3 Oil & Gas Stocks for Ambitious Investors

The oil and gas industry has had its share of ups and downs throughout the years, including several recent down years in a row. That said, the sector still has the potential to fuel explosive returns for investors who know where to look. A good place to start is with Golar LNG (NASDAQ: GLNG), Clean Energy Fuels (NASDAQ: CLNE), and Energy Transfer Partners (NYSE: ETP). Here's why these stocks could deliver needle-moving returns for investors in the coming years.

Betting on the fastest growing hydrocarbon market

Tyler Crowe (Golar LNG): Let's face it, just about every fossil fuel market is at a point of slow growth. Even natural gas, the fastest growing of the fossil fuels, is only expected to grow at an annualized rate of 1.6% per year. That isn't the kind of growth rates you want to hear when you are trying to find stocks with room to run.

There is a niche market within those hydrocarbon markets that is expected to grow seven times faster than natural gas: Liquefied natural gas (LNG). Even though LNG has been around for decades, technology advances and regional natural gas price discrepancy have made it commercially competitive with pipeline gas and coal.

One company that could be a major disruptive force in the global LNG trade is Golar LNG. The company specializes in building and operating a fleet of vessels that serve the LNG market: Floating LNG liquefaction (FLNG) vessels, LNG tanker ships, and floating storage & regasification units (FSRU). These types of vessels are unique because they open up the LNG trade to smaller markets. FLNG vessels allow producers to monetize offshore gas fields that are too small to justify building a larger, land based facility, and the same can be said for FSRUs for smaller ports of demand. These versatile, lower cost vessels have immense potential in filling the fast growing demand for LNG.

Of course, it isn't going to be easy for Golar to execute on this plan. The upfront costs for these vessels is immense, and it will have to secure long-term contracts with producers and consumers to justify the costs. If it can pull it off, though, this company has an incredible opportunity ahead of it.

Another niche with huge growth prospects

Jason Hall (Clean Energy Fuels Corp): Over the past several years, investors in Clean Energy Fuels have taken a beating. But even while that's happened, it's looking like the company is finally primed to start delivering solid returns for investors.

I know what you're thinking: Why natural gas? Isn't the future of cars the EV? It probably is, but to ignore Clean Energy Fuels, for this reason, is a gross misunderstanding of the company's business, as well as its likely future.

To start, Clean Energy Fuels' customers are medium- and heavy-duty vehicle fleet operators, such as solid waste trash truck operators, bus fleets, and heavy-duty tractor trailers among others, and not individual automobiles. And natural gas has proven to be incredibly effective for these applications, many of which are beyond the capabilities of electric powertrains and likely to remain so for years.

Furthermore, Clean Energy's fastest-growing business is biomethane, produced from landfills, dairy farms, and other such facilities, and by capturing and using this methane, the environmental impact of these facilities is significantly reduced, as are the emissions of the vehicles burning them.

Why Clean Energy now? In short, the company's balance sheet is the strongest it's been in years after a major debt reduction, operating and capital spending is also down by double digits, while fuel sales continue to grow. This has the company producing positive cash flows and set to grow those cash flows in coming years even as the market continues to beat the stock down.

Betting on a billionaire to get his mojo back

Matt DiLallo (Energy Transfer Partners): Kelcy Warren built Energy Transfer Partners into one of the largest midstream MLPs in the country over the past two decades, making him a billionaire in the process. However, his company has endured its share of issues in recent years. Weaker oil and gas prices, for example, have had an adverse impact on the company's cash flow, which has declined over the past year. Meanwhile, the company ran into significant opposition when building its Dakota Access Pipeline and has run into similar problems (including some of its own making) during the construction of several other large pipeline projects. These issues have weighed on the company's value, which has been cut in half over the past three years, taking Warren's net worth down with it.

That said, Energy Transfer is in the final stages of a major expansion phase, which will see the company put more than $15 billion of capital projects into service by the end of this year. These projects position the company to deliver significantly higher earnings and cash flow over the next year, which should fuel double-digit annual distribution growth for investors for the next several years. For a company that already yields 10.7%, that's a compelling proposition.

However, not only does the company have visible upside from those organic growth projects but Kelcy Warren has a knack for making needle-moving deals. While he failed miserably on a deal last year, that doesn't mean he has lost his touch. It wouldn't surprise me if he gets back in the game in a big way, which could be a catalyst to help drive Energy Transfer's valuation back above its former peak.

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Jason Hall owns shares of Clean Energy Fuels. Jason Hall has the following options: long January 2018 $3 calls on Clean Energy Fuels. Matt DiLallo has no position in any stocks mentioned. Tyler Crowe has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Clean Energy Fuels. The Motley Fool has a disclosure policy.