Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Ukraine Crisis Could Be Good News for American Natural Gas Producers

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

The CEO of OAO Gazprom (NASDAQOTH: OGZPY  ) has warned of a possible withholding of natural gas supplies to Ukraine, citing nearly $2 billion in unpaid bills amid the economic turmoil in the country.

The ongoing diplomatic crisis between Ukraine and Russia, along with Gazprom's status as an enormous Russian company, have made this billing dispute more critical. Several U.S. officials, including House Speaker John Boehner, are pushing for the U.S. to increase natural gas exports to blunt the influence of Gazprom.

A long, winding road to market
Getting U.S. natural gas on the international market has been a major struggle for producers for years. The Department of Energy has to approve every export, and the White House downplayed the chances of any major move, saying they don't see exports having much impact.

As a practical matter, that's probably true. Ukraine's non-payment is a bigger issue than anything, and U.S. producers aren't going to be any more willing to give them free gas than Gazprom is. Still, there's a silver lining to all of this.

Gas export complexities aren't a brand new problem, but they're something that has rarely gotten any political attention. The Ukraine situation may be just the excuse needed to get some much-needed attention for this problem, and even if the administration is unwilling to change policies now, with upcoming elections there could be a shift toward more action on freeing the market.

Who benefits?
With a lot of excess production available, the domestic price of natural gas is not expected to see a major impact from the exports. Prices are higher overseas, however, and having access to those markets at all could be a windfall for major producers, who can more easily grab some of that market share in Europe and Asia.

The biggest potential winner is Chesapeake Energy (NYSE: CHK  ) , the largest gas-focused producer in the U.S. The company is trading at a modest price right now with plenty of room to run, though with a current ratio of only 0.66 and a lot of debt there is more risk there than most.

Canadian-based Encana (NYSE: ECA  ) is a somewhat safer choice, though it is also higher priced. It is also growing somewhat slower than the industry average, so it's tough to consider it a bargain at these prices.

The safest by far, in my opinion, is Anadarko Petroleum (NYSE: APC  ) , which has been putting a lot of money into expanding its natural gas business in recent years. The company has higher margins than the other two producers mentioned, and it has the lucrative oil business to fall back on if the natural gas boom doesn't materialize. It stands as a responsibly priced company that is growing natural gas production at just the right time.

And then there's Gazprom
After looking at those figures, this is another excellent time to look at the numbers on Gazprom itself, which dropped with the rest of the Russian stock market on the Ukraine crisis, and is trading at a criminally low price.

While the other companies are looking at P/Es in the teens, Gazprom's P/E is hovering around 2, and trading at roughly a quarter of its book value. The company has much higher margins than other natural gas-centric plays, and is a market leader.

Rather, Gazprom is the market leader, by far the largest natural gas company in the world. The company sees ten times the revenue of Chesapeake, and despite the panic selling over Ukraine, the company is irreplaceable to Europe, and that's true no matter how quickly the U.S. majors can start getting more exports to market.

A dream come true for energy investors?
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!


Read/Post Comments (1) | Recommend This Article (0)

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 March 10, 2014, at 4:20 PM, amvet wrote:

    I think the Ukraine is insignificant wrt US NG producers. Here is why:

    (1) The 100 year NG supply hype has been replaced by 5 to 7 years supply.

    (2) This winter production did not keep up with demand and there has been a massive reduction in NG storage. (Look at the EIA weekly NG storage graph.)

    (3) Our NG fields have a production decline of around 19 bcfd per year. That must be replaced each year or production declines.

    (4) Our first LNG facility for export to Europe will only be in operation sometime next year.

    (5) When we can export from our new terminals, we would prefer to ship to Asia and get a much higher price than we can get in Europe.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2869190, ~/Articles/ArticleHandler.aspx, 9/2/2015 3:22:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Jason Ditz

Jason Ditz is the News Editor for He has 10 years of experience in foreign policy research and his work has appeared in Forbes, Toronto Star, Minneapolis Star-Tribune, Providence Journal, Washington Times and the Detroit Free Press.

Today's Market

updated Moments ago Sponsored by:
DOW 16,270.54 212.19 1.32%
S&P 500 1,934.26 20.41 1.07%
NASD 4,711.84 75.73 1.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 3:06 PM
APC $69.18 Up +0.89 +1.30%
Anadarko Petroleum… CAPS Rating: ***
CHK $7.34 Down -0.23 -3.04%
Chesapeake Energy CAPS Rating: ****
ECA $6.89 Up +0.07 +1.03%
EnCana Corp (USA) CAPS Rating: ***
OGZPY $4.24 Down -0.01 -0.24%
Gazprom OAO (ADR) CAPS Rating: ****