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Revitalized Interest in Natural Gas: Featured Companies

|Includes: APA, APC, CHK, CVX, DVN, GMX Resources Inc. (GMXRQ), SD, SWN, XOM

 In the last week or two, we have put together a couple articles covering the ongoing discussion concerning natural gas. With all of this renewed interest and with the energy industry refocusing toward natural gas, we figured it would be helpful to look  at some of the natural gas companies gaining momentum and attention.

GMX Resources Inc. (GMXR): GMX Resources is an oil and natural gas production company based out of East Texas. With most of its drilling occurring in the Haynesville Shale, GMX’s 2008 reserves were 465 billion cubic feet, made up of 94% natural gas in both drilling and production. GMX recently added oil exploration in the Bakken formation in North Dakota and the Niobrara formation in Wyoming to diversify its holdings. (Which we think it got for a bargain.) Natural gas prices hit GMX hard at the end of 2010, causing a reported net loss of $149 million. Stock fell as low as $4.20 on February 15 of this year, but share prices have recovered a bit, hitting $6.35 on Monday. Weaker performance than expected in late March saw many analysts downgrade the stock, but its price has surged in the past week.

Range Resources Corporation (RRC): Range Resources Corporation explores and produces natural gas in the U.S. RRC owns 2 million net acres across the U.S., including positions in the Permian Basin, Mid-Continent region, gas fields in southwestern Virginia, and 800,000 fairway acres in the Marcellus, one of the premier shale gas plays in North America. Like GMX, the biggest issue for Range in the future will be depressed gas prices. However, Range’s position in the Marcellus, which has superior conditions for drilling and close proximity to the Northeast, gives it an edge over many of its competitors. If there is movement in the U.S. toward natural gas, don’t be surprised to see Range rocket skyward. Range currently trades at $58.53. We estimate its fair value at $72.

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