• Energy and Income Advisor
  • Conrads Utility Investor
  • Capitalist Times
  • Twitter
  • Seeking Alpha
  • Roger S. Conrad

Hedging Exposure to Lower NGL Prices

By Peter Staas on Oct. 26, 2012

Oil and gas companies’ overzealous production of natural gas and NGLs has restored the fortunes of domestic chemical producers, an energy-intensive industry that relies on these commodities to generate power and as feedstock. Within this space, olefin producers have benefited the most from trends in the energy patch.

The two most prominent olefins, ethylene and propylene, serve as the basic building blocks for three-quarters of all chemicals, plastics and synthetic fibers. Petrochemical firms produce these commodity chemicals in cracking facilities, the majority of which are located on the Gulf Coast, that heat ethane and propane with steam.

Not only do shares of well-positioned US olefin producers stand to benefit from temporary declines in ethane prices and near-term investments in capacity expansions, but, more important, the group also enjoys a substantial cost advantage over peers with production facilities in Asia and Europe.

Whereas ethane and propane account for about 90 percent of the feedstock used at cracking facilities in the US, petrochemical plants in Western Europe generate more than 70 percent of their ethylene from naphtha, natural gasoline and other petroleum derivatives that hinge on the price of Brent crude oil.

Energy & Income Advisor

Your complete guide to energy investing, from growth stocks to high-yielders.

In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

Subscribe today to receive a sample issue of EIA
  • Live Chat with

    Elliott and Roger on Mar. 30, 2017

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor