Robert F. Norfleet III, Managing Director and Senior Equity Research Analyst at BB&T Capital Markets: $100 Billion in Natural Gas Transportation Infrastructure Requirements in North America Over Next 3 to 5 Years

Wall Street Transcript

67 WALL STREET, New York - April 17, 2013 - The Wall Street Transcript has just published its Building Materials, Construction and Housing Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: North American Electrical Transmission, Infrastructure Build in Emerging Markets, Strong End Markets for Building Products, Energy infrastructure companies

Companies include: Petroleo Brasileiro (PBR), Dow Chemical Co. (DOW), Chicago Bridge & Iron Company (CBI), KBR, Inc. (KBR), Halliburton Company (HAL), Exxon Mobil Corp. (XOM), Foster Wheeler AG (FWLT) and many others.

In the following excerpt from the Building Materials, Construction and Housing Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Can you explain why low natural gas prices are creating greater demand here?

Mr. Norfleet: It's a two-pronged answer. First, sustained low natural gas prices have created record spreads between oil and diesel prices, making those products less economical. Additionally, lower gas has also made other baseload fuels less desirable as utilities switch from coal and other sources to gas.

On another note, every shale basin has a different breakeven point, meaning there are some basins where $4 gas is profitable, there are some basins where you need $5.50, $6 gas to be profitable. As a result of gas prices being around $4, and it has been as low as $2.50, a number of operators from a rig perspective stopped drilling for dry gas because the profitability metrics just did not meet their threshold. These operators have instead turned their attention to drilling for oil and natural gas liquids.

I think that's been the replacement that we've seen, and as a result of that, you have a lot of the derivatives that come out of natural gas; which would be ethane, butane, various commodity chemicals like that. The prices of those underlying commodities have declined significantly because there's such an oversupply of them right now. Low natural gas prices essentially means that U.S. chemical companies have a competitive advantage as their primary feedstock cost - gas - has significantly increased their profitability metrics and increased their demand to build more facilities.

TWST: Which companies or subsectors are best-positioned to benefit from this?

Mr. Norfleet: Companies that are involved in building infrastructure will clearly benefit for a number of reasons. First of all...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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