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.
6. The Williams Companies, Inc. (NYSE:WMB)
Number of Hedge Fund Investors: 37
5-Year Net Income CAGR: 79.36%
TTM Net Income: $2.88 Billion
The Williams Companies, Inc. (NYSE:WMB) is a leading energy infrastructure company, with a robust portfolio of natural gas and natural gas liquids (NGL) assets. The company operates a vast network of pipelines, storage facilities, and processing plants, serving a diverse range of customers, including utilities, power generators, and industrial users.
The Williams Companies, Inc. (NYSE:WMB) is expanding its footprint and enhancing its capabilities through a series of strategic projects and acquisitions. One of the key drivers of the company’s growth is its focus on large-scale natural gas transportation and storage projects. The company recently acquired the Gulf Coast Storage system, which has significantly bolstered its storage capacity and reliability. The company has also successfully placed several major projects into service, including Transco’s Regional Energy Access, to expand the capacity of its existing natural gas transmission system, which was completed ahead of schedule and under budget.
In addition to these large-scale projects, The Williams Companies, Inc. (NYSE:WMB) is actively developing smaller, high-return pipeline projects that collectively contribute to the company’s growth. The company has entered into binding agreements for several expansion projects on the Northwest pipeline, totaling approximately 260 million cubic feet per day of firm capacity. These projects offer strong returns and demonstrate the company’s ability to leverage its existing infrastructure to meet growing demand. The Southeast Supply Enhancement Project (SESE) is another significant initiative, which will expand the company’s capacity by 1.6 billion cubic feet per day, serving the Mid-Atlantic and Southeast markets. SESE is fully contracted and is expected to generate substantial EBITDA contributions in the coming months.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Investors: 41
5-Year Net Income CAGR: 18.84%
TTM Net Income: $3.40 Billion
Devon Energy Corporation (NYSE:DVN) is a leading independent oil and gas exploration and production company headquartered in Oklahoma. The company maintains a strong presence in major U.S. basins, including the Permian Basin, Delaware Basin, Williston Basin, and Powder River Basin.
Devon Energy Corporation (NYSE:DVN) is actively prioritizing strategies to maximize natural gas realizations, particularly in the Permian Basin. The company has made substantial investments in infrastructure to transport gas from the Waha hub to the Gulf Coast. A notable example of this effort is the recent completion of the Matterhorn Express Pipeline, a 580-mile natural gas pipeline with a capacity of 2 billion cubic feet per day, connecting the Permian Basin to Katy, Texas. This initiative aims to minimize the company’s exposure to regional price fluctuations by ensuring access to the Gulf Coast market.
To support continued growth in production and operational efficiency, Devon Energy Corporation (NYSE:DVN) is embracing advanced technologies. Key areas of focus include the deployment of e-frac (electric fracturing) and simul-frac (simultaneous fracturing) techniques. Additionally, the company is leveraging data analytics and machine learning to optimize well placement and completion designs, ensuring maximum production from each well.
4. Baker Hughes Company (NASDAQ:BKR)
Number of Hedge Fund Investors: 45
5-Year Net Income CAGR: 60.40%
TTM Net Income: $2.24 Billion
Baker Hughes Company (NASDAQ:BKR) is a leading provider of technologies and services to the energy and industrial sector. The company operates through two primary segments: Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET). The IET segment is particularly focused on gas technology and offers a wide range of equipment and solutions including flow control systems, and turnkey solutions for mechanical drive, compression, and power-generation applications.
Baker Hughes Company (NASDAQ:BKR) is focusing on growth and margin improvement by leveraging its robust portfolio of natural gas, LNG, and gas infrastructure. The company is committed to expanding its installed base of gas technology equipment, driven by a combination of new projects, infrastructure developments, and offshore and onshore production. Additionally, Baker Hughes Company (NASDAQ:BKR) is investing in advanced service solutions, including digital capabilities and upgrades to enhance its services. These upgrades are focused on improving efficiency, reliability, and emissions, which in return are expected to drive additional revenue and margin expansion.
Baker Hughes Company (NASDAQ:BKR) is also focusing on enhancing its aftermarket service offerings as the company’s Gas Technology Services (GTS) segment is expected to benefit from the recurring revenue stream generated by installed units, which can generate 1x to 2x the revenue over the life of the equipment compared to the original sale. This recurring revenue is characterized by higher margins and long-term contractual agreements, which provide stable and predictable revenue.
3. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Investors: 46
5-Year Net Income CAGR: 19.01%
TTM Net Income: $7.14 Billion
EOG Resources, Inc. (NYSE:EOG) was established in 1985 and is based in Houston, Texas. The company along with its subsidiaries, engages in the exploration, development, production, and marketing of crude oil, natural gas liquids, and natural gas, primarily in active basins within the United States, the Republic of Trinidad and Tobago, and other international locations.
EOG Resources, Inc. (NYSE:EOG) is making strategic infrastructure investments that are designed to ensure that the company can capitalize on the growing demand for North American natural gas. The company is building the Janus gas plant in the Delaware Basin, which is expected to be completed in 2025. Furthermore, the company has completed the Verde pipeline, which will be primarily used to transport natural gas extracted from the Dorado play in South Texas to the Agua Dulce hub in Texas to allow the company to access the Gulf Coast market.
The company is optimistic that new LNG projects, exports to Mexico, and increased power generation will drive about 10 to 12 billion cubic feet per day of new LNG capacity starting in 2025 and continuing through 2027. To capitalize on this trend, EOG Resources, Inc. (NYSE:EOG) in 2022, announced to drill 25 wells using two rigs in the Dorado area, which is part of the Eagle Ford and Austin Chalk formations. However, during the Q3 earnings call, management informed that the company now plans to continue a one-rig program in the Dorado area to improve efficiency and deepen its understanding of the play. The company estimates that Dorado holds about 21 trillion cubic feet of natural gas with a production cost of less than $1.25 per million British thermal units (MMBtu).
2. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Investors: 49
5-Year Net Income CAGR: 25.54%
TTM Net Income: $3.22 Billion
Diamondback Energy, Inc. (NASDAQ:FANG) is a US-based independent oil and natural gas company, specializing in unconventional, onshore oil and natural gas reserves in the Permian Basin of West Texas. The company utilizes advanced technologies and efficient drilling practices to maximize natural gas recovery while maintaining a low-cost operating structure.
Diamondback Energy, Inc. (NASDAQ:FANG) is prioritizing infrastructure and transportation solutions to access higher-value markets for its gas. In Q3, the company secured significant capacity on major pipelines, including Whistler and Matterhorn, with approximately 250 million cubic feet of gas per day of space. This ensures a substantial portion of the company’s gas production reaches markets where it can fetch better prices. Furthermore, the company holds a 10% stake in the upcoming Blackcomb pipeline, which will transport gas from the Permian Basin to South Texas and is anticipated to become operational in the coming years.
Diamondback Energy, Inc. (NASDAQ:FANG) is also exploring innovative strategies to enhance the value of its gas production. One initiative involves the development of power generation facilities utilizing its natural gas resources. By converting natural gas into electricity, the company aims to achieve higher margins and shield its operations from gas price volatility. The company is currently engaging with data center operators and other potential partners to develop power solutions that capitalize on the low-cost gas available in the Permian Basin.
Additionally, the company is investing in Verde Clean Fuels, which focuses on converting natural gas into low-carbon fuels. This investment aligns with the increasing demand for sustainable and cleaner energy solutions to monetize its gas resources effectively.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Investors: 86
5-Year Net Income CAGR: 18.13%
TTM Net Income: $33.70 Billion
Exxon Mobil Corporation (NYSE:XOM), founded in 1870 and headquartered in Spring, Texas, is one of the largest international oil and gas companies. The company focuses on gas through its Upstream segment, which involves searching for and extracting crude oil and natural gas both in the United States and internationally.
Exxon Mobil Corporation (NYSE:XOM) is advancing plans for a Gas to Energy Project in collaboration with the Government of Guyana. This initiative aims to harness natural gas from the company’s offshore operations in the Liza Phase 1 and 2 fields. The project involves constructing a pipeline to transport approximately 50 million standard cubic feet of natural gas per day from these offshore sites to onshore gas processing facilities. As of Q3, the company has completed the tie-ins for the Gas-to-Energy project. Once the government completes the associated power plant, this project will provide electricity that is significantly cheaper, cleaner, and more reliable.
Exxon Mobil Corporation (NYSE:XOM) is also leveraging its technological advancements and operational excellence to optimize gas production and reduce environmental impact. Furthermore, the company is expanding its gas portfolio through strategic investments and partnerships. Exxon Mobil Corporation (NYSE:XOM) is continuously exploring new opportunities in regions with high gas potential, such as the Middle East, Africa, and Asia-Pacific. The company is also committed to innovation and research to enhance gas recovery and processing techniques and is investing in advanced technologies, such as carbon capture and storage (CCS) and methane emission reduction, to make gas operations more sustainable and environmentally friendly.
While we acknowledge the potential of Exxon Mobil Corporation (NYSE:XOM) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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