October 18, 2007: Don't pass on Gas

Credit Suisse First Boston released a comprehensive analysis of the Natural Gas Infrastructure sector that , true to CSFB quality, appears outstanding. Here is the summary:


Liquid Natural Gas flows collapsed. Fourth quarter estimates are only 1.0 Bcfd.
Liquid natural gas is heading nowhere through the first quarter of 08.

However, three stocks are highly recommended out of the universe of fifteen companies that CSFB follows.

Williams Companies (WMB) is a buy. Strong processing margins, closure of the sale of Power to Bear Stearns, execution of top tier performance of its E & P division bode well for Williams.

Southern Union Company (SUG). Valuation will be increased by as much as 20% due to the sale of its under performing LDC operations and the high likelihood of MLPing both its midstream and interstate pipeline division over the next twelve months.

CenterPoint Energy (CNP). CNP is to roll out a superb smart meter program in both its electric and Houston gas service territory by year-end. Better cost recovery will amount to as much as $146m in overdue income to be adjudicated favorably by the second court of appeals - more realistically business friendly than the politically convenient initial court ruling. CNP offers over 24% total return with little or no commodity exposure.

Thus, the summary, after pouring through thirty odd pages of data. I hope I got it right.

To me, CNP looks the most interesting, and I may decide to seriously look at a purchase. SUG comes in a close second, based upon today's data.