Are Natural Gas Stocks Ripe for Investment?http://www.fool.com/investing/general/2013/11/07/are-natural-gas-stocks-ripe-for-invesment.aspx Bob Ciura
November 7, 2013
Natural gas is gaining importance among the U.S. energy mix, and the companies engaged in the discovery and production of natural gas are seeing business conditions firm. After several quarters of disappointing results over the past few years, natural gas players are on the comeback trail. And, for interested investors, there are publicly traded stocks involved in all stages of natural gas production. That means that there's a viable choice for growth or income investors alike.
Ride the natural gas boom
In all, Devon booked a $151 million profit over the first three quarters of the year, reversing the $227 million loss from the same period last year. Devon primarily benefited from better cost controls as well as increased production from many of the company's key areas.
Devon delivered 38% production growth in its U.S. oil operations, thanks to the hugely successful Permian Basin. Of course, natural gas and natural gas liquids represent key segments for Devon as well, and total production of oil, natural gas, and natural gas liquids averaged 691,000 barrels of oil equivalents per day in the third quarter. This figure handily exceeded the midpoint of the company's previously issued production guidance, and increasing production going forward will provide plenty of profits to Devon.
As far as turnaround efforts within the natural gas space are concerned, Chesapeake Energy (NYSE: CHK) certainly fits the bill. Chesapeake has aggressively sold assets over the past year to bolster its debt-heavy balance sheet as well as place it in a better position to take advantage of more promising projects. Chesapeake divested $1 billion worth of assets in the Northern Eagle Ford and Haynesville Shales earlier this year, and through the first six months, shed $3.6 billion in assets.
Chesapeake plans to use these proceeds to pay down debt and shore up its overall financial position, but the market is clearly concerned this will come at the direct expense of future growth. Shares of Chesapeake declined after earnings, when it was revealed that capital spending has fallen 48% this year and will likely fall again next year. However, Chesapeake's earnings per share more than quadrupled, so it may be premature to write off the company's turnaround efforts as a failure.
A midstream MLP for income seekers
Energy Transfer Partners ramped up investments last year to put itself in prime position once the boom in natural gas production took hold, and it's now reaping the benefits. Distributable cash flow over the first nine months of the year totaled