ConocoPhillips (COP), Statoil ASA (ADR) (STO): We Could Prevent Europe’s Energy Scare

Of course, Europe will not be the only ones that could benefit from a U.S. natural gas supply. Natural gas producers in the U.S. could stand to benefit greatly as well. The problem for natural gas producers in the U.S. today is that they have to play a delicate production game: produce enough to keep revenue growing, but don’t produce too much as to flood the market. (See April 2012 gas prices to see what happens when gas companies overproduce.) With a export outlet, this could help to make the gas market more fluid and stabilize gas prices.

Right now, natural gas spot prices are in the $4.00 range. For low-cost natural gas producers like Ultra Petroleum Corp. (NYSE:UPL) and EXCO Resources Inc (NYSE:XCO), a $4 price for gas will be a welcome sight. Exco had written down so many assets because of low gas prices, the company expects profits as long as gas remains above $2.15. Once LNG exports do come on line, an uptick in natural gas prices is expected, but not one that is so severe. More importantly, companies like Ultra Petroleum Corp. (NYSE:UPL) and EXCO Resources Inc (NYSE:XCO) that deal exclusively with natural gas will not have to worry as much about wild price swings.

What a Fool believes
With Freeport receiving its export license this month, it is likely that there are other facilities around the U.S. that will also receive permission to export as well. But, there are enough companies proposing LNG export terminals in the U.S. to export 41% of total production, so it is highly unlikely that all of these facilities will be granted a license. There are still some detractors who would like to see natural gas remain in the U.S., but this situation is unlikely as well. Somewhere in the middle is a balance point that will allow the U.S. to export enough LNG to stabilize prices, and countries around the world will want to get a piece of the action. It’s unclear when another price spike like the one in the U.K. will happen again, but with the U.S. playing a bigger role in the natural gas market, the chances of this are less likely.

The article We Could Prevent Europe’s Energy Scare originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool. The Motley Fool recommends Statoil ASA (ADR) (NYSE:STO) and Ultra Petroleum. The Motley Fool owns shares of Ultra Petroleum Corp. (NYSE:UPL) and has the following options: Long Jan 2014 $30 Calls on Ultra Petroleum, Long Jan 2014 $40 Calls on Ultra Petroleum, and Long Jan 2014 $50 Calls on Ultra Petroleum.

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