It's Time to Buy Natural Gas

It seems like everyone's been invited to the party lately except for poor old natural gas. Gold, silver, and copper are just months removed from all-time highs, oil is trading very near $100 per barrel again, and even the food-based commodities like coffee, corn, and wheat have had monstrous runs over the past few years. As for natural gas, it's down more than 50% in the past two years.

What's behind the move? Abnormally warm weather across much of the U.S. this winter has crushed demand for the heating agent and driven prices to decade lows. With prices having fallen almost exponentially lower since 2012 began, I think the following question needs to be posed: "Is it time to buy natural gas?" I think the answer is yes, and I can give you a few reasons why and a few good ways to play the frustrating commodity.

Reasons to buy
First, the ratio between the price of oil and the price of natural gas has never been higher. With oil at $98.39 per barrel and natural gas at $2.33 per million BTU, the gap between the two is now at a staggering 41. Historically, the price ratio has vacillated between five and 15 with a widening gap only seen in recent years. The discovery of vast natural gas reserves in the U.S. has contributed to its price decline, but it in no way makes up for the fact that natural gas is still a finite resource. I don't see this pricing inefficiency lasting.

Second, extremely low natural gas prices aren't conducive to supporting the drilling of new wells. The U.S. government and the natural gas drillers clearly want to see natural gas become a more prevalent source of fuel in our world as it's one of the cleanest forms of energy creation. However, this isn't going to happen if it's increasingly unprofitable for them to be drilling new wells. Once demand returns, the likelihood of a knee-jerk spike in natural gas prices is increased, as is the chance that drilling will return en masse following that spike.  

The other tricky thing about natural gas pricing is that the weather can change in an instant and often isn't a good indicator for the future pricing of natural gas. A warm winter can easily give way to a cold stretch that can spike natural gas prices.

You have to pay to play
Now let me walk you through a couple of different ways you can play what I anticipate will be a sizable rebound for natural gas prices.

One way to play natural gas without having to choose between specific companies is to place your bet on the United States Natural Gas Fund (NYSE: UNG  ) . This ETF seeks to replicate the daily movements of natural gas based on futures contracts on the NYMEX. Unfortunately, tracking futures contracts isn't a perfect science, so the numbers don't translate perfectly some of the time. That's why I actually prefer the iShares S&P North American Natural Resources (NYSE: IGE  ) . This ETF actually measures the performance of dozens of U.S.-listed natural resource companies in the U.S. and Canada and gives you a much more accurate (and less volatile) way of betting on natural gas (as well as other resources).

If, like me, you're brave enough to buy individual companies, I have three for your consideration: ExxonMobil (NYSE: XOM  ) , Devon Energy (NYSE: DVN  ) , and Chesapeake Energy (NYSE: CHK  ) .

The reason for including Exxon is simple: It's a large, low-beta, diversified energy company that's going to pay a decent dividend. Following its acquisition of XTO Energy in 2009 and smaller, privately owned natural gas companies since then, Exxon has increased its stake in the Marcellus shale to more than 700,000 acres. Having produced more than $30 billion in profits last year, Exxon is a name that'll help you sleep better at night.

Much like Exxon, Devon Energy has been playing its own version of monopoly with U.S. shale, collecting as much potential drilling acreage as possible. Devon isn't going to pay you nearly the same dividend yield that Exxon will, but it will give you a little more natural gas exposure. Make no mistake, though, Devon still has ample profits from its oil production to fall back on, so like Exxon, you don't have a lot to worry about at night.

Chesapeake Energy is the wild card of the bunch because it has the most direct exposure to natural gas prices. Understandably, a quick spike higher in natural gas prices could move the stock without having a direct impact on Chesapeake's bottom line, so keep that in mind. But being responsible for 8.3% of all U.S. natural gas production, Chesapeake clearly has a vested interest in natural gas pricing and could show the largest move higher when demand finally rebounds.

