Topic: Energy Stocks

Energy stocks: This company is growing with the race for shale gas

Natural gas processing plant image

Yesterday we discussed the shale revolution. (View the post: Why the shale revolution will make oil price shocks a thing of the past.) The production of natural gas and oil from shale is rising rapidly in North America. This angers some environmentalists, even as it creates jobs and tax revenues at a time of economic uncertainty. More than that, oil production from shale – which will contribute much more to oil reserves than most people realize – is due to alter the balance of supply and demand in international energy.

As we begin to depend less on despotic regimes around the world and more on localized, stable energy stocks, it will keep oil prices in check, to the greater benefit of the economy as a whole.

The major impact from shale oil production is in the future, but the race for natural gas from shale is on now. Today we discuss one Canadian stock that plays a key role in the industry. This company rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration equipment and power generators.

In the three months ended September 30, 2011, this energy stock’s revenue rose 4.2%, to $282.3 million from $270.9 million a year earlier. The company gets about 28% of its revenue from stable, recurring sales of parts and services. Without one-time items, earnings per share jumped to $0.22 from $0.06, thanks to the higher revenue and improved profit margins. Long-term debt of $132.9 million is a low 14.2% of its market cap.

This firm’s order backlog continues to grow as it benefits from rising shale gas production in the southern U.S., including the Eagle Ford and Marcellus shale areas. Since the end of September, this stock has won a two-year, $228-million U.S. contract to build a gas-processing plant in Oman.

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Energy stocks: Company established in rapidly expanding markets at home and overseas

The company has a strong position in three rapidly expanding markets: U.S. and Canadian shale gas production, Australian natural gas from coal beds and conventional Middle Eastern natural gas, which is converted to liquefied natural gas (LNG) for shipping.

The stock trades at 13.2 times its forecast 2012 earnings of $0.92 a share. The shares yield 2.0%.

In the latest edition of Stock Pickers Digest, we reveal this energy stock’s identity and give you our clear buy-hold-sell advice.

If you’re looking for energy stocks – and other growth stocks in sectors with fast-developing trends – that have the potential for gains of 50% or more in 6 months or less you should subscribe to Stock Pickers Digest.

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