Mexican natural gas demand is exploding — and these three top stocks stand to benefit from new pipelines coming online…
Good news for energy investors. Our natural gas supply glut may soon begin to ease in a big way.
No, I’m not talking about how the recent approval of two liquefied natural gas plants will soon open up new markets overseas.
I’m talking about a market much closer to home — one that’s accessible via pipeline. And one whose demand for US natural gas has grown 92% over the last five years.
I’m talking about our neighbor to the south: Mexico.
Viva la Gas Natural!
If you don’t yet have exposure to southern Texas shale plays like the Eagle Ford, here are two reasons to get moving.
First, by the end of 2014 Pemex’s $3.3 billion cross-border pipeline project is expected to come online.
It will stretch 750 miles from Agua Dulce, Texas — the heart of the Eagle Ford shale — to the central Mexican state of Guanajuato — the heart of Mexico’s auto industry. In 2015, when the final phase of the 750-mile pipeline is completed, the network will boost Mexico’s gas import capacity from approximately 1.3 billion cubic feet per day (Bcf/d) to 3.4 Bcf/d
And second, NET Midstream announced this past February it will build a 124-mile pipeline from Agua Dulce to the Texas/Mexico bordertown of Rio Grande City. This is expected to provide a further 2.1 Bcf/d of capacity.
In total, US gas exports to Mexico are expected to more than TRIPLE when these new pipelines come online. It will account for 10% of our export market, up from 3% currently.
Anytime growth like that happens in a few short years, there will be opportunities to profit. So what are the top stocks to own if you want to gain from the “Great Mexican Gas Migration”?
Top Stocks to Buy Now:
As mentioned earlier, 4 – 5 Bcf/d of new demand is expected in the next three years. This bodes extremely well for Eagle Ford producers and two of the top companies in the region are EOG Resources (NYSE:EOG) and ConocoPhillips (COP:NYSE).
Both of these companies have large acreage positions and strong production numbers. Also, because of their location they have relatively easy access to the new pipelines, making them two great options to benefit the Great Mexican Gas Migration.
Another one of the top stocks to buy is Matador Resources (MTDR:AMEX).
Matador is a junior producer with big ambitions.
The company has locked up a 165,486 gross acres (41,302 of which are in south Texas’ Eagle Ford). It has proven reserves of 23.6 million barrels of oil equivalent. And the company has grown production from a total of 154,000 barrels in 2011 to 1.2 million barrels in 2012 — an extremely impressive accomplishment.
But perhaps more impressive is this: the company shows no signs of slowing down.
In fact, Matador expects to increase oil production another 50% to a total of 1.9 million barrels in 2013. On top of that, it will also pump out a whopping 11 billion cubic feet of gas.
Opportunely, most of Matador’s growth is concentrated in the Eagle Ford.
Of the 31.3 wells it plans to drill this year, 27.4 are planned in the Eagle Ford. The company also has an additional 274 potential drilling locations — which means we can expect strong growth to continue for years to come.
So if you’re looking to profit from the Mexican gas migration, Matador is one of the best stocks to buy. Other top stocks to own are EOG Resources and ConoccoPhillips.