A great way to play the booming natural gas market

“Everything I say now is completely biased and I can say categorically, that I believe alternatives, and in particular real assets, deliver clients the best risk-adjusted returns, especially in the type of environment we find ourselves in today,” CEO and co-founder of Longreach Alternatives, Sam Mann, proclaimed as he took the stage at The Inside Network’s Alternatives Symposium held in Brisbane last week.

Mann may be biased in his opinions, but he isn’t afraid to say so.

“Energy is by far the greatest inflation hedge you can have, particularly in the current environment. From a diversification benefit standpoint, energy is truly uncorrelated to global markets,” Mann said. 

Energy has certainly become one of the most topical thematics of our time, impacting every global market and every investor. But the problem that investors face, as Mann highlights, is the challenge of gaining access to alternative assets in general.

“The assets are typically illiquid, opaque, and complex investments that the broader advice market just doesn’t have access to. Our primary goal at Longreach Alternatives is to democratise the access to these types of investments,” Mann said.

The US is unique to the energy business, explained Andrew Sinclair of Longreach Energy.

“At its heart, it comes down to who owns what is under the ground. In almost all cases, the government owns what is underground, except in the US. The land is privately owned. This has meant the energy space is broadly held. There are thousands and thousands of people who own land that has some form of mineralisation buried beneath. In Oklahoma and Texas there’s roughly 20 per cent—30 per cent of the population with mineralisation somewhere in the family,” Andrew said. “What that does is deliver alignment between communities.”

But it’s also the sheer scale and volume of deals done that is really making this sector attractive.

“To give you an idea of scale, I’ve never done a deal in Australia. It’s too small. For every one deal done in Australia there will be 10,000 in the US,” Sinclair said. “Put aside what is happening in Australia with its long-term contracts, the US LNG market is growing, it’s nimble, efficient and can send gas anywhere in the world.”

Sinclair also shed light on the unique opportunity set in onshore energy assets in the US, where a powerful thematic is currently underway, ensuring that natural gas remains relevant for decades to come. In a short space of time, natural gas has become an important part of the US energy mix. It is not only one of the lowest-cost producers of natural gas, but it is also the largest producer of natural gas in the world. A recent global energy crisis has only reiterated the important role that natural gas will play during the transition to renewables.

Longreach Energy has a unique play on predominantly natural gas supported by a portfolio of US-based gas projects in Texas and Oklahoma.

“It’s a great place to do business with fantastic infrastructure,” Sinclair said. “No red tape and no bureaucracy. That’s why Longreach Energy is there.”

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.