Natural Gas: Why Waste An Opportunity?

| About: Aqua America, (WTR)

The price of natural gas is hitting all-time lows recently after the use of fracking has allowed energy companies with a stake in natural gas such as Apache (NYSE:APA), EOG Resources (NYSE:EOG), and Exxon Mobil (NYSE:XOM) to acquire greater volumes of natural gas with less cost. Fracking is a method that releases gases from shale rocks through hydraulic fracturing. The amount of natural gas reserves in the U.S. and worldwide are seemingly limitless now thanks to these somewhat recent technological advances.

The chart below shows the increasing amounts of natural gas reserves in the U.S. over a 30 year span, it can be found here.

With the price of energy declining rapidly, partially due to this fall natural gas prices and due to a milder winter where should investors look? Fracking involves pressuring thousands and thousands of gallons of water in order to extract the natural gas. After the water has been used, it requires proper disposal due to the high amounts of chemicals and contaminants it is exposed to during the process. That's where wastewater services come into play and could become a beneficial utility play to any portfolio. Companies such as Aqua America Inc. (NYSE:WTR), California Water Service Group (NYSE:CWT), and American Waterworks Company Inc. (NYSE:AWK) provide proper wastewater disposal for multiple companies across the nation.

Currently, Aqua America Inc. operates in 13 states in the U.S. They offer a solid 3% yield at their current price of $22.27. With only 10.5% of the companies total revenue coming from their wastewater services, even if the federal government tightened it's regulations on fracking and wastewater disposal the company would be relatively safe.

Operating Revenues
Residential water $448,931 $431,178 $392,054 $374,572 $360,542
Commercial water $111,210 $105,294 $94,149 $90,062 $85,553
Industrial water $22,406 $21,550 $19,437 $19,873 $19,548
Other water $72,497 $70,428 $70,374 $58,504 $58,274
Wastewater $75,352 $73,939 $70,226 $58,873 $52,891
Other utility $11,874 $12,118 $12,665 $13,278 $12,935
  $742,170 $714,507 $658,905 $615,162 $589,743

The companies shareholder report can be found here.

Aqua America Inc. has a P/E ratio of 20.40, however it also has the highest revenue growth out of all the main wastewater utility stocks. Aqua America Inc. is a great option for those looking for a low risk utility play while the energy sector remains uncertain. It probably won't be a homerun play, but in an uncertain and volatile market with an upcoming election this fall, Aqua America Inc. could help provide some stability to a portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.