10 Best Natural Gas Stocks To Invest In for 2022
Energy stocks have their ups and downs, just like every other sector. It’s a complicated business with a lot of different players, but there’s certainly money to be made. Here’s what you need to know about investing in natural gas.
Investing In Natural Gas Stocks
Natural gas is formed deep in the earth and contains methane, natural gas liquids and nonhydrocarbon gases. Like oil, natural gas needs to be extracted from the ground, processed, and transported to homes and businesses where it is used to heat and cool. The companies that provide natural gas are divided into three categories. Upstream companies, otherwise known as exploration and production companies, find the gas and get it out of the ground. Midstream companies process the gas and move it from the well to the downstream companies, which distribute it to consumers.
If you’re wondering how you can invest in natural gas, you have a lot of options. You can choose from companies in different parts of the process — upstream, midstream or downstream. Or you can choose based on the type of stock — value, growth or momentum.
Here are some natural gas stocks to consider.
Best Value Natural Gas Stocks
If you’re looking for value stocks — those that produce income for investors in the form of a dividend — there are a few in the natural gas sector. Here are three to consider.
DCP Midstream LP
DCP Midstream LP (DCP) produces and markets natural gas liquid and processes natural gas. As a midstream company, it doesn’t explore or produce natural gas; rather, it transports, stores and markets it. DCP Midstream LLC, which owns DCP Midstream LP, is a joint venture between Phillips 66 and Enbridge. DCP Midstream has an annual dividend yield of 5.26%, making it a good choice for those looking for income.
Ovintiv Inc. (OVV) produces natural gas, natural gas liquids, oil and condensate. The company touts its commitment to generating free cash flow and returning money to shareholders. In September 2021, the company announced a buyback of up to 26 million shares. It also has a dividend yield of 2.43%. According to Yahoo Finance, Ovintiv has an average analyst rating of 2 out of 5, which is a solid buy.
Coterra Energy Inc.
Coterra Energy Inc. (CTRA) is an upstream oil and gas company that was created by the merger of Cabot Oil & Gas and Cimarex Energy. It currently has projects in the Permian Basin in West Texas and southeast New Mexico, Marcellus Shale in northeast Pennsylvania, and Anadarko Basin in western Oklahoma. Coterra Energy stock closed at $27.42 on July 18 but has a one-year target estimate of $37.96.
Best Growth Natural Gas Stocks
Growth stocks are those that tend to make money for investors because they appreciate in price over time, compared to value stocks that generate income. When looking at growth stocks, you want to choose those that will grow faster than the overall economy. Here are some natural gas growth stocks to consider.
EQT Corp. (EQT) is the largest producer of natural gas in the United States. The company is focused on replacing international coal with domestic natural gas in order to address climate change. EQT traded at $37.86 on July 18 and has a one-year target estimate of $54.24 per share.
Southwestern Energy Co.
Southwestern Energy Co. (SWN) is a natural gas exploration and production company. The company focuses on developing natural gas and natural gas liquids in Pennsylvania, Ohio, West Virginia and Louisiana. It also transports oil, natural gas and natural gas liquids. SWN closed at $6.09 per share on July 18, and its low price makes it a bit risky. Most analysts (22 out of 33) recommend holding the stock, but nine of them call it a buy or a strong buy.
Tellurian Inc. (TELL) is an upstream natural gas company with almost 100 drillable locations and, it estimates, 1 trillion cubic feet of net natural gas resource. The stock closed at $3.30 per share on July 18, making it inherently risky due to its low price. But analysts seem to like it, giving it a consensus recommendation of 2.4 on a scale of 1 (strong buy) to 5 (sell).
Best Momentum Natural Gas Stocks
Momentum stocks are those that are going on an upward trajectory and are expected to continue to do so. These stocks are doing well, and that should continue.
Antero Resources Corp.
Antero Resources Corp. (AR) is an exploration and production company for natural gas, natural gas liquids and oil in the Appalachian Basin. It provides midstream services through Antero Midstream. The stock closed at $33.64 on July 18, well above its 52-week low of $10.91, and has a one-year target estimate of $49.07.
Comstock Resources Inc.
Comstock Resources Inc. (CRK) is an independent producer of natural gas with developments in the Haynesville shale in North Louisiana and East Texas. It currently boasts 1,600 high-return net drilling locations. While down from its 52-week high in May, the stock is trading at $12.70 as of July 18 with a one-year target estimate of $18.60.
Kinder Morgan Inc.
Kinder Morgan Inc. (KMI) is one of the largest U.S. energy infrastructure companies, with pipelines that transport natural gas, crude oil, gasoline and carbon dioxide. Its terminals store renewable fuels, chemicals, petroleum and other products. Out of 19 analysts following the company in July, five rated it a strong buy and six rated it a buy. Eight recommend holding the stock.
Vermilion Energy Inc.
Vermilion Energy Inc. (VET) is an exploration and production company with producing assets in North America, Europe and Australia. The company focuses on generating free cash flow and returning cash to shareholders. Vermilion Energy is trading at $21.52 as of July 18, very close to its 52-week high of $25.41. Its one-year target estimate is $25.38.
What Is the Best Natural Gas Stock To Invest In?
If you’re looking for the single best position in the natural gas sector, well, it may not be a natural gas stock at all. The First Trust Natural Gas ETF (FCG) is a natural gas exchange-traded fund that tracks the ISE-Revere Natural Gas Index. Investors in this fund own a little bit of 49 different energy stocks, including most of those listed above. So if you want to participate in the natural gas sector but don’t want to have to decide on a single stock, this might be worth a look.
Whether you choose a specific natural gas stock — or two, or three — or decide to invest in an ETF, adding natural gas positions to your portfolio could be a wise move.
Data is accurate as of July 18, 2022, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance.
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- U.S. Energy Information Administration. 2021. "Natural gas explained."
- Ovintiv. 2021. "Ovintiv to Increase Shareholder Returns Through Share Buy-Back Program."