Foolish roundup
I've never been good at reading a crystal ball, but at some point logic needs to take over and investors need to realize that despite the newfound reserves, natural gas is still a highly demanded and finite resource. I'm therefore going on the record and calling a bottom in natural gas prices here.

If you're looking for more ideas, check out The Motley Fool's free report, "The Only Energy Stock You'll Ever Need." In it, Fool analysts detail a company that will benefit from the natural gas boom and pays a dividend. Click here to grab a copy.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He'd like to think he's quite a "gas" at parties. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Devon Energy. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that isn't full of hot air.


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  • Report this Comment On January 24, 2012, at 5:14 PM, BHS13 wrote:

    The problem with your analysis and what you are missing is regardless of weather, there is so much natural gas in the US the price will not recovery for many years.

  • Report this Comment On January 24, 2012, at 5:27 PM, xetn wrote:

    Your observations regarding the pricing of natural gas is spot on (no pun intended) but you lost me with your identification of just 3 possible winners. There are many and I believe it would have been nice to have seen some more of them highlighted.

  • Report this Comment On January 24, 2012, at 5:40 PM, sevenheart wrote:

    Chesapeake just announced they are cutting their drilling program in half and they are cutting back on production. They are prepared to slash production from their new near $6.5 billion production level to $1 billion if prices do not strengthen. Info from rigzone.com

    Gas prices dropped from near $4/m to a recent low of $2.34 since the end of December 2011. This is a major shock to the industry and will likely result in a significant drop in all activity.

    The Marcellus play was averaging a cost of development to revenue ratio of 120% before prices dropped in the fall of 2011 making it likely all activity would begin to decline.

    Gas will be a good investment but I think it would be wise to time it carefully with the development and commissioning of LNG facilities allowing excess US gas production to be exported (2013-2014)

  • Report this Comment On January 24, 2012, at 5:53 PM, dennilflawwsss wrote:

    I have lost thousands on UNG, which has drastically and consistently underperformed its benchmark for at least two years, presumably because of contango, a frequent characteristic of the futures markets which UNG invests in . Buyer beware!

  • Report this Comment On January 24, 2012, at 5:57 PM, oyoyoy wrote:

    I am new to this so excuse me while I ask what may be a naive question. Why no mention of FCG?

  • Report this Comment On January 24, 2012, at 6:09 PM, skulisv wrote:

    I just read the EPA´s draft report on the "Investigation of Ground Contamination near Pavillion, Wyoming" and the conclusions are startling. See page 33 - polusion in ground water, both in the shallow wells and the deep aquifer. I think the EPA is a bout to ban fracking and that could spike the gas price.

  • Report this Comment On January 24, 2012, at 6:41 PM, 102971 wrote:

    UNG replicates the price of gas in the futures market but the futures price is still in the $4-$5 range. This indicates that the market is expecting the price of natural gas to increase quite substantially.

    Personally, I don't believe it and would rather sell UNG put options.

  • Report this Comment On January 24, 2012, at 6:46 PM, ThePoulTrend wrote:

    HMMMM..... Natural Gas has been one of my favorite Buys the past few months. I actually like CHK, however do agree their may be sometime before I would take a chance in investing in them. UNG has seemed to never perform at what ones would of liked it to. Personally I have Loved (LNG) since it was trading at $5.0 a share, The company has inked three 20-year long-term LNG supply contracts with GAIL India, Ltd , Gas Natural Fenosa of Spain and BG Group in Great Britain. Another investment which I love that has soared over recent weeks is (CLNE) Clean Energy Fuel Corp. and Finally another investment I have been watching and love for the Future is (HFC) HollyFrontier. Other than that wonderful post, Natural Gas may be a great buy but not all companies do not forget (SUN) Sunoco announced they are out of the Natural Gas in the North East as it costed them millions and they never got to where they wanted it to get to.

