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 $2.70 per MMBtu.

According to its latest Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) "expects natural gas prices to moderate in the coming months, based on a forecast of record natural gas production levels." The EIA forecasts an average price of $2.99 per MMBtu over the course of 2018. Investors in this sector should monitor natural gas prices in case inventories rise significantly like they did in 2016. Natural gas is often considered seasonal, but the EIA predicts that commercial use of natural gas will rise by around 3.5% in 2018.

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 natural gas 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 2018. All figures are current as of April 7, 2018. (To learn more, check out: A Natural Gas Primer.)

BHP Billiton Limited (BHP)

Natural gas is not the only source of income for BHP Billiton, as the company is also a significant miner of metals. However, BHP does extract and develop oil and natural gas. The company has assets in the Gulf of Mexico, but it also develops products in Australia as well as Trinidad and Tobago.

In 2016, the stock rose from around $18 per share, and it is now trading at $43.64 per share. The chart looked healthy going into 2017, but then it started moving down gradually. The shares broke sharply upward in June and July 2017, and after moving sideways for several months, BHP stock took off again in December to end the year with a solid run. The stock became volatile along with the rest of the market in February 2018, but if natural gas prices rise, BHP will be a profitable natural gas play. This stock also offers investors stability because of its diversified product line. (See also: 3 Stocks Poised to Gain on a 10% Plunge in Dollar.)

Antero Resources Corporation (AR)

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.

The stock has been trending downward since June 2016, but it ticked upward at the end of 2017. Antero shares recovered quickly after the recent sell-off and are currently trading at $20.81. At the moment, the 50-day moving average remains below the 200-day moving average, but there is a chance that Antero could see a golden cross in the near future – if the 50-day moving average crosses above its longer-term counterpart, this would be a positive sign for the stock.

  • Average Volume: 3,718,047
  • Market Cap: $6.365 billion
  • P/E Ratio (TTM): 10.37
  • EPS (TTM): $1.94
  • Dividend and Yield: N/A (N/A)

Cabot Oil & Gas Corporation (COG)

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.

After reaching a high in May 2017, the stock gave up some gains. Cabot shares broke out several times during the second half of last year, gaining significantly in October. After some sharp share price declines in February 2018 and an attempted recovery, the stock trades at just over $23 and pays a 1.00% dividend. Cabot 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 2018. (See also: Cabot Misses Earnings and Revenue Estimates in Q3.)

  • Average Volume: 5,996,044
  • Market Cap: $10.685 billion
  • P/E Ratio (TTM): 107.27
  • EPS (TTM): $0.22
  • Dividend and Yield:  $0.24 (1.00%)

Phillips 66 Common Stock (PSX)

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 recent market correction. The stock has recovered since then to its current level of $96.97. 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 is more upside coming for the stock. (For more, see: 9 High-Return Stocks for a Shaky Market: Goldman.)  

  • Average Volume: 2,249,975
  • Market Cap: $45.22 billion
  • P/E Ratio (TTM):9.85
  • EPS (TTM): $9.85
  • Dividend and Yield: $2.80 (2.96%) 

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.)

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