This Is Real "Sweat Equity"

"BG Group (BRG NYSE)—formerly known as British Gas—is a leading exploration and production (E&P), power producer, and gas utility based in the United Kingdom.

"With some of the world's most attractive E&P assets, production is about 70% weighted in favor of natural gas. The gas market in Europe is far tighter than in the US because the US enjoyed a record mild winter, while Europe was bitterly cold; and inventories of gas in storage are much higher in the US than in Europe

"Moreover, Europe—like the US—has experienced some very hot weather this summer, resulting in political representatives in many countries forgoing their usual August holidays. They’re keen to avoid a repeat of the disastrous heat wave in 2003, when power failures and hot weather resulted in heat-related deaths in Germany and France, just as many politicians were on holiday. With excessive heat once again pulling record power demand, there's a chance of another shortage this summer.

"BG gets a little less than half its production from the UK's North Sea gas fields. UK gas prices are attractive because demand is high, but supplies are diminishing, as domestic gas fields are no longer sufficient to meet Britain's growing needs—a highly profitable market for BG.

"Outside Europe, BG is one of the most interesting plays on liquefied natural gas (LNG), with gas fields in Egypt, Kazakhstan, Bolivia, and Brazil. These assets are highly attractive due to their low production costs, large projected growth in production, and ability to ramp up quickly due to being fairly immature fields. BG Group has some of the fastest gas-production growth of any major global E&P company.

"Many of the company's fields are so-called stranded gas fields, miles away from existing pipeline infrastructure. But by liquefying the gas, BG can produce them, then ship the gas in the form of LNG to distant markets at current sky-high prices. BG is a key player in US LNG, a market that's set to grow rapidly in coming years.

"The stock got hit earlier this year, due to general weakness in energy and also its exposure to Bolivian and Nigerian fields. But BG is well diversified internationally, so I don't see that exposure as particularly troubling. And, with such attractive production growth, I see BG Group as a potential takeover target. Any number of big, integrated producers would love to own BG's asset base. Buy BG and set a stop loss order at 57.50 for now."