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Natural Gas Historical Prices and How to Invest in Producers

By Edited May 10, 2016 0 0

Do you know what the historical prices of Natural Gas are and how you can invest in a Natural Gas producers through stocks and ETFs? I believe that Natural gas is the energy of the future and also feel that prices for the gas are far too low currently. I like this energy because it is clean, inexpensive and I feel it has big investing potential. In the United States, it is becoming more and more common for people to get their homes powered by natural gas, and I believe one day that most cars will also be running on this fuel as oil supplies continue to dwindle. I feel that natural gas is also a cleaner, better alternative to coal, so it's likely that governments will continue to support this gas in the future.

If you Believe in Peak Oil, Believe in Natural Gas 

The world is running out of oil – this is a fact. Peak oil is a "theory" that is finally gaining some steam. It says that we’ve basically reached our maximum point of production with oil.

So production levels, according to the theory, will continue to dip. You must realize that this energy needs to be replaced – this is where I think natural gas fits into the picture, along with wind and solar energy. 

Natural Gas Prices Historical Chart

Prices are currently about $3.50 (mmBTU or million per thermal unit), the lowest they have been in years. This chart will show you that prices peaked at around $15 a barrel in 2006 and hit almost $13 in 2009.

Demand is driven by economic growth, so if the economy recovers you can expect natural gas prices to rise. It’s also based on what the price for thermal coal is, which is also based on economic growth.

 If prices get back to those levels, the stocks that produce this gas will go much, much higher.

Natural Gas Prices
Credit: Wikipedia

So now that you know the potential for profits... how can you invest?

Natural Gas Stocks to Buy

#1 *GAS*

Company Overview: “AGL Resources Inc. (AGL Resources) or GAS is an energy services holding company whose principal business is the distribution of natural gas.

 AGL Resources operates its natural gas in seven states includes Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee and Maryland. As of December 31, 2011, the Company's seven utilities served approximately 4.5 million customers. It is involved in several related and complementary businesses.

 Its retail operations segment serves more than one million retail customers and markets natural gas and related home services to customers in Georgia, Illinois, Ohio, Florida and New York.

 The Company operates in five operating segments: distribution operations, retail operations, wholesale services, midstream operations, cargo shipping and one non-operating segment-other. On December 9, 2011, the Company completed its merger with Nicor Inc.”

This is a 5 billion dollar company, with a current share price of $41.6 per share.

I like GAS because of their nice dividend – currently .46 percent quarterly or 4.42 percent annual yield. The company has a trailing P/E ratio of about 22 and a forward 2013 P/E of 13.6, making them somewhat cheap. I am slightly bullish on this company currently. 

 

#2 *Chesapeake Energy* (CHK)

This is the next natural gas company I’d like to mention. They also are engaged in oil production and exploration as well.

Company overview: “Chesapeake is engaged in the exploration, development and acquisition of properties for the production of natural gas and oil from underground reservoirs. It also provides substantial marketing, midstream, drilling and other oilfield services.

Its operations are located onshore and in the continental United States. As of December 31, 2011, the Company owned interests in approximately 45,700 producing natural gas and oil wells that produced approximately 3.5 billion cubic feet of natural gas equivalent per day, net to its interest.”

One reason I like Chesapeake is the history of insiders buying shares. On Nov. 26, one director bought 40,000 shares worth over $680,000, and in the last 5 years insiders have on average purchased 970,471 shares each year, according to ETrade.com.

This is a 13.4 billion dollar company, with a share price of $20.21 per share. They pay a .0875 quarterly dividend, good for a 1.74 percent annual yield.

 Chesapeake’s 2013 EPS forecast of 1.22 gives them a forward P/E ratio of 16.56. I am bullish on this company and may buy shares within the next few months. 

#3 *Apache Corporation*

The next company I’d like to mention is Apache Corporation (APA).

Company overview: Apache Corporation (Apache) is an independent energy company, which explores for, develops, and produces natural gas, crude oil, and natural gas liquids.

As of December 31, 2011, Apache had exploration and production interests in six countries: the United States, Canada, Egypt, Australia, offshore the United Kingdom in the North Sea, and Argentina. During the year ended December 31, 2011, it participated in drilling 1,087 gross wells, with 1,005 completed as producers.

As of December 31, 2011, in addition to its completed wells, several wells had not reached completion: 39 in the United States (28.44 net); 50 in Canada (42.69 net); 23 in Egypt (21.75 net); six in the North Sea (4.91 net); one in Australia (0.33 net), and three in Argentina (3.00 net). In January 2012, it acquired Exxon Mobil Corporation's Mobil North Sea Limited assets, including the Beryl field and related properties.”

Apache is a larger company than the last two mentioned, with a market cap of 33 billion. They pay a .17 per share quarterly dividend, for a .81 percent annual dividend yield.

Apache has a current yearly EPS of 6.251, giving them a trailing P/E ratio of 13.66. I am bullish on this company but not planning on buying any shares any time soon.

Natural Gas ETF to Buy Purchasing a Natural Gas Exchange-Traded Fund (ETF) 

 There are a couple out there but first I will use the United States Natural Gas Fund, one that I like personally (Quote: UNG) as an example.

 This is designed to track the movements of the price of natural gas, so if you just want exposure to a rising price and do not want to invest in a producer, this is for you.

Super Leveraged Natural Gas ETF?

If you're really bullish on natural gas like I am, you may want to take it a step further and check out the Direxion Daily Natural Gas Related Bull 3x ETF (Quote: GASL).

This exchange traded fund seeks daily investment results, before fees and expenses, of 300% of the performance of the ISE Revere Natural Gas Index.

So you are getting the upside in the price of natural gas, mutliplied times three. For more info. Please read more here in this article I wrote on Natural Gas Investing. It goes more in depth on natural gas and how you can even convert your home to it. 

Full Discloure: I don't own any of these stocks or ETFs mentioned. This article is for informational purposes only, and should not be looked at as investing advice. 

If you are interested in investing in natural gas producers, I hope this article helped you out!

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