  • Report this Comment On January 24, 2012, at 6:46 PM, 102971 wrote:

    I just read skulisy's comment. I don't think the EPA has the power to ban fracking. The "powers" behind fracking are too strong besides which it is an important innovation in extracting energy.

  • Report this Comment On January 24, 2012, at 6:49 PM, 102971 wrote:

    LNG and GLNG are two of my favorite stocks in the energy market but don't leave out WPRT. I am long on all three and sitting on good profits.

  • Report this Comment On January 24, 2012, at 7:02 PM, LAVol wrote:

    (1) Ratio between oil and natural gas

    It doesn’t matter. There is so much natural gas that oil is not a serious competitor. Gas prices can bring oil down, but oil can’t move gas up. Argue if you want, but if you look back over the past 10 years, there’s really no correlation.

    (2) Low natural gas prices aren’t conducive to supporting the drilling of new wells.

    The statement is correct. BUT, producers have to drill to hold leases. And they will. There is so many natural gas leases that have to be held by production that drilling will more than keep up with production declines.

    (3) Weather. Not a factor at this point. No matter how cold it gets, storage will fulfill any increase in demand because storage holders CURRENTLY view it as an opportunity to lower their inventory cost. They’ll be able to put gas in cheaper later.

    Don’t buy natural gas ETF’s or natural gas companies. Oil companies are less risk. The best play on natural gas is Westport Inovations (WPRT). Natural gas won’t go over $4 for any extended period of time in the foreseeable future, and that bodes incredibly well for Westport.

    I’m a retired natural gas marketing exec. I’m not always spot on with regard to nat gas prices, but I’m right far more than I’m wrong. I’ve talked with my sources in the industry and they pretty much mirror my comments above. My info is from the inside and based on years of experience. Don’t buy what the street is saying. They may be right, but it’s far too risky to bet on it!

  • Report this Comment On January 24, 2012, at 7:09 PM, B1gfool wrote:

    Long UNG is not a good way to to play Nat Gas unless you are VERY bullish. UNG deals in futures contracts and is replete with downside pressures. It does not track Spot price well. WPRT was a good risk but now it is looking expensive to me. LNG is still a good value. And CLNE has room to move up but I just put a tight trailing stop on that one. Self disclosure, I have strangled and straddled UNG successfully for over 1 year and never gone Long UNG. I am Long CHK, LNG, WPRT and CLNE now. I am NOT involved in the industry other than a consumer, but I believe in the merits of Nat Gas as a bridge fuel.

  • Report this Comment On January 24, 2012, at 7:16 PM, sevenheart wrote:

    skulisv,

    The Pavillion study is scientifically flawed. These old wells are abnormally shallow relative to the typical gas well and it appears that the chemicals the EPA claims to have measured are from plastics and components of the EPA drilled test wells. These chemicals are just not used in gas drilling or well completions and they aren't common in produced gas. As for methane (colorless, odorless, tasteless gas) in wells, it is present in many water wells prior to natural gas activity, but many try to convert it into a winning lottery ticket when drill rigs show up to drill for deeper gas. There is orogenic methane, produced by organic sources such as coal and peat seams which a lot of water wells drill into and catagenic methane created by time, heat and pressure at greater depths. Fracing is used to release catagenic gases. It is easy to test for the difference. You are right that the EPA could politicize the 60+ year old process of fracing and kill the gas drilling boom during the 4-5 year study period if market conditions don't beat them to it.

    However, gas prices probably won't spike quickly. In the 30 years I've been associated with the gas industry, I've never seen gas prices recover rapidly from this type of low. One factor that seems to fly under the prognosticators radar is that from about 2005 until 2010 there were thousands upon thousands of wells drilled while gas prices were above $8 that could not be produced because there was inadequate take away capacity. In 2010 a number of significant pipeline and process plant projects were completed and idle wells were brought to market creating our current glut when combined with diminished demand from our sluggish economy. The much ballyhooed activity in the Marcellus is a parallel situation. There are a lot of wells drilled with no avenue to market, the infrastructure isn't in place in terms of pipelines and process plants. When that infrastructure comes on line the glut intensifies dramatically.

