U.S. energy renaissance?

Are we in the middle of a “veritable U.S. energy renaissance?” Editor Richard Stavros seems to think so. He cites all the cheap natural gas from the bountiful shale plays “driving a renewal in gas power plant development and the pipelines that feed them, as well as the retail and manufacturing sectors.” And although some observers predict U.S. gas production will be slow, Mr. Stavros believes these forecasts are only hiding what will be strong growth in U.S. shale gas production of 35 and 70 per cent by 2015 and 2017, respectively.

This increase will be powered by “a reserve of more than 1,000 wells currently shut in,” as well as by more associated gas from oil and natural gas liquids exploration. The increase will also be fueled by increased demand from the shutting down of coal-fired power plants, along with the demands of new export terminals for liquefied natural gas that are expected to go on line between 2015 and 2018.

In the meantime, there’s been no shortage of income investors playing the shale gas boom via pipeline operators like Spectra Energy Corp. (SE-NYSE, $33.49) and Kinder Morgan Energy Partners LP (KMP-NYSE, $81.42). To Mr. Stavros, there’s also an added benefit in gaining more direct exposure to the single area of economic activity enjoying “phenomenal growth”: pipeline construction.

Unlike the well-diversified operators of said pipelines – firms in which the earnings of their other divisions can impact pipeline development revenue – companies that build these resource conduits tend to be independent contractors. This creates the potential for “a pure play.” For Mr. Stavros, the best investment opportunity in such pipeline construction outfits is Quanta Services Inc. (PWR-NYSE, $26.01), now trading at nearly 30 per cent below its historical valuation multiple.



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