By Michael Brush, MarketWatch
Industry experts concur: “We fully expect the emerging markets and Europe to continue to have fundamental demand growth,” says Anatol Feygin, the chief commercial officer at Cheniere Energy /zigman2/quotes/206202121/composite LNG +0.91% , an LNG exporter. China demand recently grew 10% year over year, he adds.
2. Shippers will continue to use natural gas to replace dirtier fuel, because the International Maritime Organization has imposed limits on sulfur emissions.
3. Natural gas benefits from climate change fears. To the extent that policy makers and technology advances boost the use of electric cars, this will bid up natural gas prices, since utility companies increasingly use natural gas to produce power.
Among U.S. natural gas plays, these companies look particularly interesting:
1. EQT: The largest natural gas producer in the U.S., EQT /zigman2/quotes/209305691/composite EQT +4.08% has a huge, low-cost asset base in the Marcellus and Utica Shale plays in the Northeast U.S. Company insiders including the CEO have been big buyers of the stock this year, most recently at $16.33. Shares are much cheaper now.
2. Kinder Morgan: Richard Kinder, founder of this pipeline company /zigman2/quotes/208455654/composite KMI +3.47% , is a top expert on energy infrastructure in the U.S. So when he puts more than $130 million into his own stock, as he has done so far in 2019, it’s worth paying attention. Increased natural gas production and usage will benefit Kinder Morgan because that boosts demand for pipelines. The company pays a 5% dividend yield.
3. Royal Dutch Shell: This is the world’s second-largest natural gas producer , behind Russia’s Gazprom /zigman2/quotes/210269676/composite OGZPY -46.60% . Shell produces gas in countries worldwide, including Norway, Malaysia, Canada, and the U.S. It is also a big player in LNG, so it will benefit from growth there. The stock’s dividend yield is 6.2%.
4. Williams Companies: Like Kinder Morgan, Williams /zigman2/quotes/205467183/composite WMB +1.87% is a huge natural gas pipeline company, but with an emphasis on natural gas plays in the Northeast like the Marcellus and Utica shales. Insiders including the CEO and CFO have purchased about $1 million worth of stock this year, most recently at $23. Dividend yield: 6.8%.
5. Comstock Resources: Under the leadership of oil billionaire owner Jerry Jones, this Haynesville shale play in Texas /zigman2/quotes/205709071/composite CRK +6.46% just completed a merger with private energy company Covey Park. The merger dramatically increases production, while the combined company cuts costs. Expect more mergers as Jones picks off other assets at a discount, since natural gas plays are so out of favor.
For ETF exposure consider the United States Natural Gas Fund /zigman2/quotes/205527422/composite UNG +4.30% , SPDR S&P Oil & Gas Exploration & Production and Energy Select Sector SPDR Fund. The latter two give a lot of exposure to oil producers, but oil prices should rise from here as recession fears ease.
At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush has suggested EQT, KMI, RDS-A, WMB and CRK in his stock newsletter,Brush Up on Stocks.