In this article, we discuss the 10 best natural gas stocks to buy now. To skip the detailed analysis of the natural gas industry, you can go directly to the 5 Best Natural Gas Stocks to Buy Now.
Natural gas is one of the most used energy sources in the world. In the US alone, it accounted for 32% of the energy consumption in 2021, and in the electricity sector, it accounted for 36% of the U.S. primary energy production.
In 2022, fuel prices including natural gas peaked due to the Russia-Ukraine war which led to sanctions on Russia, resulting in pressure on European and global gas markets. However, due to favorable weather conditions and actions taken by the governments, the pressure on the market eased a little since the beginning of 2023. In Europe, natural gas consumption fell by almost 55 billion cubic meters year-over-year during the 2022/2023 heating season, marking the steepest decline in consumption for any recorded winter season. Furthermore, to avoid further pressures due to the cut-off from Russian exports, the European Union has also unveiled a 210 billion euro plan to completely be rid of Russian fossil fuel dependence by 2027. Compared to 2022, the Russian pipeline gas consumption is expected to drop around 45% in 2023. Nevertheless, In Asia and the Middle East, the natural gas demand is expected to increase by 3% and 2%, respectively, The higher demand from these regions will offset most of the drop in demand from Europe and the US in 2023 which is expected to decline by 5% and 2%, respectively.
In the first quarter of 2023, the natural gas average price at Henry Hub was $2.55 per Metric Million British Thermal Units (MMBtu), which showed an almost 40% YoY decline and a 57% sequential decline. The natural gas price was $4.55 per MMBtu in Q1 2022 and $5.92 per MMBtu in the fourth quarter of 2022. Between mid-December and the first quarter of 2023, natural gas prices dropped by around 70% in Northeast Asian, North American, and European markets.
The Energy Information Administration (EIA) released its short-term energy outlook on June 6 which reveals that the US natural gas production set a monthly record in April with 104 billion cubic feet per day (Bcf/d) production. In the previous month, it was 102 billion cubic feet per day. The EIA expects natural gas production to average around 103 Bcfd in the second half of 2023. According to the EIA’s outlook, natural gas prices are expected to remain conservative in the second half of the year too with an estimated $2.60 per MMBtu average price in the third quarter of 2023. One of the main reasons for these low prices is overstocked inventory. In May, natural gas storage inventories were 15% above the 5-year average.
Despite having a rough time, natural gas prices can still increase over time as it has been a key source of fuel in reducing global carbon emissions. On top of that, if a dry or hotter-than-usual summer comes along and gets followed by a cold winter, the commodity can experience high price volatility. On June 26, natural gas futures to their peak in two months and have since dropped by 6.8% on June 30.
Even though natural gas prices are under pressure due to several factors, the commodity is still expected to play a huge role in the energy industry until renewable energy completely takes over fossil fuels. Due to low prices, natural gas stocks are also experiencing a decline in their stock prices. To take advantage of the situation, Occidental Petroleum Corporation (NYSE:OXY), Exxon Mobil Corporation (NYSE:XOM), and ConocoPhillips (NYSE:COP) are some of the best stocks to look out for.
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Our Methodology
For this article, we chose the natural gas companies according to their hedge fund sentiment as of the first quarter of 2022. The hedge fund data was taken from Insider Monkey’s database of 943 elite hedge funds. We also added analyst ratings and growth catalysts around these stocks for further understanding of the readers.
10 Best Natural Gas Stocks to Buy Now
10. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 50
Chesapeake Energy Corporation (NASDAQ:CHK) is an American oil and gas exploration company. The company has recently started focusing completely on natural gas and is phasing out oil. In the first quarter of 2023, Chesapeake Energy Corporation (NASDAQ:CHK) produced 4 billion cubic feet of gas equivalent per day and 90% of it was natural gas.
Chesapeake Energy Corporation (NASDAQ:CHK) has been covered by 13 analysts in the last three months with 10 of them keeping a Buy or Overweight rating. The average price target of all the analysts is $107.46.
Chesapeake Energy Corporation (NASDAQ:CHK)’s stock was held by 50 hedge funds in the first quarter of 2023. Oaktree Capital Management held the most prominent stake in the company with 8.57 million shares worth $652.414 million.
Occidental Petroleum Corporation (NYSE:OXY), Exxon Mobil Corporation (NYSE:XOM), and ConocoPhillips (NYSE:COP) are some of the best natural gas stocks along with Chesapeake Energy Corporation (NASDAQ:CHK).
Carillon Tower Advisers made the following comment about Chesapeake Energy Corporation (NASDAQ:CHK) in its Q3 2022 investor letter:
“Chesapeake Energy Corporation (NASDAQ:CHK), a natural gas exploration and production company, emerged from bankruptcy with little fanfare in 2021, despite having rid itself of its debt burden and onerous pipeline contracts. The company was able to make two large acquisitions at very reasonable prices within its core producing areas, allowing for scale and cost savings. Then in 2022, natural gas prices began to rise well above expectations, increasing the value of Chesapeake’s large natural gas resources and production and contributing to its outperformance.”
9. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 52
PG&E Corporation (NYSE:PCG) is a California-based utility company providing electricity and natural gas to 16 million people across several parts of California. The company ranks 9 on our list of top natural gas companies.