    What has me baffled is the huge disconnect between the price of oil and gas. Historically the worth of a btu is the relative whether from coal, gas or oil. This disparity is unprecedented and really defies logic.

    There are companies that will remain profitable through this down market, but any investment at this time should be in bargain seeking and a long term view. I think completed LNG infrastructure for exports will be the bell weather that indicates the next gas bull market.

  • Report this Comment On January 24, 2012, at 7:21 PM, sevenheart wrote:

    LNG is Liquified Natural Gas in my posts, not a company

  • Report this Comment On January 24, 2012, at 7:28 PM, VegetableFool wrote:

    Worst analysis I have seen on an open subject. Not much use repeating the above but if you are beating natural gas will go to $4 /scf you have point, if you think there is any prayer of reaching historical ratios with oil in the next 10 years then you know nothing.

  • Report this Comment On January 24, 2012, at 7:59 PM, 2011Phoenix wrote:

    I hate to be the optimist on the Nat Gas Act, but what would happen to the price of natural gas when (if) this passes and there is a big drive in conversion to natural gas?

  • Report this Comment On January 24, 2012, at 8:01 PM, stryder41 wrote:

    are there any natural gas penny stocks ready to bust big.

  • Report this Comment On January 24, 2012, at 8:03 PM, mjjp08 wrote:

    What about BOIL and GASL for bullish time, and for bearish time KOLD and GASX?

    I made money with KOLD, and lost money with BOIL.

  • Report this Comment On January 24, 2012, at 8:20 PM, Usnzth wrote:

    If someone wants to "bet" on natural gas, why not invest in a royalty trust that pays a decent dividend while you wait. HGT has paid me well for over three years now. I also own PBT. There are three or four others (SBR, BPT, etc.) who can do the same.

    I persoanlly don't like betting. i prefer investing. A company that pays me to own their stock and still has the potential to grow on a price spike seems the best option.

  • Report this Comment On January 24, 2012, at 8:25 PM, kpaxian wrote:

    This is a weird perspective, I will continue to buy HGT at a bargain price and recommend collecting great dividends from strong partners like XOM and a wet gas trust like PER . I would rather own trusts because they have no debt and work on 90% plus margins.Mix it up with VOC and MVO and ECT.I will be buying SDR because I did well with SDT.Buy these beauties when the prices drop due to fear and people are throwing out the babies with the bathwater. I made money last week with that strategy and safely.I could not advise any of you to buy the recommended stocks in this article.

  • Report this Comment On January 24, 2012, at 8:42 PM, daveeemoon wrote:

    I think people are disregarding the demand side of the picture here. Yes, the supply may be at one of its all time high due to innovation in extracting nat gas, but as we all know and been following, I believe that the demand will increase the price of nat gas with companies such as westport acting as a catalyst. With the future cars potentially running on nat gas it could be a win for nat gas.

  • Report this Comment On January 24, 2012, at 8:52 PM, hydrodan wrote:

    sevenheart : "What has me baffled is the huge disconnect between the price of oil and gas. Historically the worth of a btu is the relative whether from coal, gas or oil. This disparity is unprecedented and really defies logic. "

    The reason for this disparity :

    - energy equivalent of 1 barrel of WTI is about equal to 6 BTUs of gas

    - price equivalent is 1 barrel of WTI to about 41 BTUs of gas

    is because to actual exercise that disparity, one needs to do several things, depending on the context.

