While the global economy remains unstable , the oil and natural gas sector in the United States continues to boom. Using a combination of advanced techniques and technologies, cutting-edge companies are now extracting oil and natural gas from previously untapped resources. Much of the oil and natural gas is extracted through new techniques, such as fracking, and from new sources, such as shale. This has created unique opportunities for niche firms to expand their businesses, and has also created numerous investment opportunities for savvy investors as well.
Oil and gas companies stand to benefit the most as the boom continues, and investors can tap into this growth by investing in the rapidly expanding companies that are supporting the boom. With energy demand likely to continue to increase across the globe, even if the economy slows, the oil and gas industry may offer some of the safest investment opportunities. All investments carry risk, of course, but this article will outline some companies worth watching.
One favorite pick is EnCana Corporation (USA) (NYSE:ECA). This multi-sector company is involved in both oil and natural gas. Its stock has remained somewhat suppressed in recent weeks as natural gas has flooded the market and suppressed prices. Still, energy demand is likely to trend upwards over the long haul, especially as the global economy continues to build momentum. While the company does have $7.73 billion in debt, it still has nearly $3 billion in cash on hand. Furthermore, with revenues of over $4 billion and gross profits of $2.79 billion, the company should face few financial difficulties in the future. EnCana Corporation (USA) (NYSE:ECA) also pays a small dividend (about 20 cents) and is launching a share buy-back program. This suggests that EnCana Corporation (USA) (NYSE:ECA)’s management believes that the company is currently undervalued.
Another good investment, PAA Natural Gas Storage, L.P. (NYSE:PNG), runs natural gas storage facilities in Louisiana, Mississippi and Michigan. As more natural gas is extracted, companies will have to turn to firms like PAA Natural Gas Storage, L.P.(NYSE:PNG) to find a place to keep it all. The company currently enjoys a trailing P/E of 21 and has seen its stock prices rise from $16.61 to as high as $23.10. While this growth is considerable, given overall market conditions, prices should continue to rise. The company does have a considerable amount of debt at just over $600 million, and quarterly revenue growth has exceeded 18% and is likely to continue to build momentum in the future.
If you’re looking for a bit more stability and a larger company, Apache Corporation (NYSE:APA) is definitely worth a look. Trading at about $82, the company cooled off of a 52 week high of nearly $95, largely due to a decline in natural gas prices. This drop in prices contributed to a 10% decline in revenues, which total $16.38 billion. As with many other oil and gas companies, Apache has been borrowing money to fuel its expansion and currently has $12.48 billion in debt on its balance sheets. Still, with a market cap of $32 billion, this debt is nothing worth fretting about.
There are several other companies worth examining, including Chesapeake Energy Corporation (NYSE:CHK) and EQT Midstream Partners LP (NYSE:EQM). With the oil and gas boom likely to continue, there should be numerous big winners over the next few years. Still, you should keep a close eye on company management and debt levels to make sure that overly zealous leaders are not overextending business operations. Also, even though gas prices are likely to rise over the coming years, in the short term prices could continue to drop. This might suppress share prices in the immediate future, but as demand for natural gas and oil begins to outstrip supply, prices will rise. If anything, a short-term decline in natural gas prices could create numerous value buys for investors who are willing to wait until prices rebound.
Colin Tweel has no position in any stocks mentioned. The Motley Fool owns shares of Apache.
The article Profiting from North America’s Resource Renaissance originally appeared on Fool.com.
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