Energy Business

Why 3 Major Energy Companies Should Be Huge LNG Winners

Kinder Morgan

Executive Chairman Richard Kinder has bought a ton of shares of the company recently, and that is a huge positive for shareholders. Kinder Morgan Inc. (NYSE: KMI) is one of the largest energy midstream companies, with diverse operations across the midstream energy value chain. Businesses include natural gas pipelines, liquids terminaling, CO2 production, as well as products pipelines.

Kinder, also the co-founder of the energy pipelines company, continues to buy more Kinder Morgan stock. From February 15 through 21, he bought more than 519,100 shares for a total of $9.9 million, or $19.05 per share on average, according to forms Kinder filed to the Securities and Exchange Commission. Kinder now owns 237 million Kinder Morgan shares in his personal account and 11.8 million more shares through a limited partnership.

Stifel sees the stock as a solid play on LNG and noted this about the company:

Kinder transports approximately 40% of U.S. natural gas production with its pipeline network that covers the lower 48. The company owns an LNG export facility that is in the process of entering service and is expected to ramp over 2019. In addition, the company’s owns a significant Texas intrastate system and sanctioned two greenfield Permian natural gas takeaway pipelines that are slated to enter service in the fourth quarter of 2019 and the fourth quarter of 2020.

Kinder Morgan shareholders receive a solid 4.03% dividend. Stifel has a $23 price target for the sector giant, while the posted consensus target price is $21.37. The shares were last seen trading at $19.85 apiece.

Williams Companies

This top energy stock is also a solid pick for more conservative accounts looking for exposure to LNG. Williams Companies Inc. (NYSE: WMB) is now largely a pure-play domestic natural gas infrastructure company that has a 74% ownership interest in its underlying master limited partnership, Williams Partners.

The company has a lower risk, fee-based business model with some volume sensitivity. Natural gas demand continues to be driven by LNG exports, power generation and industrials. In addition to steady demand growth, Marcellus production and associated gas in the Permian are expected to continue to be primary supply drivers.

The Stifel report said:

Williams handles 30% of U.S. natural gas production through its long-haul pipeline network and gathering and processing footprint. Transcontinental Pipeline (Transco), which stretches from New York to South Texas. Transco currently serves four of the six operating/under construction LNG exports facilities with 2 Billion cubic feet per day of contracted capacity. Management believes Transco is well positioned to serve the second wave of projects given its Gulf Coast connectivity and optionality

Williams Companies shareholders are paid a very sizable 5.56% dividend. The $35 Stifel price target compares with the $31.94 analysts’ consensus estimate. The stock closed most recently at $27.40 per share.

These three top ideas to play the LNG explosion are all measurably safer ways to be involved as they are all mature and exceptionally well run. Toss in the solid dividends, and they also are great total return ideas.