What Low Natural Gas Prices Mean for Investors

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Natural gas prices in the United States reached a point they hadn't seen since 2002, dropping below $2 yesterday. This led to a drop in the share price of producers such as Chesapeake Energy (NYSE: CHK  ) , which fell as much as 3.8% yesterday. Though it has since recovered, the continued reduction in natural gas prices could affect some companies going forward.

Producers are suffering
As natural gas prices continue to decrease, natural gas producers may cease production. The U.S. is using 12% less natural gas per day than usual. This has led many gas producers to take steps to hedge some of their reliance on natural gas. Calgary-based EnCana (NYSE: ECA  ) , North America's second-largest natural gas producer, has taken numerous steps to shield its balance sheet from further decreases in natural gas prices, including selling assets and renewing and extending credit facilities. Chesapeake Energy has sold land assets in the past to cover expenses, and has done so again, selling some shale acreage in Oklahoma to ExxonMobil for $2.6 billion, closing the gap on what some analysts estimate as a $3 billion shortfall this year.

Benefits for customers... and investors
Low natural gas prices could ultimately benefit customers in other ways as well. Utah gas utility Questar (NYSE: STR  ) has sought approval from state regulators to refund $42 million to customers, resulting in an average credit of $34.50 in May. Since the company makes its money delivering gas to customers, supplying the fuel to its customers at the price it pays, it typically asks regulators twice a year to adjust the amount it charges customers. If approved, it would only be the third time in 17 years that customers were actually refunded money -- usually price changes are simply reflected in future bills. Should natural gas prices stay near current lows, it would be easy to see other gas utilities doing similar things in other parts of the country.

Also benefiting from low natural gas prices are companies looking to use liquefied natural gas as an alternative fuel source. With gasoline prices remaining high, some people may consider converting to natural-gas-fueled vehicles. The long-haul trucking industry, with engines developed by Westport Innovations (Nasdaq: WPRT  ) , could reduce costs using liquefied natural gas and filling up at the stations provided by Clean Energy Fuels (Nasdaq: CLNE  ) . As Clean Energy continues developing natural gas fueling stations throughout the U.S. and Canada, the "natural gas highway" may become a reality and an alternative to gasoline. It is no wonder that Clean Energy has jumped more than 150% from its low in October, and Westport is up nearly 100% over its 52-week low.

Foolish bottom line
Natural gas won't be this cheap forever. While producers consider their options to make it through to an increase, other companies are taking advantage of the low cost by either refunding money to customers or developing new technologies that take advantage of the use as an alternative fuel. Either way, it's worth keeping an eye on, and you can do so by adding these companies to My Watchlist to keep track of the news out of the natural gas industry.

Though natural gas prices are at 10-year lows, the price of gasoline seems to keep going up. Our analysts have identified "3 Stocks for $100 Oil" that should continue to profit as oil prices climb. You will not want to miss out on this incredible opportunity, Click here to get your free copy of their special report before it's gone forever.

Fool contributor Robert Eberhard owns shares of Westport Innovations, but he holds no other position in any company mentioned. Follow him on Twitter, or click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Clean Energy Fuels, Chesapeake Energy, and Westport Innovations. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1860824, ~/Articles/ArticleHandler.aspx, 5/27/2016 12:38:13 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,863.12 34.83 0.20%
S&P 500 2,096.95 6.85 0.33%
NASD 4,927.27 25.51 0.52%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/27/2016 12:21 PM
WPRT $2.12 Up +0.10 +5.13%
Westport Innovatio… CAPS Rating: ****
CHK $4.10 Down -0.14 -3.19%
Chesapeake Energy CAPS Rating: ***
CLNE $3.16 Up +0.03 +0.96%
Clean Energy Fuels CAPS Rating: ****
ECA $7.54 Down -0.12 -1.57%
EnCana Corp (USA) CAPS Rating: ***
STR $25.24 Down -0.03 -0.12%
Questar Corp CAPS Rating: ****