Market Review Part 4: LNG Exports Opportunities
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One of the things we've heard a little bit about without any real specifics yet, but is encouraging, is LNG exports.
Market Review Part 4: LNG Exports Opportunities

Nathan Dean: I mean, I've had several energy analysts, and I'm not an energy analyst, but just talking to them, say that if you compare Donald Trump to Barack Obama, you may actually come out with a similar story about how things have worked so far. Is Donald Trump answering the rhetoric with actual policy goal, or is he actually trying to deliver on policies that he's put in the campaign?

Michael Roomberg: I think it's a great question. The shale revolution occurred under Obama, it didn't happen because of Obama, but it didn't happen in spite of him either. Today, we have an abundance of oil and gas, a glut of oil and gas, and prices remain low. I think the best thing the administration could do is pursue policies that increase the demand for these products.

One of the things that we've heard a little bit about without any real specifics yet, but is encouraging, is LNG exports. There is no better way for Donald Trump to deliver on his dual campaign mandates of creating good skilled-labor jobs, and narrowing the trade deficit, than pursuing additional LNG export agreements with places like China, India, Korea, and Japan. China and India are going to double their imports of LNG over the next five years.

There are currently six LNG export facilities that are under construction in the United States. Each of these is a multi-billion dollar project. There's about 3,000 construction jobs directly on site. And if you consider the entire value chain that supplies that facility, whether it's the pipelines, or the drillers in the field, or the regulatory folks, or all the way down to the country store that has to serve the workers out in the field. All told, one of these facilities will generate about 10,000 jobs.

And so, this is something that is incredibly potent from that perspective. It's one of the few things that the United States manufactures that is cost competitive with the rest of the world. So I think one way to translate some of this protectionist rhetoric and sort of brouhaha at the negotiation table. Obviously Rex Tillerson is aware of this, and Gary Cohn, and certainly Donald Trump, is to talk to these counterparts, and say, "My entire candidacy was about becoming more equal partners with you in trade. If you would like to avoid or avert a trade dispute, perhaps buying more of our LNG would be a good way to start."

Nathan Dean: So you mentioned LNG, and I have to ask this question because of it. Do you see Donald Trump playing a role in the Qatar-Saudi Arabia debate? Is there a market impact, or several of our analysts put out a note saying that you should just keep calm and carry on. What are you thinking?

Michael Roomberg: Well it's a great question. So, this is obviously a bit of a Byzantine conflict, and one that I don't think will have a big macro impact. But what it does do is remind LNG buyers that Qatar, which provides 30% of the world's LNG, that diversity of supply and security of supply from various places is equal to or greater in importance than price. The country of Japan, their entire economy would shut down overnight if they had no access to regular LNG imports. So I do think it's something that we can capitalize upon.

In terms of that individual conflict, I've seen mixed media reports about whether the US is kind of supporting one side versus the other, whether there's legitimate claims, or it's sort of just a historical grievance. The US has 11,000 active service members stationed in Qatar, and I think the world is full, generally speaking, of kindling, and its best to kind of take the matches away whenever we can as a policy, and hopefully that will ... I say that strictly from the portfolio management standpoint, because I think it's important for risk.

© 2018 Miller/Howard Investments.

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DISCLOSURE

Investment products: are not FDIC insured - May lose value - Are not bank guaranteed

Opinions and estimates offered constitute Miller/Howard Investments' judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. All investments carry a certain degree of risk, including possible loss of principal. It is important to note that there are risks inherent in any investment and there can be no assurance that any asset class will provide positive performance over any period of time. The material may also contain forward-looking statements that involve risk and uncertainty, and there is no guarantee they will come to pass.

The information above is from sources deemed to be reliable and is provided strictly for the convenience of our investors and their advisors. These materials are solely informational. Legal, accounting and tax restrictions, transaction costs and changes to any assumptions may significantly affect the economics of any transaction. The information and analyses contained herein are not intended as tax, legal or investment advice and may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal, investment or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability. Any investment returns, past, hypothetical or otherwise, are not indicative of future performance. Investment Decisions: Do not use this report as the sole basis for investment decisions. Do not select an allocation, investment discipline or investment manager based on performance alone. Consider, in addition to performance results, other relevant information about each investment manager, as well as matters such as your investment objectives, risk tolerance and investment time horizon.

Past performance does not guarantee future results.