Guide to Investing in Natural Gas 2022 Investment Guide

The natural gas market becomes exuberant and bearish over a short period of time. However, if you are interested in natural gas stocks, it’s easiest to make stock investments. You can choose different natural gas companies to invest in from within the sector if you are trying to achieve some portfolio diversification. Natural gas prices have been in a bull market in 2021, and that will not necessarily end soon. In fact, we could see even stronger price gains for the commodity in the coming months.

  • In addition to expense ratio and issuer information, this table displays platforms that offer commission-free trading for certain ETFs.
  • If Peyto generates FFO per share of CAD$2.50 this year, which would equate to US$1.97, then investors could buy shares at a 3.9x FFO multiple right now, translating into an FFO yield of 26%.
  • 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.
  • It is worth pointing out that the oil and gas sector has experienced a significant rise over the past years and promises to follow this upward trajectory in the future.

Its terminals store renewable fuels, chemicals, petroleum and other products. Hess Corp., Civitas Resources Inc., and Permian Resources Inc. are among the top-performing natural gas stocks over the past year, all up by 30% despite falling natural gas prices. The benchmark First Trust Natural Gas ETF (FCG) declined by 7% in the last year, while the Russell 1000 Index fell 8%. Natural gas is abundant, affordable, and has environmental advantages over other fossil fuels. Plus, advances in drilling technologies have steadily lowered extraction costs and increased production. As a result, natural gas is a critical source of energy for many homes and businesses and has grown over the past decade to account for nearly 40% of electricity production in the United States.

Kinross Gold Corp. stock rises Monday, outperforms market

In addition to seasonal trends, natural gas prices can also experience volatility through changes in available supply, which can be impacted by exports, storage capacity, or the cost of production. There is a multitude of factors that affect natural gas prices, and a prudent natural gas investment requires a good model and careful risk management. We believe the best way for the average investor to take advantage of natural gas’ future growth potential is by investing in natural gas stocks and/or mutual funds. Other approaches, such as natural gas futures, options on futures, and contract for difference (CFD) derivative instruments can be quite risky and require a high degree of sophistication. Natural gas investing is a bet on the prospects of the oil and gas energy sector.

  • Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund.
  • Natural gas is a raw material in between fossil fuels ”no green” and modern energetics of developed economies based on uranium or hydrogen.
  • The values indicate what $10,000 would have grown to over the time period indicated.
  • Those who decide to invest in natural gas have plenty of ways to gain exposure to the fuel.
  • Especially trading physical natural gas is complicated and not similar to precious metals like gold or silver.

For example, oil and gas stocks, exchange-traded funds, future contracts, mineral rights, and private placements. Regardless of the diversification of energy sources across the globe, studies have shown that the demand for fossil fuels has not decreased. Indeed, the global oil demand has been predicted to increase by 38 million barrels per day to 115 million barrels per day by 2025. This alone should dispel any thoughts of decline in the oil and gas industry. Russia is one of the world’s largest producers of natural gas, accounting for around 17% of total global production in 2020. It was also the biggest exporter of natural gas in the world as of 2021.

Energy impacts every element of our lives, and our trusted fact-based research informs the decisions that affect all of us. Get the latest as our experts share their insights on global energy policy. In addition to the financial impact of pipeline construction, employment opportunities will increase significantly.

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ETFs, or exchange-traded funds, are pooled investment funds in a diversified portfolio. Many ETFs will track a particular index, sector, or commodity (like natural gas). Purchasing a share of a natural gas company allows you to invest in the natural gas market on a company-by-company basis. There are giant natural gas producers to invest in such as BP, ExxonMobil, and Shell Global. The performance of these companies is often correlated with the price of natural gas.

This company also has a strong financial profile and a vertically-integrated, large-scale operating base. Thanks to this, Phillips 66 is one of the most cost-effective refineries in the sector. From their financial reports, investors can get stock updates and information. Philips 66 is a refining company operating in Europe and the United States.

Natural Gas Commodity Power Rankings

After this, you pay on margin to the broker, who then executes the trade on the stock exchange. Through problems with the China coal supply and lack of other energy sources, China has begun to hedge with supplies of liquid LNG, which has caused the demand in the natural gas market to rise sharply recently. Natural gas is used in power and heat generation, heavy and light industry, and transportation.

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. While we’ve written about renewable energy stocks, it’s important to acknowledge that the world still uses natural gas. We will focus on natural gas companies that work on finding, producing, delivering, and exporting the energy source.

Invest in natural gas ETFs

Where you can really see the risk of natural gas stocks, on average, is if you look at their debt-to-equity ratios. Because of the capital-intensive nature of the industry, the debt ratios are high for all the industries in the sector. It provides about 18% of the world’s energy needs and, by 2040, it’s estimated that it will provide 25% of energy requirements. The bottom line is that the natural gas industry will grow about 40% by 2040. It is a clean-burning fuel emitting only 50% of the carbon dioxide that is produced by coal. At around 7x this year’s DCF, shares are pretty inexpensive, and even though they have less upside potential than FLNG in a natural gas bull market, shares do seem like a solid value pick today.

Shell CEO’s New Strategy Sees a Long-Term Future for Natural Gas – Bloomberg

Shell CEO’s New Strategy Sees a Long-Term Future for Natural Gas.

Posted: Mon, 12 Jun 2023 09:45:35 GMT [source]

EQT expects to use some of its free cash flow to repay debt and strengthen its balance sheet. The debt reduction could leave the company with ample cash for other shareholder-friendly activities such as dividends, share repurchases, and accretive acquisitions. The company also reinstated its dividend in late 2021, which it intends to increase over time. EQT aims to continue to be a consolidator in the natural gas sector. It purchased Alta Resource Development for $2.9 billion in 2021 and Chevron’s (CVX -0.96%) Appalachian Basin assets for $735 million in 2020.

There are several reasons for the price explosion of natural gas in Europe, including weak power generation levels from wind parks and growing demand as natural gas power is replacing the more environment-damaging coal power. 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. Liquefied natural gas has become a hot topic since Europe has imported a record amount of LNG in 2022.

IShares Oil&Gas Exploration and Production (IOGP.UK) this fund gives direct exposure to a broad range of global companies involved in the exploration and production of gas and oil. Fund IOGP.UK has a lot of gas companies in holdings like EOG Resources, Canadian Natural Resources, Conocophillips, Devon Energy Corp or Hess Corp. WisdomTree Natural Gas (NGAS.UK) is an investment fund that enables investors to gain exposure to their natural gas investment by tracking the price of the Bloomberg sub-index Natural Gas Subindex (”Index”). One of the world’s largest companies by revenue, ExxonMobil has ranged from the first to the sixth largest publicly traded company by market capitalisation from 1996 to 2017. The company ranked third in the world on the Forbes Global 2000 list in 2016. ExxonMobil was also the tenth most profitable company in the Fortune 500 in 2017.

An account approved to trade futures is required in order to trade natural gas futures. The Henry Hub Natural Gas futures contract (NG) on the New York Mercantile Exchange (NYMEX) is widely used as a national benchmark price, at 10,000 million British thermal units (mmBtu). The price is based on delivery at the Henry Hub in Louisiana, the nexus of 16 interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits.