We recently published a list of 8 Most Profitable Natural Gas Stocks To Invest In. In this article, we are going to look at where EOG Resources, Inc. (NYSE:EOG) stands against other most profitable natural gas stocks to invest in.
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.
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).
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).
Overall, EOG ranks 3rd on our list of one of the most profitable natural gas stocks to invest in. While we acknowledge the potential of EOG to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
