Have you paid your gas bill recently?
I have and let me tell you, it wasn't a pleasant experience. Of course, I know why gas prices are going up but there's nothing I can do about it.
However below I'll show you how ordinary investors, like you and I, can benefit from the increased prices we're currently experiencing.
But first, consider this…
Many investors prefer to steer clear of resources stocks. That's because valuing companies can be difficult at the best of times, let alone when volatile and unpredictable commodity prices enter the fray.
That's why I believe anyone considering exposure to the mining and resources sector should set out with a long-term investment horizon.
Picking low cost producers and only those with strong balance sheets is essential.
Follow the smart money
However, despite our reluctance, I believe investors are slowly recognising Australia as a serious player on the global oil and gas scene.
Not only are the opportunities in Asian markets immense, even producers focused solely on the domestic market look set to benefit from continuously rising energy prices.
"East coast gas prices set to triple" – The Australian, September 2013
"Santos expects east coast gas price leap" – The Australian, September 2011
"Looming leap in gas prices is no laughing matter" – WA Today, August 2014
Some of Australia's biggest energy companies, such as Origin Energy Ltd (ASX: ORG) have already made huge commitments to capitalise on rising gas prices domestically, and abroad.
Even our biggest independent oil and gas producer, Woodside Petroleum Limited (ASX: WPL), recently surprised the market when it announced it'd buy 850,000 metric tonnes of LNG from US energy export facility owner, Cheniere Energy, Inc. (NYSEMKT: LNG).
With newer and bigger projects, such as GLNG in Queensland, energy companies can send their gas to Asian markets for massive premiums to local prices. This is expected to push up household energy prices dramatically.
Source: World Oil Outlook, 2013.
Here's how you can benefit RIGHT NOW
I've already begun positioning my portfolio to benefit from rising oil and gas prices.
BHP Billiton Limited (ASX: BHP) is my first stock pick for lower risk exposure to key commodities markets. BHP has a diversified portfolio of assets but will benefit from rising oil and gas prices domestically and abroad. In FY14 it experienced a 16% increase in natural gas prices.
Another blue-chip resources company, Santos Ltd (ASX: STO) is also set to benefit from rising gas prices. In addition, production is tipped to balloon in coming years. With stakes in both GLNG and PNG LNG projects, cash flows could be set to double in coming years.
One company I recently added to my portfolio is Senex Energy Ltd (ASX: SXY). Senex is a mid-tier oil and gas producer in the Cooper Basin. In FY15 the company is likely to produce a higher gas mix and, over time, production is set to rise dramatically. With projects close to pipelines, a healthy cash balance and growing reserves, I believe Senex presents as a compelling long-term buy for investors seeking exposure to Australian oil and gas markets.
Our #1 analyst's 3 top resources stocks
Right now, Australia's biggest resources companies are positioning themselves to benefit from rising prices of key commodities. Whilst it's extremely difficult to accurately predict future commodity prices, the proof is in the pudding. And make no mistake, there's huge potential in Australia's oil and gas industry.
That's why The Motley Fool recently asked our top analyst to identify 3 up-and-coming Australian resources stocks set to benefit from rising prices of key commodities.
