Back to top

Tap Clean Energy Demand With These 4 Natural Gas Producers

Read MoreHide Full Article

To combat global warming and check greenhouse gas emissions, regulatory bodies across the world are increasingly taking tough measures. Naturally, the focus has shifted to natural gas for clean energy generation.

Notably, the shale boom has turned the United States into a net exporter of natural gas. This has created opportunities for domestic natural gas producers as the commodity is likely to see a continued surge in global demand.

Global Natural Gas Demand to Keep Rising

According to the 2018 World Oil Outlook by OPEC, the growth rate of global natural gas demand through 2017 was roughly 3%, the highest since 2010.

Mounting pressure by regulatory bodies is resulting in the widespread construction of natural gas power plants in place of coal-fired units, driving global demand growth. China, Europe and the Middle East have contributed to almost 85% of the growth in global demand in 2017, per the outlook.

OPEC added that from 59.4 million barrel of oil equivalent per day (MMBoE/D) in 2015, the worldwide natural gas demand will likely soar to 91.3 MMBoE/D in 2040, representing a rise of almost 54% over a time span of 25 years. Importantly, among all the fuels, natural gas will be the second largest source for energy in 2040 — according to OPEC.

US Becomes Net Natural Gas Exporter

The United States had been a net importer of natural gas until 2016. Turning things around for the first time in 60 years, America’s imports were lower than exports in 2017 owing to the shale boom.

In other words, the United States exported 3.17 trillion cubic feet (Tcf) of natural gas through 2017, the country’s highest in record, per the U.S. Energy Information Administration (EIA).

New technologies like hydraulic fracturing (or fracking) and horizontal drilling have transformed the U.S. energy industry. The country has a huge surplus of natural gas production, which has encouraged the construction of pipelines and port facilities so that America is now a major exporter (or net exporter) of the commodity. 

America’s Natural Gas Producers to Gain

The natural gas produced in U.S. resources is much in demand in the international market owing to competitiveness and low cost.

Last year, America exported 78% of the commodity through pipeline, of which Mexico imported 63%, per EIA estimates. Canada also imported significant natural gas volumes. Moreover, shipments of liquefied natural gas (LNG) vessels across the world from the United States rose drastically in 2016 and 2017.

Through 2017, the United States shipped 103,410 million cubic feet of LNG to China, surging from just 17,221 million cubic feet a year ago. The massive increase reflects China’s initiatives to reduce air pollution. Although the escalating U.S.-Sino trade tensions might hurt America’s LNG export to China, the recent decision by China to levy only 10% tariff on U.S. LNG instead of the expected 25% implies the severe dependency on American LNG by Beijing. 

It is to be noted that OECD America — which includes Mexico, Canada and the United States of America apart from Chile, Guam, Puerto Rico, and United States Virgin Islands — alone contributed 27.1% to the global natural gas demand in 2015, per OPEC. With the projected 25.7%, 22.8% and 20.7% share of global natural gas demand in 2020, 2030 and 2040, respectively, OECD America will continue to be the leading contributor to worldwide natural gas demand, added OPEC.

OPEC also expects the share of global gas demand from developing countries like China to increase considerably over the years. The cartel expects China to account for 6.7%, 9% and 10.2% share of the global natural gas demand in 2020, 2030 and 2040, respectively, significantly higher than 5.4% in 2015.

Overall, with the growing importance of U.S. natural gas across the globe, America is well positioned to capitalize on the mounting natural gas demand for clean energy needs. In fact, as many as 28 nations imported American natural gas through 2017, per EIA.

Hence, it is time for investors to focus on U.S. natural gas producers who are directly or indirectly providing support to the growing exports by the United States.

Bet on 4 Natural Gas Stocks

Picking winning stocks is no mean feat. This is where our Stock Screener comes in handy. We have narrowed down our search to the following stocks based on a good Zacks Rank along with other favorable parameters.

Headquartered in Irving, TX, Exxon Mobil Corporation (XOM - Free Report) is the largest publicly traded energy firm in the world. The upstream operations of the integrated energy company are based in Canada, Europe, Africa, Asia and Australia apart from United States.

Of ExxonMobil’s worldwide natural gas production of 9,321million cubic feet per day (MMcf/D), America alone provided almost 28% of the company’s output through first-half 2018.   

The firm, with a Zacks Rank #2 (Buy), will likely see earnings growth of 28.1% and 24.3% in 2018 and 2019, respectively.  

Headquartered in Fort Worth, TX,Range Resources Corporation (RRC - Free Report) is among the leading producers of natural gas with focus in the Appalachian Basin. Of the company’s total production mix through the first half of 2018, natural gas accounted for more than 68%.

The stock will likely see earnings growth of 87.9% and 7.9% in 2018 and 2019, respectively. Currently, Range Resources carries a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Approach Resources Inc. (AREX - Free Report) , headquartered in Fort Worth, TX, exploits and develops gas and oil resources in the Permian basin. Almost 74% of the company’s production consisted of natural gas and NGLs through first-half 2018.

The #2 Ranked stock will likely witness earnings growth of 13.9% and 30.7% in 2018 and 2019, respectively. 

Chevron Corporation (CVX - Free Report) , headquartered in San Ramon, CA, is one of the largest integrated energy companies in the world. Through the first half of 2018, the company produced 986MMcf/D of natural gas in the United States.

The company, with a Zacks Rank of 2, is expected to see earnings growth of120.8% and 16.1% in 2018 and 2019, respectively.

5 Companies Verge on Apple-Like Run

Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.

Click to see them right now >>



More from Zacks Analyst Blog

You May Like