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 $1.50 from 2019 through 2020. The commodity currently trades at roughly $2.95 per MMBtu as of November 2020.
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 $3.13 per MMBtu in 2021, increasing to $3.25 for 2022.
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. Also, each of these companies has a chart pattern that is promising for the remainder of 2020.
All figures are current as of December 2020.
- Natural gas stocks are companies that deal in natural gas as a significant percentage of their other operations, as opposed to oil.
- Natural gas prices have been volatile over the past year, seeing lows near $1.50 and highs around $3.00, nearly a 200% intra-year move.
- Here we look at four stocks that could be good natural gas plays.
1. 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. 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 to around $41 per share in early January 2020. The stock became volatile along with the rest of the market as COVID-19 struck in the Spring of 2020, and it currently trades at $34.25 after reaching lows just above $25. 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.
- Average Volume: 2.1 million
- Market Cap: $135.1 billion
- P/E Ratio (TTM): 16.74
- EPS (TTM): $3.14
- Dividend and Yield: $2.20 (4.25%)
2. Antero Resources Corporation (AR)
Independent oil and natural gas company Antero Resources 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 COVID sell-off but it recovered quickly and eventually hit a 52-week high above $4.40 in August 2020. Shares in the exploration and production company, however, have declined significantly over the past several years, where it was trading above or around $20 per share until 2019. 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: 10.1 million
- Market Cap: $1.04 billion
- P/E Ratio (TTM): N/A
- EPS (TTM): $-6.50
- Dividend and Yield: N/A (N/A)
3. Cabot Oil & Gas Corporation (COG)
Cabot Oil & Gas 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 volatility throughout 2019 and into 2020. Cabot stock currently trades at around $17 a share and pays a 2.5% dividend. This stalwart that dates back to 1989 has the track record, management, and resources to do well in the remainder of 2020.
- Average Volume: 4.7 million
- Market Cap: $6.93 billion
- P/E Ratio (TTM): 32.69
- EPS (TTM): $0.53
- Dividend and Yield: $0.40 (2.35%)
4. Phillips 66 (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 band eventually hitting a high of just under $120 in November 2019. The stock, however, has struggled during 2020, falling dramatically to $42 at the height of the pandemic, and only recovering to $49 by November 2020. Still, given that it is valued at less than half it was a year ago, there may be room for growth. The stock may also be attractive to investors given its current 7.5% dividend rate at its current price.
- Average Volume: 3.4 million
- Market Cap: $25.4 billion
- P/E Ratio (TTM): N/A
- EPS (TTM): -$6.14
- Dividend and Yield: $3.60 (6.1%)
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, which offers protection against natural gas price fluctuations.