices remain unsettled. But resilient Sempra is a buy in our conservative portfolio for long-term growth and income up to $140. Ben Reynolds, Sure Dividend Enterprise Products Partners is a midstream Master Limited Partnership (MLP) with services including the storage and transportation of oil and gas. Its assets include approximately 50,000 miles of pipelines, 260 million barrels of storage capacity for Natural Gas Liquids and 14 billion cubic feet (Bcf) of natural gas storage capacity. The company has tremendous competitive advantages, primarily its vast network of assets. It would be enormously costly to build out a network of pipelines and terminals large enough to compete. These are high-quality assets, which generate strong cash flow. Enterprise Products recently snapped a streak of raising its distribution for 63 quarters in a row. However, cash flow and distributions are likely to hold up, even during a recession. Enterprise Products is arguably the safest MLP in our coverage universe. Enterprise Products Partners' future growth will come from new projects. For example, the MLP recently opened its Mentone cryogenic natural gas processing plant. Exports are another growth catalyst, as demand for liquefied petroleum gas (LPG) and liquefied natural gas (LNG) is growing at a rapid rate across the world, particularly in Asia. We expect 3.7% annualized growth from Enterprise Products Partners over the next five years. Including its 3.7% annual EBITDA-per-unit growth and the 10.1% distribution yield, we believe Enterprise Products is capable of delivering annualized returns of 17.5% through 2025. National Fuel Gas Co. is a diversified energy company; its upstream assets have a production capacity of 610 million cubic feet of gas per day. Despite operating in the highly cyclical and economically sensitive energy industry, the stock performed very well during the Great Recession. Its recession resilience has allowed the company to increase its dividend for 50 consecutive years. We expect positive long-term growth for National Fuel Gas. The recent acquisition of Shell's integrated upstream and midstream assets in Pennsylvania for $541 million is expected to boost natural gas production by 215 million to 230 million cubic feet per day. The coronavirus is a lingering challenge for the economy, but the pandemic has affected the natural gas market much less than the oil market. In addition, the pipeline & storage, and gathering segments provide a strong buffer to earnings amid low commodity prices. Based on expected fiscal 2020 adjusted EPS of $2.85, NFG stock recentyly traded at a price-to-earnings ratio of 13.9, which we feel is too low for a company with such a long history of dividend increases. Combined with 5% expected EPS growth and the 4.5% dividend yield, total returns are expected to reach 14.2% per year through 2025.

Warren Buffett's Investing in Natural Gas: Here's How You Can Too

The recent move by Berkshire Hathaway has brought renewed interest to the natural gas sector. Here are a variety of investment ideas in gas utilities, processing, storage and shipping.

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