Natural gas has been making plenty of headlines, both good and bad. This week natural gas hit a 10-year low, inching below the $2.00 barrier. On the other side of the coin, this week CNBC profiled Rick Santelli converting his truck from traditional gas to a natural gas powered engine. Combine that with recent news that Apache Corp (APA), Chesapeake Energy (CHK), and Encana Corp (ECA) are either in the process or have already converted some of their drilling rigs to run on natural gas instead of the costlier diesel fuel. Adding to the growing demand, Enterprise Products Partners (EPD), Anadarko Petroleum Corporation (APC) and DCP Midstream (DCP) agreed to design and construct a new natural gas liquids pipeline that will originate in Colorado, and extend approximately 435 miles to Texas.
Natural gas's popularity and future use has many contrarian, momentum, and dividend oriented investors alike looking for ways to generate either income or growth from all the buzz. Below, I have created a table of popular companies involved in nearly every aspect of the natural gas space. You'll find large-, mid- and small-cap companies; drillers, pipelines, and storage companies; both regulated and unregulated utilities; and everything from juicy yields and high betas to inexpensive PE ratios and low market correlations as evidenced by SPDR S&P 500 Trust (SPY). Not to mention approximate dividend ex-dates and year-to-date returns to boot.
Devon Energy Corp
PAA Natural Gas Stor
DCP Midstream Par
As you can see, there is a broad array of natural gas related companies, some of which deal almost exclusively with it while others derive only a percentage of revenue from it. Most notable are the unregulated and regulated utilities differentiated at the bottom.
Despite all the hype and potential surrounding natural gas, I still believe it has a long road of infrastructure ahead of it. Therefore, as sentiment and news headlines like those we are seeing continue to build, savvy investors need to consider the role that many of these companies can play in their portfolios and as a major source of energy both here domestically, as well as globally in the future… but they need to proceed with caution at this time.
Additional disclosure: The above article has been written utilizing data from publicly available sources, which are believed to be reliable, and is provided for informational and educational purposes only. Investors should consider their personal situation and become intimately familiar with any investment, including its prospectus, before investing. Past performance and current yields are no guarantee of future results.