The energy sector as a whole is creating new demands on infrastructure material suppliers and providers. For instance, in October 2012, Honeywell International Inc. (NYSE:HON) purchased a 70% stake in privately-held Thomas Russell, the leader in gas processing plant construction. The acquisition will allow Honeywell to offer technologies and products that allow producers of shale and conventional natural gas to remove contaminants from natural gas and recover high-value natural gas liquids used for petrochemicals and fuel. Or in plain English, Honeywell can claim a bigger, more profitable, stake in the natural gas boom.
Honeywell International Inc. (NYSE:HON) is currently trading at the high-end of its 52- week range, and the stock increased by 24% during the same time period. The company announces earnings later this week, and is currently looking bullish. Honeywell International Inc. (NYSE:HON) is so widespread and involved in so many industries, that success or growth in one tangential sector is not enough to truly make a lasting impact.
As the gas comes up out of the ground it has to have a place to go. The railway industry is also rising to meet the demand to move the gas. Companies like Norfolk Southern Corp. (NYSE:NSC) are upgrading operations in New York state in order to unload freight five times faster than they currently do, in order to support the booming gas industry better.
For further evidence of the economic results of the shale natural gas revolution look no further than the state of Pennsylvania’s economy- where companies like Chesapeake Energy Corporation (NYSE:CHK) Energy are hard at work. Hydraulic fracturing brought double digit job growth in the state in 2010 and 2011. The energy sector supports nearly 103,000 jobs in the state in 2012. The state’s unconventional gas-related employment is expected to more than double to nearly 221,000 by 2020 and grow to 387,000 by 2035. Pennsylvania’s Marcellus shale is now the largest-producing formation in the country.
A poll conducted for the University of Texas found the American public generally supports increased domestic energy production but is sharply divided about the use of hydraulic fracturing and exporting liquefied natural gas. 45% of respondents who said they were familiar with fracking said they supported its use for extracting fossil fuels, down from 48% a year ago; 41% said they opposed the practice.
Natural gas (shale energy) and hydraulic fracturing have resulted in new jobs and economic growth in multiple sectors. However, investments into the individual companies must be done with careful research, and not just based on the success of the overall industry.
Erin McBride has no position in any stocks mentioned. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy Corporation (NYSE:CHK), Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.
