On November 4, the Canadian government, under Prime Minister Justin Trudeau, announced preliminary regulations aimed at reducing carbon emissions from the oil and gas sector by 35% from 2019 levels over the next eight years. These regulations are set to be implemented through a cap-and-trade system, which will establish a legal limit on the sector’s emissions, allowing companies to buy and sell a limited number of emissions allowances. The cap is expected to be enforced starting in 2030, with gradual reductions until Canada achieves net-zero emissions by 2050. The plan is set to be finalized in the coming year and phased in starting in 2026. The Canadian Association of Petroleum Producers has expressed concerns that the cap will lead to production cuts and a reduction in business investment. The effectiveness and implementation of this policy remains uncertain, as the governing Liberal Party faces a significant challenge from the Conservative Party, which is leading in the polls ahead of the next election, scheduled no later than October 2026.
Read Also: 10 Oil Stocks with Biggest Upside Potential According to Analysts and 7 Best Emerging Markets Stocks To Buy Now.
Natural Gas Shows Signs of Recovery
In an interview with CNBC on September 11, Katie Stockton, Founder of Fairlead Strategies discussed the potential for a natural gas trade as the market shows signs of basing and improving momentum. Stockton began by noting that natural gas prices have experienced a significant decline, with a 75% drop from September 2022. This dramatic decrease has put natural gas in a long-term downtrend, making it a challenging and volatile asset to trade.
One of the key indicators Stockton highlighted is the long-term momentum gauge for natural gas prices. For the first time since the beginning of 2023, this gauge has flipped to a buy signal, indicating a significant shift in the long-term trend. This is a positive sign, as it suggests that the downward momentum may be reversing. Additionally, natural gas has been showing signs of basing for several months, which is a positive signal for potential upside movement. Stockton also pointed out that short-term momentum has been improving. Natural gas futures have recently moved above their 50-day moving average, a key technical level that often signals short-term strength. The prices are now testing the 200-day moving average, another critical resistance level. Breaking through this level could trigger more buying interest and potentially lead to a sustained upward trend.
Natural gas has become a key part of the world’s energy supply, serving as a bridge between traditional fossil fuels and renewable energy sources. This increased demand is expected to help stabilize prices and open up new opportunities for investors. With that in context, let’s take a look at the 8 most profitable natural gas stocks to invest in.
An aerial view of a large natural gas transmission pipeline network in an industrialized landscape.
Our Methodology
To compile our list of the 8 most profitable natural gas stocks to invest in, we used Finviz and Yahoo stock screeners to find the 30 largest gas companies. We shortlisted companies with a 5-year net income compound annual growth rate (CAGR) of over 15% and a minimum net income of $1 billion in the trailing twelve months (TTM) as informed by SeekingAlpha. Then we used Insider Monkey’s Hedge Fund database to rank 8 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Most Profitable Natural Gas Stocks To Invest In
8. ONEOK, Inc. (NYSE:OKE)
Number of Hedge Fund Investors: 33
5-Year Net Income CAGR: 17.48%
TTM Net Income: $2.80 Billion
ONEOK, Inc. (NYSE:OKE) is involved in the gathering, processing, fractionation, storage, transportation, and marketing of natural gas and natural gas liquids (NGL) in the United States. The company owns natural gas pipelines and processing plants in the Mid-Continent and Rocky Mountain regions and provides midstream services to producers of NGLs. ONEOK, Inc. (NYSE:OKE) was founded in 1906 and is headquartered in Tulsa, Oklahoma.
ONEOK, Inc. (NYSE:OKE) has been proactive in expanding its footprint through strategic acquisitions that enhance its natural gas and NGL infrastructure. In October, the company acquired a controlling interest in EnLink Midstream, a natural gas pipeline transportation company, and finalized the acquisition of Medallion Gathering and Processing, a company primarily focused on gathering and processing natural gas in the Delaware Basin of West Texas. These acquisitions are expected to establish a fully integrated Permian Basin platform and provide significant growth potential. The company is confident in its ability to identify and realize additional synergies to further enhance its competitive position.
ONEOK, Inc. (NYSE:OKE) is also expanding its natural gas gathering and processing capabilities, particularly in key regions such as the Rocky Mountain, Mid-Continent, and Permian Basin. In the Rocky Mountain region, the company has seen record processing volumes, driven by robust production and the drilling of longer laterals with higher well performance. In the Mid-Continent, the company is expanding its presence through the acquisition of EnLink, which will provide additional coverage and operational efficiencies.
ONEOK, Inc. (NYSE:OKE) is also making significant investments in pipeline expansions and key projects that will add capacity and support the company’s long-term growth strategy. These infrastructure developments are designed to ensure reliable and efficient transportation and storage of natural gas and NGLs.
7. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Number of Hedge Fund Investors: 34
5-Year Net Income CAGR: 19.96%
TTM Net Income: $15.55 Billion
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), commonly known as Petrobras, is a state-owned oil and gas company headquartered in Rio de Janeiro, Brazil. The company’s Gas and Power segment is particularly focused on the logistics and trading of natural gas and liquefied natural gas (LNG), transportation and trading of LNG, and the generation of electricity through thermoelectric power plants. This segment also includes renewable energy businesses, low-carbon services, and the production of biodiesel and its co-products.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) is focusing on Colombia’s energy sector, on December 5, Reuters reported that alongside its partner, Ecopetrol, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) has drilled the Sirius-2 well in the Guajira Basin, which has revealed gas volumes exceeding 6 trillion cubic feet. This discovery has the potential to increase Colombia’s current gas reserves by 200%. The company plans to start natural gas production expected by 2027, contingent on securing all necessary environmental licenses and confirming the commercial viability of the project. The company aims to produce up to 13 million cubic meters (mcm) per day of natural gas for a decade, which would meet nearly half of Colombia’s current domestic gas demand.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) is also preparing to start commercial operations at a natural gas production unit in Rio, which will initially operate at 50% capacity and is expected to reach 21 million cubic meters of gas per day by the end of the year. Furthermore, the company is also focusing on strategic partnerships and capital allocation. The company is committed to a governance process that ensures all investments go through the same rigorous evaluation. The company is prioritizing projects that generate higher returns, especially those with lower risk, while also considering medium and long-term strategic benefits.
