Investment

Oil and Gas Industry Investment Opportunities

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Natural Gas and Oil Plant

2019 was not a good year for investors, who placed their money in the oil and gas industry. The energy stocks took a rough dive, but 2020 is showing promising signs of investment return. When it comes to energy investments, the current nation in the lead is the US, with their spending on fossil fuels exceeding $150 billion. There are many non-renewable energy investment opportunities when it comes to oil and gas, however plans remain tentative due to Coronavirus impact..

Understanding the Importance of Gas and Oil Market Investment Opportunities

So, what makes natural gas and oil such great investment opportunities?

In 2009, around 22.8 trillion ft3 of natural gas was consumed by the US. Most of this natural gas was delivered to around 70 million businesses and homes. With the population rising, this amount is estimated to increase.

Moving on to petroleum, in 2018, the US used around 20.50 million barrels of oil per day. Following is the petroleum consumption data of different sectors:

  • 69% transportation
  • 25% industrial
  • 3% residential
  • 2% commercial
  • 1% other

Uses of Natural Gas

Industrial Uses

  • Making fertilizers, plastics, pharmaceuticals, antifreeze, and fabrics
  • Making chemicals like propane, acetic acid, ammonia, methanol, ethane, and butane
  • Used in many manufacturing processes such as drying, baking, melting and heating, and glazing a product
  • Used in making commodities such as glass, steel, cement, ceramics, tile, paper, bricks, etc

Uses of Oil

  • Combustion engines
  • Heavy locomotives
  • Aircrafts
  • Manufacturing of sporting goods, electronics and clothes

Types of Gas and Oil Investments

Before you decide to place your money in a natural gas and oil company, you need to understand the different investment options available to you. Energy management consultants to look at portfolios.  Generally, there are four ways to invest your money, which are as follows:

Exploration

Companies that start with exploration are not fully established. In fact, they are in their initial phase of buying land for drilling. If the company strikes oil, your investment is paid off ten times more. If the land doesn’t yield any gas or oil, then you lose everything. This type of investment option is best for people who can handle a high investment risk.

Income

This investment opportunity area is the safest and promises results one way or the other. Companies purchase a land of proven gas and oil reserves. They aim to generate income above their expenses. Since companies buying such lands have a well-established reputation, you can invest in them in whatever way you see fit.

Developing

Companies that drill on proven reserves in hopes of striking more oil or gas pose less risk as compared to the ones that are in the exploring phase. However, there are no guarantees that the land will yield a higher quantity of gas or oil.

Support and Services

In this option, you are not investing in the company, but in the services they provide. For example, a company that drills for natural gas and oil provides its resources to transportation companies, logistics companies, rigging and construction companies, pipeline companies and more. This investment structure is similar to investing in B2B services. If you invest in such services, you will yield a profit based on the demand for services.

Ways to Invest

1. ETFs or Mutual Funds

In this investment approach, you buy shares of gas and oil-focused ETFs. The best thing about this investment is that you get substantial exposure without taking any risk in the spot prices of the commodity. Moreover, you don’t need to tie your fortune to one company. Following are five of the top ETFs that you can invest in right now :

  • VelocityShares 3x Long Natural Gas (Total Assets: $658.88 Million)
  • The United States Natural Gas Fund (Total Assets: $532.21 Million)
  • VelocityShares 3x Inverse Natural Gas (Total Assets: $90.52 Million)
  • ProShares Ultra Bloomberg Natural Gas (Total Assets: $46.61 Million)
  • ProShares UltraShort Bloomberg Natural Gas (Total Assets: $16.41 Million)

2. Large Cap Stock or ADRs (American Depositary Receipt)

These two methods give you great exposure to the gas and oil markets through publicly traded companies. One of the biggest companies that you can invest in is ExxonMobil. It has the highest market capitalization and plans to spend around $35 billion every year till 2025 in order to expand its production of oil. The following are five of the top Large Cap Stocks that you can invest in right now:

  • ExxonMobil (Investment Yield: 5.6%)
  • Royal Dutch Shell (Investment Yield: 7%)
  • Total (Investment Yield: 5.8%)
  • Kinder Morgan (Investment Yield: 6%)
  • Pembina Pipeline (Investment Yield: 5.2%)

3. Futures Contracts

Futures Contracts refer to derivates like gasoline and oil contracts that give you the power to buy oil at a particular price. It works in the same manner as stocks. If you keep up with your Future Contract till the settlement date, you will have the power to purchase oil in units of thousand barrels at a price stated in your contract.

Here’s a link to the Futures Contract that you can buy in 2020 – https://quotes.ino.com/exchanges/contracts.html?r=NYMEX_NG

4. Micro-Cap Stock

Micro-Cap Stocks allow you to invest in your budget. If you find a company that is not yet publically trading, then you might have to hire a broker. This investment option is best for people who are looking for a private opportunity. The following are five of the top Micro-Cap Stocks that you can invest in right now:

  • Canadian Natural Resources (CNQ) (Investment Yield: 4%)
  • Suncor (SU) (Investment Yield: 4%)
  • Valero (VLO) (Investment Yield: 4%)
  • Torchlight Energy Resources Inc ((Investment Yield: 1.8%)
  • Sanchez Energy Corp (Investment Yield: 6.1%)

5. Partnerships

Last but not least, gas and oil investment partnership opportunities work on the basis of capital, which you provide to obtain, develop and operate gas and oil wells. In return, you are paid cash on a quarterly or monthly basis. The following are five of the top companies that you can partner up with right now:

  • Energy Transfer
  • Enterprise Products Partners
  • Marathon Petroleum
  • Brookfield Infrastructure Partners
  • Cheniere Energy Partners

The investment yield changes every day based on market capitalization. So, what are you waiting for? Now is the time to invest in these companies!

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