    If you're a end consumer, this means you need to convert your vehicle to natural gas in order to take advantage of the disparity, but you'll sacrifice convenience. Sure it's cheaper on mileage, but it does cost money to do the conversion and because the energy density of natural gas is so much lower than liquid gasoline, your travel range between fillups for the same size gas tank is much lower, which makes it less convenient. Not to mention speed of fillup at a station for natgas vs. gasoline. Roughly, natgas in this context is similar to fully electric cars in range and recharge rate and adds the excitement of having a highly pressurized gas tank on board the vehicle. (IMO, this is also the biggest stumbling block for hydrogen powered cars). Fleet cars can take advantage of this situation since they typically have shorter drive times between fillups and can take advantage of central depots with filling stations. We already see this in cities. Los Angeles has converted most of their bus fleet to natgas.

    The other side of this price to energy disparity is refining. It's not particularly cost effective for refineries to convert natural gas to more valuable liquid fuels like gasoline or kerosene. If it was, they would already be doing it, and the price of natgas would equilibrate to the BTU content relative to liquid gasoline.

  • Report this Comment On January 24, 2012, at 10:08 PM, sevenheart wrote:

    Hydrodan,

    Good analysis on several points, I can fill in some information for other points. In the past the price ratio has been tighter and more predictable, this is a very unique situation. The value of energy is consistent for a btu regardless of it's source. The chemical value differential between oil and gas doesn't justify this exaggeration.

    A common misconception is that oil and gas are used primarily for transportation. With the increased use of gas for electrical generation that trend will be different in the future. Approximately 35-45% of oil is used for transportation the rest is refined for use as fertilizers, and chemical feedstock for plastics, synthetics, medicines, etc. The ratio of oil for transportation can be higher at times based on industrial demand. While nat gas can produce an associated natural gasoline (not an actual component of the nat gas) called condensate, the gas itself doesn't contain gasoline or kerosene as does oil. Nat gas is believed to be a mature catalyzed product of oil in most cases.

    Gas processing plants break out propane, ethane, butane and pentane through heating, cooling and various simple, inexpensive processes. These components are also industrial items used for chemical needs. The whole procedure of processing gas from well head to a burner is one of drying out the gas, initially removing saline water from the ancient seabeds which collected the organic matter that eventually became kerogen and catalyzed into gas and the condensate mentioned above. CO2, sulphur and other impurities are removed and marketed if possible, in the midstream section the other valuable liquids are removed and often piped separately to refineries. There is technology available which increases the amount of gas that can be stored at low pressure for vehicles and the biggest limitation to gas for vehicles is the lack of infrastructure for retail sale (and nat gas powered vehicles creating demand). Emissions are virtually water vapor, nat gas powered engines have a longer useful life because of the clean burning properties, a typical vehicle could run 500,000 miles with wear comparable to 125,000 miles on a gasoline powered engine. We use nat gas powered compressors to transport gas that will literally run a quarter of a million hours before overhaul.

    Hydrogen vehicles would by necessity rely on hydrogen created by electrolysis (the classic high school chemistry experiment) which requires far more energy than it produces or by breaking it out of natural gas. The only benefit of hydrogen is the clean burning which is already possible from nat gas. Breaking out the hydrogen would be an unnecessary step and expense to produce the desired result of low emission transportation.

    Enough science, as for investment, I would be very careful, as they say past performance is not indicative of future performance. Nat gas prices are low and will likely stay that way for some time for reasons I've discussed above. Royalties are based on price and previously reliable gas trusts are going to see reduced revenues as income declines and wells are shut in until market conditions improve resulting in lower volume sales. Operators (Exxon, Chevron, Chesapeake, etc) control the decision as to whether a well will produce or be dormant, not the trust.

    Royalties also lag quite a bit behind when the gas is actually marketed so reduced royalty incomes may not evidence themselves for another 6 months or more. If you want to invest in nat gas, make sure it is at bargain prices and that you are looking at long term prospects. In the past it has taken as much ten years to reduce surplus supply enough to significantly improve price. I know only because my income suffered during 3 of those periods in my time in the industry. This turn around should take less time, but as I've noted there are thousands of wells with no access to markets, as they are brought to production the glut will not ease any time soon even as the economy recovers.