PG&E Corporation (NYSE:PCG) is one of our 10 stocks under $50 that billionaires are loading up on. In the first quarter of 2023, 14 billionaire-owned or managed hedge funds were bullish on the company stock. The total number of hedge fund holders of PG&E Corporation (NYSE:PCG) in Q1 was 52 and Dan Loeb’s Third Point was the most prominent stakeholder in the company with 59.3 million shares worth $958 million.
On May 24, PG&E Corporation (NYSE:PCG) held its investor day in California. One of the most notable news from that day was that the company might reestablish its dividend after the third quarter of 2022. PG&E Corporation (NYSE:PCG) has not revealed the exact numbers but the company management wants to be a little conservative.
Third Point Management made the following comment about PG&E Corporation (NYSE:PCG) in its Q1 2023 investor letter:
“Our strategy is to preserve liquidity and buying power to take advantage of markets when they “break”. While overall indices remain elevated, we are finding more chances to provide liquidity across all three asset classes in which we invest – credit, structured credit, and equity – opportunities which have been key drivers of performance for the fund. Our portfolio is balanced across industries with a focus on event-driven names including companies involved in spin-offs, significant cost-cutting, or other types of under-appreciated business transformation. PG&E Corporation (NYSE:PCG), which is still our largest position, continues to deliver strong performance, down 50bps in the first quarter but up 6.2% for the year to date after the Fire Victims Trust sold another 60 million shares in a block trade.”
8. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 53
Constellation Energy Corporation (NASDAQ:CEG) is an American energy company headquartered in Maryland, USA. The company provides electricity and natural gas to customers across the United States,
On May 24, Constellation Energy Corporation (NASDAQ:CEG) set a new industry record after blending high concentrations of hydrogen with natural gas. The test was done in collaboration with Siemens Energy and Electric Power Research Institute. Constellation Energy Corporation (NASDAQ:CEG)’s test revealed that their Hillabee Generating Station could operate on a 38% hydrogen blend with only minor modifications. The hydrogen blend with natural gas is one of the most notable ways of producing clean energy.
On June 14, Constellation Energy Corporation (NASDAQ:CEG) announced a 12-year agreement with CVS Health Corporation (NYSE:CVS). The agreement will begin in April 2025 and the company will provide CVS with 18 megawatts of zero-emission renewable energy equal to the electricity usage of 147 of the healthcare company’s locations across Michigan.
Alger Capital made the following comment about Constellation Energy Corporation (NASDAQ:CEG) in its Q3 2022 investor letter:
“Constellation Energy Corporation (NASDAQ:CEG) is America’s leading clean energy company, based on carbon-free production. The company is the largest supplier of clean energy and sustainable solutions to homes, businesses, governments, community aggregations, and a range of wholesale customers (such as municipalities, cooperatives, and other end markets) across the continental U.S., backed by approximately 32,400 megawatts of generating capacity consisting of nuclear, wind, solar, natural gas and hydroelectric assets. Constellation produces nearly 10% of the nation’s carbon-free energy.
Shares outperformed during the third quarter primarily due to the Inflation Reduction Act (IRA). Signed into law in august, the bill provides a nuclear production tax credit of approximately $43.75 per megawatt hour of energy generated. This credit favorably impacted earnings, resulting in an increase in Constellation’s share price.”
7. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 58
Marathon Petroleum Corporation (NYSE:MPC) engages in downstream oil and gas operations. The company operates nearly 5000 miles of natural gas and natural gas liquids along with other forms of transport. Marathon Petroleum Corporation (NYSE:MPC) is one of the most profitable energy companies in the world.
In the last three months, 9 analysts have covered Marathon Petroleum Corporation (NYSE:MPC) and 6 of them maintain a Buy or Overweight rating on the company stock. The average analyst price target for the company is $140.13 which shows a 20% upside to the company’s stock price of $116.34 on June 29.
In the first quarter of 2023, Marathon Petroleum Corporation (NYSE:MPC) was held by 58 hedge funds, up from 52 in the previous quarter. Elliott Management owned over 11 million shares of the company, valued at $1.49 billion, and was the largest hedge fund holder of Marathon Petroleum Corporation (NYSE:MPC).
6. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
NextEra Energy, Inc. (NYSE:NEE) is an American energy company that provides electricity to customers in the United States and Canada. The company owns around $3.6 billion of natural gas infrastructure in the United States. However, NextEra Energy, Inc. (NYSE:NEE) is planning to sell its natural gas pipelines to invest in renewable energy. This transition is expected to take place in 2025.
In the first quarter of 2023, Marshall Wace LLP increased its holdings in NextEra Energy, Inc. (NYSE:NEE) by 237% to 2.9 million shares worth $224.593 million to become the most significant hedge fund holder of the company. In the quarter, 59 hedge funds held the company shares.
On June 8, Goldman Sachs initiated coverage on NextEra Energy, Inc. (NYSE:NEE) with a Buy rating and a $90 price target. The firm expects the company’s EPS to grow at a CAGR of 9% in the next five years.
NextEra Energy, Inc. (NYSE:NEE) is one of the top ten natural gas stocks to buy along with the likes of Occidental Petroleum Corporation (NYSE:OXY), Exxon Mobil Corporation (NYSE:XOM), and ConocoPhillips (NYSE:COP).
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Disclosure. None. 10 Best Natural Gas Stocks to Buy Now is originally published on Insider Monkey.
