Since peaking at $10.02 in August 2022, natural gas has traded in a range that has bounced between $2.25 and $3.25 since February 2023. The clean-burning fuel hit a low earlier this year in February and has trended up after an early June pop. Recently, natural gas spiked a stunning 17% and could be ready to power through the $4 level. If it does close over $4, it could be off to the proverbial races.
24/7 Wall St. Key Points:
- For years, weather tended to dictate the spot price of natural gas
- While a cold winter is indeed expected this year, the future of the commodity may evolve dramatically
- The United States is the leading global producer of natural gas and LNG exporter
- Are energy stocks a good fit for your portfolio? Why not contact a financial advisor near you for a portfolio check-up? Click here to get started.
In an odd twist of fate for the clean-burning natural gas sector, the electricity needs of Artificial intelligence-fueled data centers could be just one of the reasons for the recent spike in prices and the seemingly inevitable move higher after years of trading near or below-negative prices. While big tech has started embracing nuclear energy to produce the massive amount of electricity needed for data centers and Bitcoin mining, licensing and building small independent atomic plants could take years.
We screened our 24/7 Wall St. energy research database, looking for companies leading in natural gas production and midstream. Five top companies hit our screens, all rated Buy across Wall Street, and all pay very solid and dependable dividends.
Why we are covering natural gas stocks
Between the need for more and more electricity and the potential for clean-burning natural gas vehicles to dominate in China and beyond, it makes sense for investors to add companies that are major producers. Add the fact that the Trump Administration should be solidly behind natural gas production in the United States; all the tailwinds are in place for a big move higher.
Coterra Energy
Coterra Energy is a premier, diversified energy company well positioned to deliver superior and sustainable returns.
With a solid 3.25% dividend and a potential stock breakout, this is an outstanding idea now. Coterra Energy, Inc. (NYSE: CTRA | CTRA Price Prediction) is an independent oil and gas company that develops, explores, and produces oil, natural gas, and natural gas liquids in the United States.
The company’s properties include:
- The Marcellus Shale, with approximately 186,000 net acres in the dry gas window of the play located in Susquehanna County, Pennsylvania;
- Permian Basin properties with approximately 296,000 net acres located in west Texas and southeast New Mexico
- Anadarko Basin properties with approximately 182,000 net acres located in Oklahoma
It also operates natural gas and saltwater gathering and disposal systems in Texas.
The company sells its natural gas to industrial customers, local distribution companies, oil and gas marketers, major energy companies, pipeline companies, and power generation facilities.
Piper Sandler has an Overweight rating on the company with a $35 target price.
EQT
EQT Corporation is a leading independent natural gas producer.
This company is the largest natural gas producer in the Appalachian Basin and pays a 1.42% dividend. EQT Corporation (NYSE: EQT) is a natural gas production company in the United States. It sells natural gas and natural gas liquids to marketers, utilities, and industrial customers through pipelines located in the Appalachian Basin.
The company also offers marketing services and contractual pipeline capacity management services.
Billionaire hedge fund giant David Tepper, who also owns the Carolina Panthers NFL team, has a large position in the company, which he trimmed back in the fall. Other big hedge funds, like Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group, are also reported as shareholders.
Citigroup has a Buy rating with a $51 target price.
Kinder Morgan
Kinder Morgan, Inc. is one of North America’s largest energy infrastructure companies.
This is one of the top energy stocks and remains a favorite across Wall Street. It pays a dependable 4.21% dividend. Kinder Morgan, Inc. (NYSE: KMI) is an energy infrastructure company in North America.
The company operates through:
- Natural Gas
- Products
- Terminals
- CO2 segments
The Natural Gas Pipelines segment:
- Owns and operates the interstate and intrastate natural gas pipeline and underground storage systems
- Natural gas gathering systems and natural gas processing and treating facilities
- Natural gas liquids fractionation facilities and transportation systems
- Liquefied natural gas liquefaction and storage facilities
The Products Pipelines segment owns and operates refined petroleum products, crude oil and condensate pipelines, associated product terminals, and petroleum OKEpipeline transmit facilities.
The Terminals segment owns and operates liquids and bulk terminals that store and handle various commodities, including:
- Gasoline
- Diesel fuel
- Chemicals
- Ethanol
- Metals
- Petroleum coke
- Owns tankers
Lastly, the CO2 segment produces, transports, and markets CO2 to recover and produce crude oil from mature oil fields. It owns interests in and/or operates oil fields, gasoline processing plants, and a natural oil pipeline system in West Texas. It holds and runs approximately 83,000 miles of pipelines and 144 terminals.
Wells Fargo has an Overweight rating with a $30 target price objective.
Ovintiv
Ovintiv Inc. is a leading North American exploration and production (E&P) company.
This off-the-radar name has seen strong movement since the fall but has undeniable positive prospects and pays a 3.10% dividend. Ovintiv, Inc. (NYSE: OVV), together with its subsidiaries, explores, develops, produces, and markets natural gas, oil, and natural gas liquids in the United States and Canada.
The company operates through three segments:
- USA Operations
- Canadian Operations
- Market Optimization
Its principal assets include Permian in west Texas, Anadarko in west-central Oklahoma, and Montney in northeast British Columbia and northwest Alberta.
In addition, the company’s upstream assets comprise Bakken in northwest North Dakota, Uinta in central Utah, and Horn River in northeast British Columbia. The company was formerly known as Encana Corporation and changed its name to Ovintiv Inc. in January 2020. Ovintiv Inc. was incorporated in 2020 and is based in Denver, Colorado.
UBS has a Buy rating and a target price objective of $56.
Phillips 66
The Phillips 66 Company is an American multinational energy company.
This is an old-school natural gas/energy play with a hefty 4.09% dividend. Phillips 66 (NYSE: PSX) operates as an energy manufacturing and logistics company in the United States, the United Kingdom, Germany, and internationally.
It operates through four segments:
- Midstream
- Chemicals
- Refining and Marketing
- Specialties (M&S)
The Midstream segment:
- Transports crude oil and other feedstocks
- Delivers refined petroleum products to market
- Provides terminaling and storage services for crude oil and refined petroleum products
- Transports, stores, fractionates, exports, and markets natural gas liquids
- Provides other fee-based processing services
- Gathers, processes, transports, and markets natural gas
The Chemicals segment produces and markets ethylene and other olefin products; aromatics and styrenics products, such as benzene, cyclohexane, styrene, and polystyrene; and various specialty chemical products, including organosulfur chemicals, solvents, catalysts, and chemicals used in drilling and mining.
The Refining segment refines crude oil and other feedstocks into petroleum products, such as gasolines, distillates, aviation fuels, and renewables.
The M&S segment purchases and markets refined petroleum products for resale, including gasolines, distillates, and aviation fuels. This segment also manufactures and markets specialty products like base oils and lubricants.
Wells Fargo has an Overweight rating with a $161 target.
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