  • Report this Comment On January 24, 2012, at 10:21 PM, skulisv wrote:

    I read a book some two years ago, Aqua Shock by Susan Marks and there she talks about the increasing scarcity of water and the aquifers with can be as big as a state and are all running low on water. I don´t think people are going to like it if they get polluted.

    The report of the EPA sais about the pollution that:

    „the explanation best fitting the data for the deep

    monitoring wells is that constituents associated with

    hydraulic fracturing have been released into the Wind

    River drinking water aquifer at depths above the

    current production zone.“

    And yes I think the EPA has in fact some power to ban fracking:

    EPA Regulations Put Thousands of Oil Jobs at Risk - http://www.wealthwire.com/news/energy/2565?r=1

    But I´m no expert but I know that there are a lot of short positions in GAS and it there will be some problem with the oil supply like in the Persian Golf there is going to be a spike that can cause a general spike in energy prices – the hedge fund guys can get short squeezed. In 2009 the price of GAS went from 2,5 to 6 in a month so it can happen.

  • Report this Comment On January 24, 2012, at 11:21 PM, Chontichajim wrote:

    For at least the lifetime of all of us alive today Nat. Gas should be a profitable investment, but I do prefer dividend paying companies even if it means leaning to the infrastructure side. Besides CVX I hold KMI and WMB both more on the infrastructure side than the discovery side of the Gas industry but both have decent growing dividends and upside if gas production increases.

    The split of WMB this month was nearly all gift since the resulting company slightly increased the dividend it already had and dropped a lot less than the new company stock could be sold for the day of the spinoff.

    Infrastructure is more for the income investor than the growth investor, but there is some upside if increases in Nat Gas prices leads to more volume passing through the pipelines.

  • Report this Comment On January 25, 2012, at 12:43 AM, MyGoals627 wrote:

    I agree with above comments regarding CLNE not being mentioned, but I'd buy on pullbacks at this point as it has run a little here - I wouldn't bet against T. Boone on his CLNE venture; the billionaire oilman knows where the next pot o' gold lies in energy.

    I'm also surprised COP (Conoco Philips) wasn't shown any love in the article. With its upcoming breakup, it will only add more value to its already undervalued shares.

    As for transitions to nat gas usage in this country and for those who don't feel it will roll out with any gusto anytime soon, I would only offer that other countries are already ahead of us in transposing much of their energy usage to nat gas. The irony is that for most of these countries it's too expensive to drill it themselves and extract it. I think Cramer even mentioned that it costs them roughly a quarter to a third their costs to buy it from here and have it shipped to them.

    As for the EPA and fracking concerns, I think the President basically laid what the law of the land will be regarding any harmful methods to extraction. Whether he remains in office after this year or not is no longer an issue on this topic. This cat has torn through the bag and too many communities are reporting problems for this to be of isolated concerns.

    I think it's an unfortunate yet positive course of events, much like the BP oil disaster, that the industry will learn from its mistakes and take the proper steps to solve this dilemma with good old (American) ingenuity. I'm sure the newest line of preventers for oil rigs are already being rolled out; so, too, will the fracking and chemical dumping in the aquifers be figured out and rectified - perhaps faster with a little government urging.

  • Report this Comment On January 25, 2012, at 1:25 AM, Indiscr33t wrote:

    CPST starting a breakout.

    Benefits from low gas prices, as they supply end users.

    Benefits from high gas prices, as they supply drillers.

    Due diligence, check out the chart, add to watch.

    Nothing more.

  • Report this Comment On January 25, 2012, at 4:48 AM, RLR0528 wrote:

    Thank you contributors for the great insightful comments. To add my two cents I would like to say that IMHO natural gas is the answer to America's transportation needs, foreign oil dependence, and air pollution. If we can develop hydrogen powered vehicle technology surely we can develop a safe and efficient natural gas storage tank for our vehicles. And why aren't most or all electricity generating plants being converted to run on gas as well as coal? We'll do it when America's energy poblems become critical enough.

