With the possibility of global demand for LNG (liquefied natural gas) doubling by 2040, companies involved in natural gas are set to increase in revenue.
The ongoing situation with Russia and Ukraine has significantly impacted energy prices worldwide as countries affect sanctions against Russia.
European countries are looking to import more LNG to reduce reliance on Russia. This opens up opportunities for U.S.-based exporters of natural gas.
With the world turning to alternatives for oil, we may find ourselves using more natural gas. Natural gas is the cleanest fossil fuel, which makes it a good bridge to renewable energy since a full conversion to solar or wind energy sources isn’t readily available at the moment.
There are many companies involved in the processing of natural gas with three distinct categories: upstream, midstream, and downstream. Upstream companies focus on exploration and production. Midstream companies take care of transportation and storage. Downstream companies handle the refining and marketing of the energy source.
The various stages of production translate to many opportunities for investments in the natural gas and energy field. We’ll look at natural gas and energy stocks that you should know about right now if you’re looking for where to invest your money.
Why is there so much attention on natural gas?
The main disadvantage of natural gas is that it must travel through pipelines, which can pose a range of logistical and environmental challenges, particularly across oceans. Companies are turning natural gas into a pressurized liquid (liquefied natural gas) to be transported with specialized ships. Billions of dollars are being invested in facilities to match this growing worldwide demand for this energy source.
The current geopolitical situation with the Russian invasion of Ukraine has impacted crude oil prices. With Russia cutting back supplies to the European countries that have sided with Ukraine, the demand and supply for crude oil has been severely disrupted. As a result of all these issues, natural gas is currently one of the most important commodities.
Liquefied natural gas has become a hot topic since Europe has imported a record amount of LNG in 2022. The rising prices of natural gas in Europe have impacted the prices of everyday items. Countries in Europe are looking to secure LNG cargoes before the winter begins to restore some balance to supply and demand.
Natural gas and energy stocks you should know about
While we’ve written about renewable energy stocks, it’s important to acknowledge that the world still uses natural gas. There’s an increased demand for natural gas—specifically LNG. We will focus on natural gas companies that work on finding, producing, delivering, and exporting the energy source. All stock prices are based on the closing of October 12, 2022.
- Kinder Morgan Inc. (KMI)
Kinder Morgan controls the country’s largest natural gas transmission network. With natural gas traveling through pipelines, the infrastructure in this sector is crucial. The company’s pipelines transport natural gas, crude oil, gas, and carbon dioxide. The terminals store renewable fuels, chemicals, and various other products. Many analysts predict that with U.S. LNG exports on the rise, Kinder Morgan will continue to reap the benefits due to its network of pipelines and storage facilities.
The Kinder Morgan stock is currently at $17.04 with a one-year target price of $20.49.
- Cheniere Energy (LNG)
This Houston-based company is the biggest national producer of LNG. Cheniere Energy was the first firm to be granted regulatory approval for exporting LNG, and the company has enjoyed the perks of being a first-mover in this industry. Long-term contracts and strong operations will help this company generate more revenue moving forward with the European energy crisis still ongoing. From an investment perspective, the company has been able to speed up its debt repayment and capital return initiatives. They also announced an increase of 20% to the dividend payments for investors. This full-service LNG provider is worth watching as the demand for natural gas grows worldwide.
The LNG stock is currently at $171.67 with a one-year target of $193.68.
- EQT Corporation (EQT)
This Pittsburgh-based natural gas producer is on track to make record profits this year as energy prices remain high. With the price of natural gas going up, EQT can capitalize on this with its upstream operations as a pure-play Appalachian explorer. EQT is already one of the largest natural gas producers in the U.S. The strategic positioning in the core of the southwest Appalachians, along with horizontal drilling, will benefit the company. With a wide inventory of drilling locations and many undeveloped sites, prospects look promising for the future of this stock.
The stock is currently at $43.53 with a one-year target of $63.26.
- Shell Plc (SHEL)
Shell is one of the world’s leading natural gas and LNG suppliers. It was announced on the morning of October 6 that Shell expected its earnings for the third quarter of 2022 to be lower due to decreased refining margins and lower profits from trading gas. This warning of lower profits may lead the stock to drop a bit, making it a decent natural gas stock to invest in.
The London-based company is focused on investing in new natural gas infrastructure and increasing supplies to LNG plants. It was also announced recently that Qatar was planning on bringing Shell on as a partner for the second phase of its LNG expansion. The company’s strong global position as a major LNG supplier should help increase future revenue.
The stock is currently at $50.32 with a one-year target of $69.31
- DCP Midstream, LP (DCP)
DCP Midstream is a U.S.-based company specializing in gathering, processing, compressing, storing, and transporting natural gas. We had to mention a midstream company here because you don’t want too much exposure to those that only explore for or produce natural gas. DCP Midstream also offers a decent dividend yield (4.65%) for those looking for a natural gas stock that also produces income.
The stock is currently at $37.72 with a one-year target of $44.17.
- Coterra Energy (CTRA)
The Houston-based Coterra Energy is a diversified energy company that was formed in 2021 as a result of the merger of Cabot Oil & Gas and Cimarex Energy. The company is reinvesting heavily into its business with a high rate of return, which has led to impressive growth in its earnings.
The stock is currently at $29.80 with a one-year target of $36.64.
- Range Resources Corporation (RRC)
Range Resources Corporation is a Ft. Worth-based natural gas exploration and production company. They have operations in the Appalachian Basin and the southwestern U.S., where they’re focused on being a leading independent oil and gas producer. RRC reported revenue of $1.2 billion for the second quarter of 2022. The company is presently focusing on improving costs and marketing strategies to increase its margins.
RRC is currently at $27.79 with a one-year target of $39.48.
What’s next for natural gas?
With the current geopolitical issues still ongoing, it’s worth paying attention to how natural gas prices are impacted. The CEO of QatarEnergy (Saad al-Kaabi, who’s also the state minister for energy) declared that his company would be the largest trader of LNG over the next decade, taking the top spot from Shell.
It’s expected that the global demand for LNG could grow for a long period as it could double to more than 700 million tons per annum by 2040. This means that companies involved in natural gas should increase revenue.
We included stocks in this list that deal with the production of natural gas and some that handle the infrastructure associated with the energy source. We will continue to monitor the prices of natural gas.
How should you be investing?
The demand for natural gas looks to be on track to continue growing for the next few years. However, there are many risks associated with investing in natural gas stocks because crude oil prices are constantly fluctuating, and it’s unknown how the global economy will react to the constant rate hikes.
If you want to invest in cleaner sources of energy with more diversification built into a single investment, you may want to look into Q.ai’s Clean Tech Kit. Q.ai takes the guesswork out of investing. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations.
It’s important to understand the risks involved with investing in the natural gas and energy sector, as ongoing global conflicts are still causing price fluctuations. There are also growing concerns of a possible global recession due to soaring inflation and rising fuel costs due to the Russian invasion of Ukraine. That said, we will continue to monitor how companies in the natural gas industry perform financially.