Chevron Corporation (CVX), Royal Dutch Shell plc (ADR) (RDS.A) – Liquified Natural Gas: Two Large-Cap Winners on the Horizon

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(1) Shell has taken final investment decisions on two new LNG transport projects in North America, which brings its total capacity for transport LNG to 0.75 MTPA. The company is producing LNG on a small scale and selling it to trucks, fleet operators, and to shipping. This is a market that may take several years to develop because of the need for original equipment manufacturers and a distribution network. That said, the potential is huge. In Brazil and China there are already +20,000 trucks and buses running on LNG. If the same were to happen in the US, the potential profits for Royal Dutch Shell plc (ADR) (NYSE:RDS.A) are poised to be huge.

(2) Through a joint venture with Kinder Morgan, Shell will build an LNG export facility at Elba Island in Georgia.
(3) Royal Dutch Shell plc (ADR) (NYSE:RDS.A) agreed to acquire Repsol’s 7.2 MTPA LNG business, including 4.2 MTPA of equity plant capacity in Latin America. Shell is the world’s leading LNG trader, which will add value to acquired Repsol’s LNG assets with expected annual cash flow of $1 billion. The deal is expected to close during the first quarter of 2014.
Trading at 2013 7.5 times P/E and paying a great 4.85% cash dividend yield, I think Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is one company to follow not only for its present but also for its bright future.

Foolish conclusion

The two companies named above are two mature oil and gas players trading at very reasonable levels. That said, they are investing heavily in the US and internationally to become leaders in the future LNG world. This is no detail. In the future, the energy landscape will be much more influenced by LNG than it is today. The shale revolution has made gas resources cheaper, making it a key element in tomorrow’s world.

The article Liquified Natural Gas: Two Large-Cap Winners on the Horizon originally appeared on Fool.com and is written by Federico Zaldua.

Federico Zaldua has no position in any stocks mentioned. The Motley Fool recommends Chevron. Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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