In this article, we discuss the 10 best gas stocks to buy now. If you want to skip our detailed analysis of the gas market as well as the first five stocks on the list, go directly to the 5 Best Gas Stocks To Buy Now.
As the world transitions to cleaner energy sources, the demand for alternative energy is one of the most important factors driving growth in the gas sector. Natural gas is an important part of the clean energy transition. Despite being a nonrenewable energy source, natural gas is a cleaner, cheaper, and less carbon-intensive alternative to coal. The natural gas market is expected to grow in the coming years due to its competitive price versus coal and crude oil. According to a forecast by the U.S. Energy Information Administration (EIA), local consumption of natural gas will average 84.6 Bcf/d in 2022, up 2% from 2021, owing primarily to an increase in manufacturing activities in the industrial sector.
Following a year of record-low consumption and an oversupplied market, natural gas demand recovered in 2021 as the global economy resumed its post-pandemic economic activities. According to the International Energy Agency’s Q1 2022 gas market report, global natural gas consumption rebounded by 4.6% in 2021, more than doubling the declining trend seen in 2020. The increase in natural gas demand was also influenced by a series of severe weather events and unforeseen supply outages. These major factors drove natural gas prices to record highs in Europe and Asia last year, while prices in the United States have more than doubled.
According to data provided by government watchdog Accountable.US, realized gas prices helped the world’s 25 largest oil and gas companies garner a combined profit of $205 billion in 2021. Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Chesapeake Energy Corporation (NYSE:CHK) are among the largest gas companies that benefited from the sharp climb in commodity prices last year. With attractive shareholder return programs like dividend payouts and share repurchases, these oil and gas majors seem to be luring more investors into the energy market. According to Accountable.US, the oil and gas industry is expecting an even better year for investors, with plans to invest more than $80 billion in shareholder returns already reported.
Our Methodology
We analyzed each gas stock and included only those with high growth potential and favorable analyst ratings. Using Insider Monkey data, we ranked these gas stocks based on the number of hedge funds that held a stake in them in Q4 2021.
Note: All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q4 2021 reporting period.
Image by Nicola Giordano from Pixabay
Best Gas Stocks To Buy Now
10. Equinor ASA (NYSE:EQNR)
Number of Hedge Fund Holders: 11
Norwegian state-operated energy company Equinor ASA (NYSE:EQNR) is Europe’s second-largest gas provider, trailing only Russia, and accounts for 20% of the continent’s gas consumption. The company ships liquefied natural gas (LNG) cargoes to over 20 countries worldwide, with France, England, and Germany being its major European customers.
As of March 15, Equinor ASA (NYSE:EQNR) is up 9% in the previous month. The Norwegian energy company announced record high full-year adjusted earnings after tax of $10 billion for 2021. On top of that, Equinor ASA (NYSE:EQNR) generated $25 billion in free cash flow last year, allowing the company to pay out $10 billion in dividends to shareholders this year. Currently, the company’s stock offers a dividend yield of 1.95%.
Just like Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Chesapeake Energy Corporation (NYSE:CHK), Equinor ASA (NYSE:EQNR) is one of the best gas stocks to buy now, according to market analysts. On March 10, JPMorgan analyst Christyan Malek increased his price target for the gas stock to NOK 285 from NOK 255 and maintained an ‘Underweight’ rating on the shares. At the end of the fourth quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $302 million in Equinor ASA (NYSE:EQNR).
Here is what Massif Capital had to say about Equinor ASA (NYSE:EQNR) in its Q2 2021 investor letter:
“We currently have two oil-related positions in our portfolio and believe the oil opportunity set is ripe. As one might expect, both positions, (including Equinor: EQNR) performed well during the second quarter, given the steady march higher that oil has made in recent months. We maintain a positive outlook for both companies, although, importantly, our posture is not predicated on an expectation for continued oil price appreciation. This is not because of our inability to imagine scenarios where that does occur, but more out of an abundance of caution for what is a highly volatile commodity that at current price levels should be more than sufficient to generate ample free cash flow for any investable oil firm.
In the future, we expect both firms in the portfolio to generate significant free cash flow and expect EQNR to reinvest that free cash flow into a combination of offshore oil and wind opportunities with high rates of return. The path forward for AOI is more complicated and does warrant a few comments.”
9. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 26
Following a downturn in 2020, BP p.l.c. (NYSE:BP) recovered to a $12.85 billion annual profit in 2021, owing to the high oil and gas prices and enhanced production. BP p.l.c. (NYSE:BP) reduced its debt by $8.3 billion in 2021, pushing it down to $30.6 billion by the end of the year.
After the Ukraine invasion began in mid-February, the London-based energy company was among the first to distance itself from its Russian partners. BP p.l.c. (NYSE:BP) exited its 19.75% stake in Rosneft by the end of February, a venture BP had held since 2013. Despite the fact that Rosneft provided approximately 3% of BP p.l.c. (NYSE:BP)’s overall cash flow from operations in 2021, BP mentioned that its Russian partner exit and financial hit will have no effect on its short and long-term financial targets.
