More Pain for Natural Gas Stocks

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.

It looks like there might be more pain ahead for natural gas stocks, and that might result in gains for Denbury Resources. The Wall Street Journal recently pointed out that prices for natural gas liquids have fallen sharply recently. With many natural gas companies rushing to liquids, those with more exposure to oil are better positioned. That doesn't help companies like Chesapeake Energy or Devon Energy. But SandRidge Energy and EOG Resources look much better positioned to handle the fall, as more of their production is in oil than natural gas liquids. We think Denbury Resources is the best option, though. The company sold its natural gas properties in 2010, choosing to focus on its core strength: using CO2 to extract oil from existing wells. We own shares of Denbury Resources and at less than $14, the stock looks very attractively priced for a long-term investment.

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