Natural gas prices have seen some volatility over the past few months, bouncing between highs near $3.00 per million British thermal units (MMBtu) and lows just above $2.50. The commodity currently trades at roughly $2.78 per MMBtu.
According to its latest Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) expects natural gas inventories to remain lower than historical levels for the current time of year. For the full year, the EIA forecasts natural gas to record an average price of $3.10 per MMBtu, increasing to $3.23 for 2019.
Finding a natural gas stock means looking for a company that deals in natural gas as a significant percentage of its other operations, as many of the successful players in this sector also explore and develop oil. We have chosen four of the best companies that deal with natural gas. None of them are pure plays, but all of these companies derive significant income from natural gas. In addition, each of these companies has a chart pattern that is promising for the remainder of 2018. All figures are current as of Sept. 16, 2018. (To learn more, check out: A Natural Gas Primer.)
Natural gas is not the only source of income for BHP Billiton, as the company is also a significant miner of metals. In addition to the natural gas market, investors in BHP Billiton need to keep an eye on the other commodities the company works with, including iron ore, coal and copper. The company has assets in the Gulf of Mexico, but it also develops products in Australia as well as Trinidad and Tobago.
BHP Billiton stock rode a solid wave of gains into this year, rising from around $41 per share in early December 2017 to over $50 in January 2018. The stock became volatile along with the rest of the market in February 2018, and it currently trades at $45.47. Any potential uptick in natural gas prices would be a benefit to BHP, but this stock also offers investors stability because of its diversified product line. (See also: Assessing BHP Billiton's Valuation.)
Independent oil and natural gas company Antero explores resources in the United States, with operations focused in the Appalachian Basin. It has 292 miles of gas pipelines. The company has been enhancing efficiency while generating strong production growth, which could pay off if natural gas prices recover.
Antero Resources stock saw some significant declines during the sell-off in February 2018, falling to a low around $17 per share, but it recovered quickly and eventually hit a 52-week high above $22 in July 2018. Shares in the exploration and production company have declined since then to current levels of $18.61. After the recent volatility, the 50-day moving average is currently trading right near the 200-day moving average. If the short-term moving average can firmly establish itself above its longer-term counterpart in what traders refer to as a golden cross, this would signal additional upside potential for Antero shares.
- Average Volume: 2,630,433
- Market Cap: $5.901 billion
- P/E Ratio (TTM): 25.56
- EPS (TTM): $0.73
- Dividend and Yield: N/A (N/A)
Cabot is a shale exploration company. Although it produces natural gas, it also buys natural gas for resale. The Houston-based company utilizes its gathering systems and pipelines to sell natural gas to a variety of customers, including power generators and local energy distributors.
The stock saw some sharp share price declines in February 2018, and it has not yet succeeded in recuperating those losses. Cabot stock currently trades at $21.92 and pays a 1.10% dividend. The company reported full-year 2017 net income of $100.4 million after a negative performance in prior years. This stalwart that dates back to 1989 has the track record, management and resources to do well in the remainder of 2018. (See also: 6 Growth Stocks for a Slowing Economy.)
- Average Volume: 5,470,141
- Market Cap: $9.671 billion
- P/E Ratio (TTM): 75.85
- EPS (TTM): $0.29
- Dividend and Yield: $0.24 (1.10%)
Phillips 66 is among the largest players in the energy sector. Natural gas is a significant part of its operation. Phillips processes and markets natural gas and natural gas liquids. This Texas-based company was started in 1875, making it the oldest natural gas company on our list.
The stock began moving sharply upward in June 2017, climbing to a high of around $107 in January 2018 before dipping back below $90 during the February market correction. The stock has recovered since then and continued marching upward, soaring to an all-time high above $120 before returning to current levels of $113.60. Up volume has been strong, and the 50-day moving average crossed above the 200-day moving average in August 2017. Both of these indicators suggest that there could be more upside coming for the stock. (For more, see: 9 High-Return Stocks for a Shaky Market: Goldman.)
- Average Volume: 2,774,275
- Market Cap: $52.74 billion
- P/E Ratio (TTM): 9.61
- EPS (TTM): $11.82
- Dividend and Yield: $3.20 (2.74%)
The Bottom Line
Anyone interested in the energy sector has some stellar natural gas companies to choose from. To be sure, the price of natural gas must be monitored, but each of these companies has income streams from sources other than natural gas. This offers protection against natural gas price fluctuations. (For additional reading, check out: Natural Gas Industry: An Investment Guide.)