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12 natural gas stocks to consider investing in

Natural gas is a vital energy source for heating and cooking, as well as powering our homes. Despite being a fossil fuel, it’s considered to be a ‘bridge fuel’ between renewables and carbon-intensive energy resources, such as oil and coal. Learn about natural gas investing and different ways to play natural gas stocks.

What are the different ways of playing the natural gas theme?

  1. Exchange-traded funds (ETFs) is one way to gain diversified exposure to all three types of companies and to play an industry that is widely known for its volatility.
  2. The most obvious way to gain exposure to the natural gas market is through buying shares in individual stocks. Make sure to learn the basics of how to invest in stocks and the different types of investing strategies before making any investments. The industry can be split into three main parts:
  • Upstream. These companies are focused on drilling and exploring for gas and then extracting it.

  • Midstream. These companies are involved in the handling and transporting of gas.

  • Downstream. These companies are those closest to consumers. They’re in the business of gasoline refining, distributing and selling.

Why invest in natural gas?

Natural gas was one of the worst-performing industries in 2020, but the energy sector — which covers oil and gas — made a comeback in 2021 to be one of the best performing parts of the market.

Since then, a worldwide squeeze on energy resources has caused a supply-demand imbalance and has seen wholesale gas prices balloon. This has been a tailwind for natural gas companies but not consumers, who are facing higher energy bills and have seen some UK energy providers collapse. Gas demand across Europe is predicted to fall in 2022 as the energy industry switches its attention to the more carbon-intensive coal.

Unlike the majority of stocks, which can be driven up and down by the rate of inflation, commodities are themselves a key driver of inflation. To this end, natural gas companies are favoured by some investors as a hedge against economic downturns.

12 natural gas companies to invest in

Here are 12 major natural gas companies to potentially add to your watchlist. They include companies that are using natural gas to accelerate the transition to green energy. Although natural gas is less carbon-intensive than burning coal, it will never be completely carbon neutral. Always make sure to consider whether now is a good time to invest​ before buying stocks.

Chevron [CVX]

The rising prices of natural gas as well as crude oil saw Chevron exit 2021 flush with cash for future exploration and production projects. During its Energy Transition Spotlight event in September 2021, the industry supermajor tripled its planned capital investment in accelerating lower carbon ambitions through 2028 to $10bn. This includes growing renewable gas and hydrogen production.

Golar LNG [GLNG]

Listed on the Nasdaq, the Bermuda-based company has more than 50 years of experience in the midstream sector. It operates a fleet of floating units used for storing, liquifying and transporting gas. Its vessels are chartered by the likes of BP.

New Fortress Energy [NFE]

New York-based New Fortress Energy operates a number of liquefied natural gas, known as LNG, infrastructure and facilities, including several in Central and South America, with plans to build a gas terminal for gas imports in Shannon, Ireland. It acquired Hygo Energy Transition and Golar LNG Partners LP from Golar LNG in April 2021. The move is likely to strengthen New Fortress Energy as a growing LNG transportation player.

EQT Corporation [EQT]

The Pittsburgh, Pennsylvania-headquartered company is the largest gas driller in the US. EQT’s production is focused on the Appalachian Basin, and it has acquired Chevron’s upstream and midstream assets in the region for $735m. The company pledged in its 2020 ESG report that it will be net carbon zero by 2025 or earlier. In July 2021, it announced a $75m fund to investigate hydrogen and clean energy technologies that will help it hit its target. Although it didn’t return a dividend in 2021, the stock is tipped for growth by the investing community, as reported by Seeking Alpha.

Equitrans Midstream Corporation [ETRN]

EQT spun off its midstream pipeline business in 2018. Equitrans Midstream’s focus is transporting oil and gas from wells to shipping facilities. The company rewarded shareholders with a healthy dividend of more than 7% in 2021, thanks to its stable cash flow, which is largely the result of long-term agreements with EQT.

Kinder Morgan [KMI]

Trading on the New York Stock Exchange, the company is one of North America’s largest energy infrastructure providers. As of the end of 2021, the midstream company pipelines stretch 83,000 miles, transporting natural gas, gasoline, crude oil and carbon dioxide.

Shell [RDSA]

The Anglo-Dutch energy firm abandoned its secondary listing in the Netherlands in early 2022 in a move that will see it simplify its structure — it hopes to boost payouts to shareholders and create a larger pool of shares for potential buybacks. The company also has moved its headquarters to London as part of its strategic move. It supplies gas, as well as electricity, to hundreds of thousands of UK households.

Shell Midstream Partners [SHLX]

Shell’s Houston-headquartered midstream business owns, operates, develops and acquires pipeline and other logistics assets. The company has a history of offering investors a more attractive dividend yield (almost 16%) than its parent company (where Royal Dutch Shell offers a dividend of around 6%).

Saudi Aramco [2222]

State-owned Saudi Aramco is the only supplier of natural gas to Saudi Arabia, as well as one of the top 10 global suppliers. While the majority of its profit is driven by its upstream business, the company is expanding its downstream business, in particular its hydrocarbon — natural gas is a mixture of hydrocarbons — value chain. Though its annual dividend is one of the world’s highest, the company has been under pressure to reduce its payouts to shareholders (including the Saudi Arabian government) and instead redirect the money to boosting the local economy.

UK Oil & Gas Investments [UKOG]

The UK exploration and production company is focused on oil and gas assets in the Weald Basin and the Isle of Wight in southern England. Its shares trade on the London Stock Exchange's Alternative Investment Market.

ITM Power [ITM]

ITM Power is at the forefront of the green hydrogen revolution. Although not a pure-play on natural gas, it’s involved in the HyDeploy project, which is blending green hydrogen into the regular natural gas supply — the first trial of its kind. Mixing the two could improve the cost of decarbonising the UK and lower the cost of heating homes.

Ceres Power [CRW]

As more countries transition to green energy, companies like Ceres Power could play a pivotal role. The UK company uses pioneering technology to generate clean power from conventional fuel sources like natural gas, as well as sustainable fuels.

FAQs

What are some natural gas ETFs?

Some of the main ones to consider are United States Natural Gas Fund LP [UNG], ProShares Ultra Bloomberg Natural Gas [BOIL] and SPDR S&P Oil & Gas Exploration & Production ETF [XOP]. All funds track an index so are good options for a passive investing strategy.

Who is the largest gas producer?

As of 2022, the US is the biggest producer of gas by country, followed by Russia and Iran. In 2019, the biggest producer by revenue was the state-owned China National Petroleum Corporation.


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