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New Jersey Resources Corp (NJR), Boardwalk Pipeline Partners, LP (BWP): Three Safe Natural Gas Companies for Your Portfolio

Published on July 18, 2013 at 9:27 am by The Motley Fool in News

The global trend towards greener forms of energy means dark days ahead for coal companies, and better prospects for natural gas firms. While this form of energy isn’t as green as wind and solar, for example, it is much better than coal and oil. Furthermore, it provides you with more security and will likely net you better capital gains than with wind or solar investments.

New Jersey Resources Corp (NYSE:NJR)

Producing energy from natural gas costs about five times more than generating it from crude oil. However, the demand for cleaner forms of energy will be enough to grow profits at natural gas firms. Let’s take a look at three of my top large-cap natural gas companies operating in the United States.

New Jersey Resources Corp (NYSE:NJR) stands to earn substantial profits due to the population increase that is expected in its service area. That includes the wealthier areas of New Jersey Resources Corp (NYSE:NJR). Currently, the business serves about 500,000 people in the wealthy counties throughout the state. The company is largely invested in its natural gas component, which is the foundation on which the firm has managed to succeed. However, the company is also forward-looking and is invested in solar initiatives, which could provide enormous growth in the years ahead as society focuses on renewable forms of energy. While the solar initiatives are currently small-scale, they could help to offset the firm’s falling marketing margin. The green project could also gain favor by regulators, who have shown tremendous support for green projects.
Boardwalk Pipeline Partners, LP (NYSE:BWP) was upgraded on July 10 to “outperform” by Zacks. That’s an improvement from its neutral rating. The price target is $33.90, which is about an 8% potential upside from its current price at around $31.80. On April 30, Credit Suisse analysts upgraded the stock to “neutral” from “underperform.” Also, on April 15, Deutsche Bank analysts raised its price target from $28 to $31.

The company has three flagship pipeline systems, which transport natural gas throughout the United States, particularly in the northeast, midwest and southeast. The pipelines aren’t near full capacity, which gives the firm plenty of room for growth. But the company isn’t restrained to those pipelines, as it also operates 11 underground storage facilities that are located everywhere from Ohio to Texas. Further growth could be in the company’s future, due to its financial backing from Loews Corporation (NYSE:L). The firm has supported Boardwalk Pipeline Partners, LP (NYSE:BWP) in the past with dept and equity financing, and this could help the firm to make acquisitions during a period of consolidation in the market.

Atmos Energy Corporation (NYSE:ATO) looks set to fluctuate in the days ahead. On July 12, the firm announced it would purchase two southwest natural gas systems. The buys received approval on July 11 from the Mississippi Public Service Commission for the purchase of the gas systems in the communities of Bude and Meadville. The purchases only total 470 new customers. While Atmos Energy Corporation (NYSE:ATO) has leased and operated the systems since 1987, the purchase will likely save the company a small amount money because instead of leasing, the firm has now accumulated the assets. While the purchase won’t affect the company’s bottom line too much, it shows the trust the firm has gained with regulators. That relationship puts the company at an advantage, because it limits the regulatory risk associated with its projects.

Exports also mean profit potential

While these companies look to make gains domestically, I also believe there is an upcoming surge in liquefied natural gas exports. According to Money Morning, that boom is already happening. Natural gas exports to Mexico have increased by 160% since 1990, and gas use in the nation has increased by 17% since 2007. The growing demand domestically for natural gas, coupled with increased global demand, are enough to keep these natural gas firms profitable for many years ahead.

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

The article 3 Safe Natural Gas Companies for Your Portfolio originally appeared on Fool.com is written by Phillip Woolgar.

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