Top Natural Gas Stocks for Q2 2022

SWN, RRC, and VET are top for value, growth, and momentum, respectively

Natural gas has long been a staple resource used in heating, cooking, and electricity production. More recently, it has begun to figure more prominently in industrial applications and even as a fuel source for automobiles. The U.S. Department of Energy estimates that about 23 million vehicles worldwide are powered by natural gas.

While natural gas is a nonrenewable fossil fuel, it remains highly popular in the United States even as consumers shift to renewable fuel sources. Natural gas prices spiked in price after the Russian invasion of Ukraine because Russia is a major gas producer and has since been subject to major sanctions.

It is difficult to find pure play natural gas companies, but many energy companies have large natural gas businesses. Major players include Chesapeake Energy Corp., Antero Resources Corp., and Range Resources Corp.

The price of natural gas, as measured by a benchmark exchange-traded fund (ETF)—the First Trust Natural Gas ETF (FCG)—has provided a one-year trailing total return of 73.6%. This is well above the Russell 1000’s one-year trailing total return of 8.2%. These figures and all data below are as of March 8, 2022.

Here are the top three natural gas stocks with the best value, the fastest growth, and the most momentum. As mentioned, many of these companies are not pure play natural gas names, but they focus more than half of their production (or, in the case of midstream companies, throughput) on natural gas.

The reason why price to sales is used for our value stocks in this story is that there were not enough natural gas companies in our list with a positive trailing price-to-earnings ratio (P/E ratio) in our database to use that as a metric. So instead we used the 12-month trailing price-to-sales (P/S) ratio in our value section below. In the growth section, multiple companies have positive EPS growth because that metric looks at growth during the most recent quarter, and the natural gas sector turned around fairly recently after struggling for much of the previous year. Therefore, we see positive earnings numbers when looking at growth in the most recent quarter, but not when looking at the combined earnings of the previous four quarters combined, as our value metrics do. This underscores how changing the time period of your analysis can drastically alter your assessment of a sector.

Best Value Natural Gas Stocks

These are the natural gas stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.

Best Value Natural Gas Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/S Ratio
Southwestern Energy Co. (SWN) 5.60 6.2 0.7
DCP Midstream LP (DCP 34.23 7.1 0.7
Chesapeake Energy Corp. (CHK) 82.46 9.8 1.2

Source: YCharts

  • Southwestern Energy Co.: Southwestern Energy is an independent energy company. The company explores and produces natural gas, oil, and related products with a focus on Pennsylvania, West Virginia, and Ohio. The company’s Q4 2021 ended Dec. 31, 2021. It posted net income of $2.4 billion compared with net losses the prior-year quarter, as well as operating revenues rose more than four-fold year-over-year (YOY). Net income was impacted by a positive $2.0 billion non-cash change in unsettled mark to market derivatives.
  • DCP Midstream L.P.: DCP Midstream is a midstream energy company that transports, trades, markets, and stores natural gas liquids and related products. The company also gathers, compresses, treats, and processes natural gas.
  • Chesapeake Energy Corp.: Chesapeake Energy is an independent exploration and production company engaged in acquiring, exploring, and developing properties producing oil, natural gas, and related products. The company’s operations are primarily in Louisiana, Pennsylvania, Texas, and Wyoming. On March 9, Chesapeake Energy announced that it had completed the acquisition of Chief E&D Holdings LP and associated non-operated interests for $2.0 billion in cash. Chief E&D Holdings owns producing assets and an inventory of premium drilling locations.

Fastest-Growing Natural Gas Stocks

These are the top natural gas stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY EPS growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest-Growing Natural Gas Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Range Resources Corp. (RRC) 26.14 6.9 2,210 144.9
Coterra Energy Inc. (CTRA) 26.01 21.2 251.5 387.6
Antero Resources Corp. (AR) 26.05 8.2 1,160 91.5

Source: YCharts

  • Range Resources Corp.: Range Resources is an independent natural gas, natural gas liquids, and oil company. The company is engaged in the exploration and production of natural gas, crude oil, and related products, primarily in the Marcellus Shale in Pennsylvania. For Q4 2021, ended Dec. 31, net income soared 23-fold while revenue more than doubled YOY. The quarterly results are bolstered by a $310 million mark-to-market derivative gain due to decreases in commodity prices.
  • Coterra Energy Inc.: Coterra Energy Inc., formerly known as Cabot Oil & Gas Corp., is a diversified energy company that develops oil and gas properties. It operates in Texas, New Mexico, and other areas throughout the U.S.
  • Antero Resources Corp.: Antero Resources is an oil and natural gas company that explores, develops, and acquires natural gas, natural gas liquids, and oil properties. The company primarily operates in West Virginia and Ohio. Antero reported Q4 2021 earnings results on Feb. 16. Net income attributable to the company climbed by nearly 13-fold YOY on surging net revenue. These figures were impacted by expenses of $182 million related to drilling and completion capital expenditures and land investments.

Natural Gas Stocks with the Most Momentum

These are the natural gas stocks that had the highest total return over the last 12 months. Companies with total returns over 2,500% were excluded as outliers.

Natural Gas Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Vermilion Energy Inc. (VET) 23.52 3.8 229.4
Antero Resources Corp. (AR) 26.05 8.2 168.0
Range Resources Corp. (RRC) 26.14 6.9 156.8
Russell 1000 N/A N/A 8.2
First Trust Natural Gas ETF (FCG) N/A N/A 73.6

Source: YCharts

  • Vermilion Energy Inc.: Vermilion Energy is a Canada-based energy producer which explores, develops, acquires, and produces crude oil and natural gas properties. The company’s operations are primarily in North America, Europe, and Australia.
  • Antero Resources Corp.: See company description above.
  • Range Resources Corp.: See company description above.

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