3 oil and gas ideas for the next decade

As the world becomes more environmentally friendly, yet demands more energy, these companies will benefit.

Owen Raszkiewicz

Owen Raszkiewicz is a Motley Fool Contributor. Owen has been a Contributor since 2013, having also spent time as a Fool writer/analyst. He also worked as an Investment Analyst at Zenith Investment Partners, Australia's top research house specialising in managed funds. Owen has appeared on Channel 10's The Project and was invited on the BBC. He holds a Masters of Applied Finance, Masters of Financial Planning, Bachelor of Technology, Advanced Diploma of Financial Services and Diploma of Mortgage Broking Management. In addition, Owen has passed Level 1 of the Chartered Financial Analyst (CFA) Program. He has taken the Banking + Finance Oath (BFO). When he is not writing, Owen is Managing Director of Rask Finance, an Australian financial education company. You can email him: [email protected].

Published January 10, 2014 10:15 am AEDT

In the midst of a booming US oil and gas market, the world has already begun to move away from toxic energy sources like coal, and a number of Australian companies look set to benefit.

Natural gas is formed over thousands of years and as such is a non-renewable energy source. However unlike petroleum, it is estimated the reserves of natural gas could power the world for more than 250 years. It is commonly used in heating, cooking, electricity generation and transport.

Many big producers such as BHP Billiton (ASX: BHP), Santos (ASX: STO) and Woodside (ASX: WPL) are already looking to position themselves for increased demand from citizens concerned about pollution and global warming. Not only here in Australia but worldwide. However, there are also a number of mid-cap oil and gas producers which look promising long-term investment ideas, albeit at higher risk.

First off, Senex Energy (ASX: SXY) is a debt free oil and gas producer with a market capitalisation of $824 million. Earnings have grown rapidly in the past three years, but it's not over yet. Earnings-per-share are expected to nearly double between now and 2015 as more production comes online.

Beach Energy (ASX: BPT) is another oil and gas producer which has operations in the Cooper basin and significant upside potential. It has a number of tenements throughout the world and has made recent oil discoveries. It too has a strong liquidity position but, unlike Senex, pays a dividend.

Dual-listed on the Australian and Toronto stock exchange, Aurora Oil and Gas (ASX: AUT) is engaged in the production and development of oil, condensate and natural gas in Texas, USA. It holds a number of strategic joint ventures in the region and has witnessed significant sales increases in the past 12 months. In 2014 the company provided production guidance of between 10.6 and 11.7 million barrels of oil equivalent (mmboe) – a 47% increase over the mid-point of the company's guided 2013 production.

Foolish takeaway

Oil and gas will continue to be in demand for the foreseeable future, but the long-term prospects for natural gas look good. Keep an eye on these three producers in the coming financial year and regularly assess the ongoing growth in reserves. After all they can only grow production if they have growing reserves.

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