3 Ways to Ignore Al Gore

A few weeks ago, Al Gore advised Americans to avoid oil stocks because the "carbon assets," that is oil and natural gas, owned by publicly traded companies are overvalued. Gore believes "this carbon bubble is going to burst." When my wife heard this, she suspected Gore of ulterior motives. I'm inclined to agree. Foolish contributor, Matt DiLallo recently responded to Gore's remarks by showing how much longer our "carbon bubble" might last and recommended three oil-related stocks to buy instead. I'd like to offer three companies that I think will do well in the carbon asset, ahem, oil and gas business.

Finding energy across the globe
Be it natural gas or crude oil, be it in the U.S., Gulf of Mexico, or a foreign country, Noble Energy (NYSE: NBL  ) seeks and generally finds hydrocarbon resources. For example, its Niobora oil play is believed to contain over 2 billion barrels of oil. Even better, production costs are less than or equal to those of the Bakken or Eagle Ford plays. Overseas, Noble discovered crude oil off the coast of both Cameroon and Equatorial New Guinea, and these assets are contributing to the company's bottom line.

Natural gas discoveries contribute to Noble's revenue as well. The biggest finds are the Tamar, Karish, and Leviathan gas fields off the Israeli coast. Gas from the Tamar has already come ashore within four years of its discovery. In the U.S., Noble produces natural gas from the low-cost Marcellus shale and the DJ Basin on Colorado. This past quarter alone saw a 16% increase in natural gas production.

As an investment, Noble represents a growth stock as its dividend yields less than 1%. And grown it has; the stock climbed almost 50% in the past year. Not only is Noble finding more oil and gas, the company is focusing on production costs and divestiture of non-core assets. These efforts to grow production and reduce costs should reward investors well.

Low-cost natural gas for years to come
Currently boasting over 3 trillion cubic feet of proven natural gas and liquids reserves, Cabot Oil & Gas (NYSE: COG  ) provides proof that a "carbon bubble" isn't bursting for a while. Production in July 2013 reached 1.2 billion cubic feet a day while production costs declined from the year before. All told, at current production levels, Cabot has enough gas to last more than 25 years. These reserves have been steadily growing and are projected to continue growing.

Cabot anticipates not only reserve growth, but production growth by over 40% in the future. Even better for investors, the improved production costs achieved over the past year should continue in the years to come. The current breakeven point for Cabot is less than $1.20/Mcf; this means Cabot can make money despite low natural gas prices. The trend toward lower production costs suggests an even lower breakeven point down the road.

This past quarter saw Cabot's earnings and cash flow increased over the third quarter of 2012. No surprise, production was 61% higher than last year's results. Nine month results for 2013 also convincingly topped 2012's results. Sale of non-core assets in Texas signaled a continuing trend for Cabot to focus on its Marcellus operations. 

Moving energy from the field to the market
Producing oil or gas in the U.S. is wonderful, but somehow that energy needs to get to a refinery. Enterprise Products Partners (NYSE: EPD  ) does that and does it well. In addition to connecting various Texas and Southern U.S. oil fields to Gulf Coast refineries, Enterprise also connects natural gas liquids from the Midwest and Pennsylvania to the Gulf Coast. The growing oil production in Colorado has Enterprise expanding into that play.

Enterprise also operates pipelines and other assets for the export market. Specifically, the company operates a natural gas liquids import/export facility at the Houston Ship Channel. Enterprise currently is expanding this facility to increase its capacity by three cargoes a month by early 2015. This is in addition to a previous expansion completed this past March. This looks to be a lucrative business as Enterprise is contracted out through 2015.

More exports are on the horizon. Enterprise has interests in three different pipeline assets connected to two Texas coast terminals. These assets will export refined products with an eye toward the Central and South American markets. The first of these terminals should come online in the first quarter of 2014, the other three to six months later.

Final Foolish thoughts
It's a free country, and Al Gore can express his opinions on the matter of future U.S. energy production and use. And you are free to agree or not. If you doubt the U.S. "carbon bubble" will soon burst, these three companies are worth considering.

For capital gains, Noble wins hands down in my book. Its growing production, diversified assets, and focus on cost reductions should pay off for years. Enterprise is the one for long-term, safe income with room for capital gains. Oil and gas production won't slow anytime soon, and Enterprise is well positioned to capitalize. Cabot is a bit expensive for me, especially considering the price of natural gas. The company continues growing production and reducing costs, but the market, in my opinion, has priced that in.

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Read/Post Comments (13) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 09, 2013, at 10:40 AM, rd80 wrote:

    Hi Robert,

    Just wondering if you could explain why you'd be long EPD puts if you're positive on the stock.