  • Report this Comment On January 25, 2012, at 6:29 AM, oyoyoy wrote:

    Just a brief comment on part of what sevenheart wrote. Do not think of water vapor as being a clean emission, on a per unit basis water vapor is a signifcant greenhouse gas.

  • Report this Comment On January 25, 2012, at 7:07 AM, 13CROSSBONES wrote:

    Pipeline owners..................period!

  • Report this Comment On January 25, 2012, at 7:07 AM, olddogfb wrote:

    I disagree with this analysis. NG is not a direct substitute for other fuels. Wide spread implementation in new areas will require large capital expenditures and possibly regulatory/tax strategies not likely to happen soon. NG is one of the best stories going but the downstream companies are not the place to be in the short term.

  • Report this Comment On January 25, 2012, at 8:11 AM, ravenesque wrote:

    Just wait till this bad boy comes on line:

    http://michaelfury.wordpress.com/2009/05/11/the-gas-must-flo...

  • Report this Comment On January 25, 2012, at 9:14 AM, Lisbet565 wrote:

    After so much touting of UPL, how come it wasn't even mentioned in this article ?

  • Report this Comment On January 25, 2012, at 10:22 AM, sevenheart wrote:

    Water vapor is a pollutant, hopefully the EPA will find a way to regulate those planet destroying clouds that drift overhead each day. After millions of years of destructive water vapor in our atmosphere we must do something!

    Now seriously, I've offered a view toward caution, here is a brief article on how nat gas producer EOG views the future for nat gas.

    http://www.rigzone.com/news/article.asp?hpf=1&a_id=11452....

    For those of you who are not inclined to cliche style and popularity contest investment it should place nat gas in a realistic context.

    For those who won't read the article here are some key quotes-

    "Nearly five years ago Papa had the foresight to focus on extracting oil from shale before his competition did. According to an article in the Houston Business Journal (HBJ) Energy magazine, Papa realized that natural gas was going to move from scarce to surplus as the rush to develop shale skyrocketed.

    "Four years ago we realized being a natural gas producer, that's not going to be worth much if gas isn't worth much," Papa explained in HBJ. So he shifted EOG's focus to oil instead of gas."

  • Report this Comment On January 25, 2012, at 12:38 PM, drkazmd65 wrote:

    I boought into two NG area stocks near the bottom of the big 2008-2009 crash - and really wish I had bought more of both of them since I bought in.

    I bought WPRT at around $3.80, held it for almost 2 years - and then got impatient and sold my holdings at about $15. That was a serious mistake as it now trades for ~$38. Still a nice profit - but could have been much nicer.

    I bought NGLS at around $9.90 and still hold that one. Good reliable, growing dividend (~6% now) and shareprice currently hovering somewhere north of $38-39. Have the dividends in a DRP - so the holding builds very nicely each quarter.

    There are a lot of ways to play NG - some of them will pan out really well.

  • Report this Comment On January 25, 2012, at 4:09 PM, granterich wrote:

    My suggestion would be to not invest in the direct drilling of natural gas, but invest in companies that will benefit from the future use of nat. gas, companies such as WPRT and CLNE. Just something to consider...

  • Report this Comment On January 25, 2012, at 11:45 PM, mikecart1 wrote:

    This article must be a joke. UNG is infamous for acting like a 3X ETF and draining shareholders daily with no return. Natural gas is the other joke. Forget ratios and history. Natural gas IS history. Stay away from this. There is no need to get into natural gas when you can buy oil, food, and tech companies like AAPL. Come on, let's not make investing rocket science!

  • Report this Comment On January 27, 2012, at 12:47 PM, mapboys wrote:

    Calling a bottom in Natural Gas Prices is just crazy. We are in uncharted territory on Natural Gas Storage, the high end of storage and the trend is not encouraging.

