Natural Gas Picks and Pans

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 |  Includes: APC, BBG, CHK, CRK, CRZO, EOG, HK, KWK, PINN, SJT, SWN, UPLMQ, XTO
by: Steve Zachritz

I was asked to provide a list of gassy stocks that I think are headed higher. Pretty straightforward question. However, understand that I'm liquidating positions right now due to a personal trip, so I won't be putting new money to work personally at this time.

That said, let me also note that yesterday's $0.31 move in natural gas which was ostensibly the result of the Gonu spinner in the Persian Gulf is no -- I repeat -- no reason for a rally in natural gas. Most of our LNG arrives from Trinidad, followed by Egyptian gas which started showing up en mass in late 2005, thirdly from Algeria, and then dribs and drabs from a half dozen other scenic locales. Egypt and Algeria get their gas here via the Mediterranean, not the Gulf of Oman or Persian Gulf. I've included a small map of the region for those not familiar with the territory.

North Africa and Middle East 05 06 2007

Anyway, here's the list of gassy stocks I like:

  • Anadarko Petroleum Corp. (NYSE:APC) -- probably has a little room to run as analysts warm up to the reinvigorated "asset sale/debt reduction via non producing assets" story.
  • Chesapeake Energy Corp. (NYSE:CHK) -- likely to trade in lockstep with gas on a big move, premier management with massive gas production and reserve potential and shining MLP potential to boot.
  • Comstock Resources Inc. (NYSE:CRK) -- this one has some room left to run right now.
  • Carrizo Oil & Gas Inc. (NASDAQ:CRZO) -- 89% gas player (based on 1Q production). It's been on fire lately, without me. I'd still chase it for a quick trade.
  • EOG Resources Inc. (NYSE:EOG) -- trades with oil, probably because it is one of those providers of Trinidadan gas, long reserves life, huge low risk prospect inventory,
  • Quicksilver Resources Inc. (NYSE:KWK) -- as gassy as they come, but it's run hard lately.
  • Southwestern Energy Company (NYSE:SWN) -- ditto.
  • XTO Energy Inc. (XTO) -- just MLP'd itself. Probably runs a little more now.
  • Petrohawk Energy Corp. (NYSE:HK) -- very gassy little E&P in all the sexy onshore plays!

There are many more that I like, but that should give you a few for the moment.

Gassy stocks I wouldn't bet on right now:

Anyone in the Rockies where gas prices at some points have fallen below $2! Bill Barrett Corp. (NYSE:BBG), San Juan Basin Royalty Trust (NYSE:SJT), Pinnacle Gas Resources (PINN) and Ultra Petroleum Corp. (UPL) to name a few.