Greetings Rogue Investors,

The comedian Rodney Dangerfield passed away in 2004, but his famous slogan "I don't get no respect" is fitting for the natural gas market. Although oil prices get all the attention, natural gas is just as important to the U.S. economy as oil.

Until recently, natural gas supplies in the United States and abroad were considered unlimited. In fact, not too long ago natural gas discoveries were considered so routine that excess natural gas was off-vented to the atmosphere and burned. Then starting in the 1970s and 1980s, everyone decided that natural gas was the fuel of choice and many power plants, homes and commercial buildings were built to utilize natural gas. At the time this approach made sense because natural gas was plentiful, much cheaper than oil and did not emit the pollutants associated with the burning of coal.

However, things have drastically changed in the last 10 to 15 years. Natural gas production peaked in the United States in the early 1990s and now natural gas is in short supply. The building boom of the past two decades has only made things worse. As buyers have demanded bigger and bigger homes, energy conservation has been ignored.

Over the past year, natural gas prices have risen more than 80 percent. This dwarfs the increase in oil prices of 35 percent during the same time period. Unfortunately, in the short term things are not likely to get much better. This is because unlike oil, the world has not built much infrastructure to transfer natural gas from areas where supplies are plentiful to areas where the demand is greatest.

Eventually, just like oil, liquid natural gas (LNG) will be transported on big ships across the world. But the infrastructure to move LNG from country to country on a mass scale will take a decade or more to build, and this effort has only just started. All we can hope for in the short term is warm winters.

This shortfall in natural gas supplies means big profits for the companies that can deliver natural gas and the infrastructure required to transport and store LNG.

Two of my favorite players in natural gas space are XTO Energy (XTO) and Chicago Bridge and Iron (CBI)

XTO Energy (XTO) is the blue chip choice for natural gas investors. This company supplies almost one trillion cubic feet of natural gas per year. They own natural gas deposits all over the United States. With a current P/E ratio of only 19 and a growth rate in earnings greater than 50 percent, this company looks very cheap.

Chicago Bridge and Iron (CBI) is more of a speculative play. Currently the company is having some accounting difficulties, which has caused the stock price to fall by 30 percent, but CBI is one of the largest players in the LNG space. Over the long haul, this company could do very well. I would wait until they settle their accounting issues, but in the past CBI has been a solid company and they have a lot of experience building LNG facilities throughout the world. When the United States wakes up and realizes that it will need to import LNG to compensate for its declining reserves, this company will have a lot of business coming their way.

Finally, another speculative play that could do well in the natural gas and oil markets over the next decade is Cheetah Oil and Gas (COGL). Cheetah has 8.3 million acres under lease in New Guinea, an area rich in both oil and natural gas but still largely undeveloped. Currently, Cheetah is pursuing an aggressive drilling program that could prove substantial oil and natural gas reserves. Independent estimates indicate that some of the properties Cheetah has under lease could have several trillion cubic feet of natural gas.

Happing investing,

Bryan Rundell