    Best regards, Russ

  • Report this Comment On November 09, 2013, at 11:32 AM, Davosil wrote:

    With the mountain of science on climate change that's been compiled, to ignore it is irrational and to invest in oil (read: invest in the destruction of the habitability for human life on Earth) is immoral. Gore is absolutely right, even though we will still burn oil for many more years. The terrifying future our kids face from climate change is only offset by the INCREDIBLE economic & strategic opportunities that exist in the transition to a clean energy society.

  • Report this Comment On November 09, 2013, at 12:55 PM, toomuchgas wrote:

    "Clean" energy will never be anything other than wishful thinking because it just is too expensive even with multiple subsidies. The best way to attack CO2 is to use the best current technologies such as using natural gas for electricity, transportation and heating, nuclear energy, and encouraging conservation and an increase of green areas. The U.S. has reduced greenhouse emissions while the developing countries are still increasing emissions at an alarming rate. I would like to see a reasonable carbon tax slowly implemented to help both fiscal and environmental problems.

  • Report this Comment On November 09, 2013, at 1:09 PM, caddis16 wrote:

    This guy has one of the biggest carbon footprints of anyone on this planet. Check out how many huge homes he has, how many fancy cars he drives. When this guy divests himself of some of these toys, who knows, maybe I'll pay attention to what he says.

  • Report this Comment On November 09, 2013, at 1:11 PM, caddis16 wrote:

    And I voted for Bill Clinton.

  • Report this Comment On November 09, 2013, at 2:37 PM, ferdiefor wrote:

    Al Gore is in direct competition with a box of rocks as to which is dumber.

  • Report this Comment On November 09, 2013, at 9:58 PM, terri wrote:

    Find out where Al Gore made his millions while in the White House and after!! OIL! So he's nothing but a hypocrite who is making millions off of ignorant people. If he wants to get rid of his houses that pollute way more than yours and mine and all his houses then I might consider buying into his happy B.S.!! But until then I'll just compare him to a box of rocks and I think the box of rocks are smarter!!!

  • Report this Comment On November 10, 2013, at 3:47 AM, Richard233 wrote:

    I have to wonder how many people who talk about "mountains of science" have ever read the papers let alone done review of the science and data behind them.

    I'd be more willing to think it was legit if it was not for the various scandals that have occurred where data was cherry pick/distorted and the computer algorithms manipulated to get the desired results.

    Climate change may certainly be happening, but narrowing down the causes and solutions, not so much. For instance, the temperature on various planets in our solar system have been observed to rise also. This would indicate that one of the main causes has to do with that big ball of fire in the middle of our solar system AKA the sun.

    Of course if you acknowledge that fact, then it makes it a lot hard to scam people via the carbon taxes and the like.

    A simple scientific fact. Carbon is used by plants to grow. When you want plants in a hot house to grow, you pump in CO2. Guess what happens? The plants absorb it and all without a single dollar having to be given to Al Gore and his ilk.

    The conclusions drawn about the "disaster" predicted a decade ago have already been shown to be false, so take the rest of their spiel with a large chunk of salt. At least, until they start blaming salt for climate change. :-)

  • Report this Comment On November 10, 2013, at 4:24 AM, maddox wrote:

    the majority of Government Elected Officials are beholding to Special Interest Commitments to the Oil and Gas Industry, amongst others special interests. In a healthy society, Elected Officials would lead, but that is not the case these days. The science of Carbon Monxide Atmospheric Poisoning is no longer speculation but fact - 500 Gigatons of Carbon Monoxide residue has remained in our atmosphere with approximately 11 Million Gigatons being added each year - 2013 going forward. Without a drastic push away from Fossil Fuel burning into renewable energy our children will be suffer

  • Report this Comment On November 10, 2013, at 6:57 PM, Mathman6577 wrote:

    It is always a good idea to ignore Algore.

  • Report this Comment On November 11, 2013, at 11:51 AM, LakotaSunrise wrote:

    When evaluating the accuracy of the "mountain" of scientific evidence, please keep in mind that there is a difference between "peer-reviewed" and "clique-reviewed" The real tragedy when it comes to the impact on future generations, the mountain of debt with which they will be saddled is far more threatening and domestic energy production.

  • Report this Comment On November 11, 2013, at 4:49 PM, dylan588 wrote:

    @Russ, I sold the puts, sorry if it didn't come out more clearly.

  • Report this Comment On November 24, 2013, at 10:54 AM, MrBear509 wrote:

    Al Gore is a self-absorbed hypocrite who only thinks of Al Gore. He is probably short oil and is trying to drive stocks down.

    He previously used his political clout to strong arm cable companies to take on Al Jazheera network after he bought it. He's made millions off the few cents/subscriber as a result.

    You can trust this guy as far as you can spit into a hurricane

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