When we first took a look at Chart Industries, Inc. (GTLS) in April, the stock was trading around $80.00 a share. The natural gas build-out is a very worthy investment theme going forward and equity market portfolios should have some exposure.
The oil and natural gas industry is a bright spot in today’s economy, and there is genuine economic growth being generated from this sector. With North America gushing with natural gas, the infrastructure necessary to process, transport, and store it is vast and represents a good investment opportunity.
Chart Industries is a company that manufactures specialized storage solutions for liquefied natural gas (LNG), petrochemical and natural gas processing, medical use gases, and related storage equipment. It’s a solid company with a good track record of managing its business.
Now that there is a push to move the glut of natural gas, there is growing demand for LNG processing plants. Chart Industries was recently awarded a contract to build a C100N liquefaction plant for Stabilis FHR Oilfield LNG LLC. The customer plans to use the processing plant to produce 100,000 gallons of LNG per day in the Eagle Ford Shale region in Texas.
Chart Industries said that Stabilis will likely order four additional LNG liquefaction plants, which can produce either 100,000 gallons or 250,000 gallons per day. Chart Industries has already reserved manufacturing time slots for these additional processing plants.
Back in July, the company won an additional order from Kunlun Energy Investment, which is a wholly owned subsidiary of PetroChina Company Limited’s (PTR) Kunlun Energy Limited for self-contained LNG station modules. The latest order was over $50.0 million, and that is on top of a $45.0-million order from the same customer in April. This is the third order over the last few quarters from PetroChina; the most recent was not included in the company’s 2013 second-quarter order backlog.
Chart Industries is a mature manufacturing company (it also makes cryogenic systems that can freeze down to absolute zero or -459 degrees Fahrenheit), and its order backlog is a very important financial metric. (See “Consumers Vulnerable as Oil Earnings Flourish.”)
The company has made some acquisitions lately, which have boosted revenues, but it’s very apparent in the company’s financial documents that revenues related to natural gas and LNG applications are growing. Orders related to distribution and storage products in the second quarter of 2013 were $222 million compared to $133 million in the first quarter of this year, which is a big deal.
Monetary policy is still the major arbiter for the stock market, but what a company reports about its operations can be used as a predictor. I think the oil and natural gas build-out is an investment theme with real staying power, possibly even for the rest of this decade. Equity investors could do well with some exposure to this market sector.
The production glut continues, which is why distribution and storage is such a strong theme for true business growth. I still view natural gas as a great multiyear buy low/sell high investment opportunity.