I’ve been a strong proponent of owning British Petroleum (BP) shares for quite some time. With good reason…

With a forward price-to-earnings ratio of 10.71, the stock is still relatively cheap when compared to BP’s peers (13). And the company still pays out a hefty 4%-plus dividend.

Yet most investors continue to ignore (and undervalue) the company’s strategic assets. And that ignorance has proven costly – as shares have continued to reach new 52-week highs daily.

[ad#Google Adsense 336×280-IA]In truth, things are going exceptionally well at BP, due in large part to the company’s brilliant timing…

Last year, BP liquidated a big stake in its Russian venture for a pile of cash.

As we now know, that was a very strategic move, considering what’s happening between Russia and the international community.

What really makes BP one of the strongest blue chips worth owning, however, is what it holds in its proverbial back pocket.

BP’s Ace in the Hole
Many investors don’t realize that BP is a major player in the liquefied natural gas (LNG) market.

It not only produces the natural gas – which is then liquefied – but it also ships the LNG in many of its own tankers. But, sometimes even that isn’t enough.

Last week, BP and CNOOC (CEO) announced a new agreement. Beginning in 2019, BP will supply up to 1.5 million metric tons of LNG (or around 72 billion cubic feet of natural gas) – annually – for 20 years.

CNOOC is a pioneer of China’s LNG industry and the third-largest LNG importer in the world. It operates six LNG-receiving terminals in Guangdong, Fujian, Zhejiang, Shanghai and Tianjin – with further terminals under construction.

The deal is worth about $20 billion at current rates, and will pad BP’s already-profitable bottom line for years to come.

BP has already supplied LNG to China in a much smaller deal, out of its Indonesian facilities. However, this deal will probably involve natural gas sourced in the United States and shipped from the American Freeport LNG Terminal in Texas.

It’s a win for both parties, too, since striking larger deals allows China to pay less for the LNG than its neighboring Asian countries.

Now, BP will probably require seven LNG tankers to fulfill the shipping requirements. And that just serves to highlight one of the company’s additional assets.

Jack of All Trades
At the end of 2013, BP boasted 49 international vessels. That includes 33 medium-sized crude and product carriers, five very large crude carriers, eight LNG carriers and three LPG carriers.

All these ships are double-hulled. But the company will still need more capacity to fulfill the Chinese order – and will likely be leasing ships from other companies.

Ultimately, the acceleration we’re seeing in the LNG market isn’t just a boom for drillers and explorers. The trend is establishing a whole new food chain in the industry, starting with explorers and ending with the shippers.

And BP is shaping up to be one of those companies that can profit from almost every segment of the LNG boom.

In the end, it’s time to add this mega blue chip to your portfolio today.

And “the chase” continues,

Karim Rahemtulla

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Source: Wall Street Daily