    CHK's announcement to cut production and delay drilling dry gas where possible helped bump up prices that day, but the reality is that they will continue to add NatGas BTUs with 'wet' gas and continue to drill dry gas as necessary to hold those really expensive leases.

    And for those of you that don't know, the rough ratio of BTU value from an MCF of Natural Gas to a barrel of Oil is 6 MCF per Barrel, so if there was a connection between Oil and Natural Gas you could say that NatGas was hugely undervalued or that Oil was hugely overvalued. I don't think either of those statements are true.

    Owning companies with a balance of both Oil, Natural Gas and Natural Gas liquids makes sense to me. The lowest cost Natural Gas producers, which are public companies, cannot make money below $3 and would really rather see $4.50. The last time I looked out in the futures market that is several years away.

    Bob Hulse

  • Report this Comment On January 27, 2012, at 1:34 PM, 100tradejack wrote:

    The are so many stocks breaking out now that it isn't necessary to try to pick a bottom in NG. Of course you could gamble, but it isn't necessary.

    100 TRADE JACK

  • Report this Comment On January 27, 2012, at 9:01 PM, DaxThe8 wrote:

    Howdy y'all;

    The reason for lower prices in the heating market in the last decade is NOT global warming. We are are @ the perhelion in the solar cycle. We are closler to the sun than in any time in the next 4 million kilometers (over 1 millon miles). This event occurs every 22K to 23 K Years. We are definitely in a heat cycle. My advice! Purchase any natural gas you can & make a ton of $!

    DaxThe8 aka Dax/Renaiassance Man

  • Report this Comment On January 27, 2012, at 9:30 PM, oyoyoy wrote:

    Sevenheart - your comment shows your ignorance of the science.

  • Report this Comment On January 28, 2012, at 3:59 PM, Oppknocking wrote:

    Supply & Demand . . .

    As long as supply outstrips demand, there won't be a lot of money in production. As long as price per BTU is reliably low relative to gasoline, coal and other energy sources that NG can replace, demand will increase. As long as demand increases, the sure money should be in companies that will benefit from increased NG use irrespective of the price of the NG.

    What comes to mind are:

    * Companies that enable conversion to NG use.

    * Companies that move NG.

    What other types of companies will benefit from increased NG use?

    Besides WPRT and CLNE, what companies fit into these categories?

  • Report this Comment On January 29, 2012, at 2:55 PM, ikkyu2 wrote:

    I have been hearing this same pitch verbatim since 2008. If I had put any real money behind it, I would have lost a lot.

    I don't understand what's suddenly different now, especially as global demand is sputtering in the face of the most powerful stimulus that world governments can muster.

  • Report this Comment On February 02, 2012, at 12:51 AM, Törleß wrote:

    I don't think you understand how much natural gas is out there (even in already drilled formations). I work in oil/gas sales and I can tell you that the production companies have all but turned off gas production. Even if price rebounded, supply could be turned up overnight.

    Also, oil drilling more often than not leads to finds in natural gas. As the price of oil stays high gas will continue to be found as new oil wells are drilled. This too, can be put on hold (almost completely) for the life of the well so if there was any rebound in price it could be turned on.

  • Report this Comment On April 17, 2012, at 3:48 PM, rawbourbon wrote:

    There's a big difference between INVESTING on sure things and SPECULATING on scenarios or guesses. Fact: Nat Gas will not go to zero. It "might" go to a buck (probably will), but it WILL be worth more that $2 someday.

    Buying UNG makes no sense and you will lose money as you wait because of carrying costs, and a rally that may not happen for 3+ years. You'll lose too much to make it a worthwhile investment. Buying a stock or ETF of stocks that have "exposure" to Nat Gas is pure speculation, especially given that the stock market has already rallied extensively since 2009 and is due for a pullback at some point.

    Bottom line: why take a good idea and drown it with nonsense?

    I would like to know how I can actually own Nat Gas directly? Seriously, like buy a $100,000 worth of tanks full of it and sit on it. How do I do that? Please help. thanks

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