I'm glad to see this thread. I feel very bullish about natural gas stocks. There isn't much drilling taking place within the current price environment.
My optimism is based upon several factors. First, unlike crude oil, nearly all natural gas consumed in North America is produced here as well. It is very costly to liquify natural gas and transport from overseas. Thus, what is going on in the middle east, OPEC, etc. has less impact.
Second, there is much less storage for nat gas than for crude. There is an inventory overhang right now that is depressing prices, but this inventory could be depleted fairly quickly if weather turned unseasonably cold or hot.
Third, nat gas wells deplete much faster. Without much drilling going on, due to low prices, it will take time for drillers to gear up quickly.
With all that said, here are some of my favorite energy stocks, along with my reasons for liking them.
PETD - 100% natural gas production. Company uses limited partnerships to cover drilling expenses, and retains 20-25% in each well. Drills low risk wells in Appalacia and Michigan. This company is selling for less than $3/share, yet continues to be profitable and drill more wells each year. Also, the company has $1.46/share in cash to make acquisitions in the current price environment.
EVER - Also 100% natural gas production. Company drills for coal bed methane in CO. Has a good track record and the lowest lifting cost in the industry. Company will continue to earn a profit, even if nat gas prices drop lower. Very high earnings growth, and more prospects for coal bed methane in CO and the UK.
SFY - Company produces mostly natural gas with some oil. Profitable, although took a special charge due to low commodities pricing last year. Cash flow is very high, leverage moderage, excellent record for growing reserves. Recently drilled an extremely successful well in a new field. Just this well alone promises to add 10% to production. Stock was selling in the $25 range before the latest crunch; it now sells for under $6. |
