Big Growth Leads to Big Dividend Yields
High pressure is a huge part of how we produce energy in the United States, and the natural gas stocks that provide that compression are seeing their stars shine across the up-, mid- and downstream sectors of the market.
The problem is pretty simple.
Natural gas molecules expand outward to fill their surroundings. Unfortunately, that poses a big problem for many natural gas companies across the entire production chain.
When a well is tapped, the underlying reservoirs are under immense, naturally occurring compression. That helps push the natural gas upward through the well and into the midstream infrastructure. Over time, as the natural gas dissipates, that pressure is reduced. To keep the flow going, natural gas companies need to use an assortment of compression equipment.
Likewise, as natural gas travels through a pipeline and gathering system, pressure dissipates over long distances. There again, midstream operators need compression gear to keep the natural gas flowing properly. These compressors also are needed to pull natural gas in and out of underground storage facilities. Finally, upstream natural gas stocks need to use the various compressors to process natural gas liquids from the raw-gas stream.
All in all, as we continue to tap our natural gas resources, demand for these compression services will continue to grow. In fact, tapping our unconventional shale formations in North America will require more than three times (PDF) the amount of current capacity. That’s more than 300,000 horsepower of compression across all segments of the natural gas market.
That fact is producing some serious coin for the natural gas stocks that provide these pressure services … and in turn, some serious dividend yields for investors.
Here are three of the natural gas stocks that can transform the high pressure into high dividend yield: