What Is the Best Way to Invest in Natural Gas?
What Is the Best Way to Invest in Natural Gas?
Severe weather seems even more severe recently. A glaring example of this is the winter storm of 2021 when nearly the entire continental United States and parts of Canada and Mexico were under threat of an ice storm. During this event, three ice storms—Shirley, Uri, and Viola—hit the state of Texas and left almost 4.5 million people off the grid. This catastrophic event occurred even though Texas has one of the most diverse ranges of energy generation in the country that incorporates a variety of renewables such as solar, wind, nuclear, coal, hydro, biomass, and the largest contributor: natural gas. Unfortunately, nearly all of these systems succumbed to inclement weather conditions.
A reliable supply of energy is not a goal, but a mandate. With this mandate in mind, we can draw two important lessons from the winter storm. First, plan for the worst and winterize; and second, utilize multiple energy sources for the strongest protection against widespread source interruption outages.
In today’s interrelated resource economy, natural gas will continue to be a vital energy source for the foreseeable future—even for advanced distribution networks like the Texas grid. Moreover, natural gas will continue to provide a compelling opportunity for wealth creation. Let’s explore this important resource with emphasis on the best way to invest in natural gas.
Oil and Natural Gas: What Is the Difference?
One of the best ways to evaluate natural gas is by comparing the resource with its more famously utilized cousin, crude oil. Let’s start with a couple of definitions:
Crude oil is an unrefined petroleum product that is primarily comprised of hydrocarbons. When refined, gasoline, diesel, and other petrochemicals are produced to serve as fuel for mechanical systems such as automobiles, earth-moving equipment, and aerospace vehicles.
Natural gas is a highly flammable substance that contains methane and other hydrocarbons. It is found underground, often mixed with oil, and is used primarily for heating, cooking, and power generation.
As these definitions indicate, oil and gas are similar resources. They also are utilized in many of the same applications and acquired through similar processes. A barrel of fluid produced from an oil and gas well commonly contains three components: salt water; oil; and natural gas and Natural Gas Liquids (NGLs). Standard measurement of a barrel of fluid equals 42 gallons or approximately 159 liters or 47,700,000 cubic meters.
Oil and Natural Gas: Acquisition and Applications:
Oil and gas, which are often found together, along with water, are also extracted by similar techniques.
|EXTRACTION TECHNIQUES FOR OIL AND NATURAL GAS|
|Primary Recovery Techniques|
|Secondary Recovery Techniques|
|Hydraulic fracturing (fracking)|
|Enhanced Recovery Techniques|
With enhanced oil recovery (EOR) techniques, up to 60 percent of well capacity may be extracted. For the most favorable conditions, the return can be as high as 80 percent.
Recovering the gas and oil mixture from the ground is critical, but it is only the first step toward consumable oil and natural gas. Before it is accessible for residential, transportation, and energy-generation applications, natural gas must be separated from the oil and water and refined to remove impurities to generate the highest quality end product.
Natural Gas Applications
🔥 Residential and commercial heating
💡 Generation of electricity
The market prices for these products are principal determining factors for the profit margin that can be realized through investing in natural gas.
Oil and Natural Gas Investing: Is There a Difference?
Although oil and natural gas are typically extracted as a mixture, it is possible to invest solely in natural gas. These investments can assume several different forms.
Natural Gas Investment Options
- Stock: As with most other commercial enterprises, you can buy shares of stock in natural gas companies. Stocks are easily obtainable and can be a relatively stable investment with energy sector companies.
- Exchange-traded funds (ETFs): Investing in a fund usually means that a wide range of assets will influence the return, not only natural gas prices. However, this diversity often encourages stability, and ETFs can provide a good option for long-term investors.
- Master limited partnerships (MLPs): MLPs offer investors the ability to defer taxes. However, there are risks associated with these investments. For example, government legislation, environmental disasters, and other contingencies—as well as market volatility—can inflict a substantial impact.
- Futures: Buying futures is more speculative than long-term investing. Futures are highly speculative; therefore, they can offer high rewards, but they are also risky.
Each of the options listed above brings both benefits and drawbacks, which is true of all investment strategies. To be successful requires that you have a knowledge of which market factors affect oil and gas prices. However, if your objective is to find the best way to invest in natural gas and oil, none of the above options will suffice.
The Best Way to Invest in Natural Gas and Oil
The best way to join the oil and gas business is to become a partner in an oilfield. As with any type of investment, there are associated risks—especially if you are a novice. However, many risks can be mitigated by partnering with a leader in natural gas and oil investing who understands the three key requirements for profitability.
Keys to Best Invest in Natural Gas
🔑 Acquire: Know what and when to buy.
🔑 Develop: Improve the value of the property.
🔑 Divest: Know when to sell.
We call this the ADD investment strategy, and to capitalize on it, please consider partnering with a proven industry expert with a track record of producing strong returns from natural gas and oil extraction operations.
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Investments in oil and natural gas partnerships are speculative and involve a high degree of risk. Oil and natural gas wells are naturally depleting assets. Cash flows and returns may vary and are not guaranteed. Past performance is no indication of future performance. Nothing herein shall be construed as tax or accounting advice. Investors may lose money. Some of the risks other than those described herein associated with investment in Larimer County Energy Fund are described in the Risk Factors section of the Confidential Private Placement Memorandum concerning the Larimer County Energy Fund accompanying, preceding, or following this Executive Summary. Prospective investors are urged to read and consider carefully the risks described in that section. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the investment opportunity described in this Executive Summary. Neither the Securities and Exchange Commission nor any state securities commission has determined the accuracy or completeness of the information contained within this Executive Summary or in the Confidential Private Placement Memorandum concerning the offering of limited partnership interests. The offering of limited partnership interests is made only by the Confidential Private Placement Memorandum, which must accompany, precede, or follow this Executive Summary, and an investment decision can only be made by the execution of definitive investment documents. Investors in Larimer County Energy Fund are required to be “Accredited Investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933.