Fisher Asset Management, the biggest shareholder of BP p.l.c. (NYSE:BP) in our database, increased its stake in the London-based company by 10% during the fourth quarter of 2021, bringing its total holdings to 13.7 million shares worth $367 million. Meanwhile, JPMorgan analyst Christyan Malek maintained his ‘Overweight’ rating on the shares with a price target of 480 GBp.
8. CNX Resources Corporation (NYSE:CNX)
Number of Hedge Fund Holders: 36
CNX Resources Corporation (NYSE:CNX) is a Pennsylvania-based independent natural gas producer with 4,400 net producing gas wells. CNX Resources Corporation (NYSE:CNX) announced in its Q4 earnings results that it had achieved an organic addition of 907 Bcfe of proved reserves through expansions and discoveries, outperforming its 590 Bcfe net production forecast for 2021 by nearly 154%, bringing total proved reserves to 9.63 Tcfe as of the end of December 2021.
Shares of CNX Resources Corporation (NYSE:CNX) have jumped 28% in the past three months, as of March 15. The gas stock’s price target was upgraded by Wells Fargo analysts recently to $26, with the firm maintaining its ‘Overweight’ rating on the shares.
The company forecasted a 7% to 8% increase in liquid volume production in 2022, numbers that hedge funds are taking note of. Of the 924 hedge funds in our database that filed 13Fs for the December quarter, 36 of them disclosed holding a position in CNX Resources Corporation (NYSE:CNX) as of December 31, up from 34 funds a quarter earlier.
Here is what Longleaf Partners Small-Cap Fund Commentary had to say about CNX Resources Corporation in its Q4 2021 investor letter:
“CNX Resources (27%, 2.14%; 9%, 0.46%), the Appalachian natural gas producer, was another top contributor. With higher strip gas prices, another strong year of FCF and a 13% annualized repurchase pace last quarter, our appraisal of the value increased over 20%. However, the company’s conservative hedging program that has helped it withstand prior bear markets also held back earnings growth this year. The board, led by chairman Will Thorndike, recently authorized another $1 billion of repurchase, representing nearly one-third of outstanding shares at today’s price. Despite higher absolute FCF than Appalachian comps with inferior inventory positions, CNX trades at less than half of their enterprise values.”
7. Marathon Oil Corporation (NYSE:MRO)
Number of Hedge Fund Holders: 40
Independent exploration and production company Marathon Oil Corporation (NYSE:MRO) is one of the leading gas producers in the U.S. The Texas-based energy firm produced higher total net gas volumes of 357 mboed in the fourth quarter of 2021, up from 342 mboed in Q4 2020.
Marathon Oil Corporation (NYSE:MRO) is one of the gas companies that is actively improving its ESG performance, with one of its initiatives being natural gas capture. Marathon Oil Corporation (NYSE:MRO) announced an increase in total company gas capture of 98.8% in its fourth-quarter earnings report.
Marathon Oil Corporation (NYSE:MRO) is being closely watched by market analysts and hedge funds after exceeding Q4 consensus estimates, delivering record shareholder returns, and generating improved free cash flow in 2021 in general. On March 18, Barclays analyst Jeanine Wai increased her price target for Marathon Oil Corporation (NYSE:MRO) to $29 from $20 with an ‘Overweight’ rating. According to Insider Monkey’s 13F filings data, Holocene Advisors increased its stake in the Texas-based oil and gas company by 21% during the fourth quarter of 2021, bringing its total holdings to 9.3 million shares worth $154 million.
6. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 41
The price target for Shell plc (NYSE:SHEL), one of the largest oil and gas companies in the world along with Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Chesapeake Energy Corporation (NYSE:CHK), was recently upped by JPMorgan analyst Christyan Malek to 2,600 GBp from 2,500 GBp. Malek kept his ‘Overweight’ rating on the gas stock. Shell plc (NYSE:SHEL) shares have increased by 18% over the previous year as of the beginning of the third week of March, primarily due to gas prices doubling between 2020 and 2021, giving the company record profit.
Shell plc’s (NYSE:SHEL) gas production increased in the fourth quarter to 4,080 mscf/d, up from 3,387 mscf/d. With more than 50 LNG carriers on charter delivering to customers and over 700 ship-to-ship bunkering operations, the Dutch integrated oil and gas company is one of the market’s major LNG cargo operators.
At the end of the fourth quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $2.63 billion in Shell plc (NYSE:SHEL), up from 33 funds with long positions worth $2.05 billion in the previous quarter.
Here is what Goehring & Rozencwajg Associates had to say about Royal Dutch Shell plc in its Q3 2021 investor letter:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize the return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 has fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
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Disclosure: None. 10 Best Gas Stocks To Buy Now is originally published on Insider Monkey.
