The Future Of Energy Is Oil, Gas – And This One Stock

Oil and gas get a bad rap.

Politicians rail against them and suggest that all profits from the beginning of time be clawed back and donated to homes for the aged and indicted term limit victims.

Activists suggest that all oil and gas should be left in the ground and industry executives executed by their choice of the ancient Viking blood eagle ritual or being forced to listen to Greta Thunberg talk until they expire or go stark raving mad.

While both classes of upstanding citizens make a lot of noise about ending oil and gas, they are actually blowing a lot of hot air, and they know it.

The future needs energy, and a substantial amount of it, especially here in the United States. This is a pressing issue that we cannot afford to ignore.

We are bringing industries like semiconductors and semiconductor equipment back to the United States for economic and security reasons. Look for pharmaceuticals and other critical industries to follow the same path before long.

The continued expansion of things like artificial intelligence, cryptocurrency mining, quantum computing, and other technological breakthroughs will use an enormous amount of electricity. So will electric and hybrid vehicles.

All that's going to require a lot of energy – from oil and gas.

One stock in particular is already riding this trend to profits…

While we would all like to meet this demand with renewable energy, it is not even close to being possible. Only about 12% of US electricity demand is met with energy generated from renewable sources (not including hydroelectric power), most of which comes from wind.

Wind is unreliable and expensive, and its environmental impact is far greater than that of solar energy. Using wind and solar energy to meet the growing energy demand is not a viable solution and will not be for decades.

A lot of folks are hoping that nuclear energy can meet the demand. It can. In fact, nuclear energy is the cleanest and most reliable energy source on earth. Measured by the grim death statistic per terawatt hour, only solar energy is safer.

Nuclear energy meets about 19% of electricity demand and satisfies roughly 8% of the country’s total energy demand. Although many plants are being extended rather than decommissioned, this does nothing to increase nuclear energy production.

The first new plant in decades recently opened in Georgia to great fanfare. Unfortunately, that plant took over a decade from start to finish, and the cost overruns were spectacular.

While nuclear is the most effective, safest solution to meeting our energy needs, the same activists and politicians that vilify oil and gas are also anti-nuclear energy.

Eventually, we will meet most of our energy demands from a combination of nuclear and renewable energy. “Eventually” is many decades away.

Until then, we have a choice of coal or natural gas to meet the excess demands required to keep the lights and air conditioning on and help the economy to grow at a level that produces and creates jobs.

Natural gas is the cleaner source, and it will be the answer to meeting our energy demand for several decades. This creates a huge opportunity for long-term, patient-aggressive investors, especially those looking for income-producing investments as part of a total return strategy.

Dorchester Minerals, LP (DMLP) is a great example of these opportunities. Dorchester is a master limited partnership (MLP) in the oil and gas industry. It is primarily engaged in acquiring, owning, and administering mineral, royalty, overriding royalty, net profits, and leasehold interests.

This company generates revenue through royalties and net profit interests from the production of oil and natural gas from its extensive portfolio of properties across the United States. The company does not directly engage in exploration or production activities, which shields it from the capital-intensive nature of these operations. Instead, it benefits from the production carried out by third-party operators on its properties, earning a percentage of the revenue.

The cash is paid out to investors after expenses, resulting in a dividend yield of over 10%.

While Dorchester is a partnership, it produces primarily from royalties and net profit interests, so Unrelated Business Taxable Income (UBTI) is not an issue. This allows investors to own as much as they want in retirement plans like IRA accounts.

The current production is about 50-50 oil and gas.

Dorchester has historically done a fantastic job of replacing assets and building value with its holdings. Its assets are in most of the major oil and gas producing regions across the United States. The company is constantly looking for acreage to replace holdings nearing the end of their useful production life.

Concerns about overproduction and global economic weakness are pressuring natural gas prices. The long-term demand picture is incredibly bright, and investors who begin buying income-producing assets while they are in decline could see massive gains over the next decade.

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Image via Midjourney