NVE NV Energy

Electric and natural gas supplier Dominion Resources Inc. (D) received a much needed nod from the U.S. Department of Energy (“DOE”) for natural gas exports to non-Free Trade Agreement countries. Dominion will export liquefied natural gas (“LNG”) from its Cove Point LNG facility on the Chesapeake Bay in Lusby, Md.

The approval will allow the company to export 770 million cubic feet of natural gas a day (mmcf/d) for 20 years. Prior to this the DOE had already approved Dominion’s request of exporting natural gas to countries with which the U.S. has a Free Trade Agreement.  Dominion’s Cove Point facility is ideally located for export activities.

The facility has an excellent infrastructure with connection to the pipeline grid, has an LNG storage capacity and an updated pier. Dominion will be primarily working to add liquefaction capability in this plant, which will require a capital investment of nearly $3.4 billion to $3.8 billion. The construction will begin in 2014 and the plant is expected to start exporting from 2017.

Technological advancement in drilling has resulted in a massive production increase of natural gas in the U.S. The global demand for natural gas is on the rise due to its clean burning nature and the major U.S. producers are trying to cash in on this.

At present more than 20 U.S. based energy companies have applied to the DOE for LNG export approvals. However, the U.S. government is taking its time. The delay inevitably raises questions as the export of natgas would bring in billions of dollars of export revenues and create thousands of jobs. Some believe unrestricted export of natural gas would increase its price in the U.S.

Superior fracking techniques will allow energy companies to ably meet domestic demand, both in volume and price. The export of natural gas will also lower the possibility of over-supply in the domestic market. We believe expedited approval of larger volumes of natgas exports will unlock greater value for this natural resource

Dominion Resources currently has a Zacks Rank #3 (Hold). Meanwhile other operators in the sector having a favorable Zacks Rank are Integrys Energy Group, Inc. (TEG), NV Energy, Inc. (NVE) and PNM Resources, Inc. (PNM). All of these stocks currently retain a Zacks Rank #2 (Buy).

 
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