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Value investing guru Ron Muhlenkamp says that because of advances in drilling techniques, we’re about to see a “dramatic increase” in the use of natural gas in transportation — which bodes well for firms that deal in the clean-burning fuel.

“We’re about to see a dramatic increase in the use of natural gas in transportation,” Muhlenkamp writes for Forbes.

Recent improvements in drilling technology and techniques have significantly increased the amount of gas available at current prices, extending our reserves to nearly 100 years at current usage rates. And current prices for natural gas are roughly half those of gasoline or diesel for equivalent energy.

Muhlenkamp says gas is the cleanest burning fuel, “the only fuel that burns clean enough to have an open flame in your home without requiring a chimney.” And, he says, the infrastructure to support natural gas already exists in most U.S. homes and businesses. But until recently, availability and price have kept natural gas from becoming more popular.

He says:

The gas wells that were drilled in Western Pennsylvania in the past were a few hundred feet deep. The wells being drilled today are on the order of 6,000 feet deep. So, of course, they are much more expensive to drill and the deep gas is trapped in shale.

In the past decade, however, Muhlenkamp says new drilling techniques have allowed drillers to tap into much more natural gas. “As a result, the amount of gas produced per well more than offsets the increased cost per well,” he says.

The amount of gas the new techniques make available at current prices is several times what was available before, extending our reserve to nearly 100 years at current usage rates.

“Natural gas has always been clean and domestic. Now, it is also abundant and cheap,” says Muhlenkamp, who also offers a couple stock picks to play on this macro trend.

Given Muhlenkamp’s comments, I was curious which natural gas-related companies have the fundamentals and balance sheets to garner interest from my Guru Strategies, computer models each based on the approach of a different investing great. The first list below is of natural gas utilities that get strong interest from one or more of my models; the second is of gas operations companies that fit the bill.

Natural Gas Utilities with Strong Interest (Source: Validea.com)

Natural Gas Utilities with Strong Interest (Source: Validea.com)

Gas Operations Stocks with Strong Interest (Source: Validea.com)

Disclosure: I'm long SUG.

Source: Stocks for the Coming Natural Gas Boom