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Natural Gas Gains 44% in Third Quarter: Stocks in Focus

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U.S. natural gas prices posted a gain of 44% for the past three months — the largest quarterly increase since the April-June period of 2016.

Natural Gas Caps Best Quarter in 4 Years

The commodity settled at 2.527 per MMBtu on the New York Mercantile Exchange on Sep 30. Following past quarter’s stunning rally, the fuel is up more than 70% since late June when natural gas fell to its lowest level since 1995 due to weak consumption from warmer-than-expected winter 2019-2020 and a coronavirus-induced drop off in usage.

The rebound traces its origins to three factors: a ramp up in air conditioning use on the back of a scorching summer, lower associated gas output tied to the brake in shale oil production growth, and steady improvement in shipments of LNG for export.

The Future Looks Bright, Too

The commodity is currently going through the so-called “shoulder season” (or the months of September and October following the summer cooling season and ahead of the winter heating demand) of typically low consumption. This usually leads to higher weekly injections at this time of the year.

However, lower year-over-year domestic production and higher LNG prices in Asia and Europe — America’s chief export markets — have contributed to natural gas’ recent strength with the commodity managing to hover around the psychological $2.50 level in the process.

In particular, the novel coronavirus outbreak remains a big catalyst for balancing the natural gas market. Analysts believe that the brake in skyrocketing shale oil production growth — tied to the crude price collapse — will also limit associated gas output, thereby cutting the massive supply glut. As a proof of the supply drop, natural gas production continues to be curtailed, with domestic volumes receding more than 8% year over year. So, we have a tighter market going into 2021.

Meanwhile, the recovering international LNG prices mean that overseas shipments have become profitable again. This should not only help relieve the domestic exporters but also act as a bullish demand factor for U.S. natural gas prices.

Finally, the impending arrival of the winter-heating season is likely to drive up consumption for natural gas and take prices up with it.

6 Natural Gas Stocks That Warrant a Look

The upward trend should aid gas-weighted producers. We present six companies that investors should watch out for.

SilverBow Resources, Inc. (SBOW - Free Report) : A pure-play upstream operator in the Eagle Ford Shale in South Texas, SilverBow Resources is a natural gas-focused E&P company. Over 60 days, the Zacks Rank #1 (Strong Buy) company has seen the Zacks Consensus Estimate for 2020 increase 16.9%. SilverBow controls 165,000 net acres in the Eagle Ford and 79% of its total output comprises natural gas.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gulfport Energy Corporation (GPOR - Free Report) : The company's asset base — primarily focused on natural gas — is concentrated on the Utica Shale of Ohio and the SCOOP play in Oklahoma. Gulfport has a combined inventory in excess of 3,000 gross drilling locations in its two primary plays. Of Gulfport’s total output, nearly 90% comprises natural gas. Over 60 days, Zacks Rank #2 (Buy) has seen the Zacks Consensus Estimate for 2020 increase 119.3%.

Range Resources Corporation (RRC - Free Report) : The company, carrying a Zacks Rank #3 (Hold), has a strong footing in the prolific Appalachian Basin. In the gas-rich resource, the upstream firm has huge inventories of low-risk drilling sites that are likely to provide production for several decades. About 70% of the company’s total output is natural gas. Over 60 days, Range Resources has seen the Zacks Consensus Estimate for 2020 increase 89.5%.

Comstock Resources, Inc. (CRK - Free Report) : Comstock is a leading operator in the Haynesville shale — a premier natural gas basin — with 307,000 net acres. About 98% of the Zacks Rank #3 company’s total output is natural gas. Over 60 days, Comstock has seen the Zacks Consensus Estimate for 2020 increase 25.9%.

CNX Resources Corporation (CNX - Free Report) : CNX Resources is a leading operator in the Appalachian basin — the most- prolific domestic gas basin — with more than 1.1 million net acres. About 96% of the company’s total output is natural gas. The 2020 Zacks Consensus Estimate for this Zacks Rank #3 company indicates 134.6% earnings per share growth over 2019.

Cabot Oil & Gas Corporation (COG - Free Report) : Cabot is an independent gas exploration company with producing properties mainly in the continental United States. The company — with a Zacks Rank of 3 — owns 174,000 net acres in the dry gas window of the Marcellus play. Cabot beat the Zacks Consensus Estimate in three of the last four quarters and reported in line in the other, delivering an earnings surprise of 20.44%, on average. All of Cabot’s production is natural gas.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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