Shale gas plays in Texas are hot properties. After all, natural gas is widely tipped to be the next biggest thing as far as the nation's future energy production is concerned. Houston-based Petrohawk Energy (NYSE: HK) holds substantial acreage in these gas plays. But how good is the company as an investment proposition?

The performance
Average daily production in 2010 was 675 million cubic feet equivalent -- a 34% jump from 2009 and a phenomenal 121% jump from 2008. This is impressive.

Not surprisingly, revenues have shown a steady climb every year since 2003, and this has reflected in the company's earnings from core operations. Cash income, or EBITDA, has shown a 31% compounded annual growth over the past five years. The corresponding figure for Petrohawk's closest peers Chesapeake Energy (NYSE: CHK) stands at -4.2%, Southwestern Energy (NYSE: SWN) at 32.7%, Range Resources (NYSE: RRC) at 4.3%, and EOG Resources (NYSE: EOG) at -4.8%. Petrohawk has clearly grown at a faster pace with regards to operations.

Current return on equity stands at 2.3%. While this is not too impressive on an absolute basis, I believe it should improve over time as higher demand for natural gas prices should alter the overall macroeconomic conditions resulting in higher profits for natural gas operators.

How cheap is the stock?
This is how Petrohawk stacks up against its peers:

Company

TEV/EBITDA

P/LTM EPS

Price/Book

Forward PEG

(1 year)

Petrohawk Energy 14.6 98.5 2.2 1.1
Range Resources 21.9 NM 3.8 2.5
Chesapeake Energy 10.1 25.6 1.6 3.2
Southwestern Energy 9.9 25.7 4.7 1.2
EOG Resources 16.1 188.1 2.9 0.6

Source: Capital IQ, a Standard & Poor's company.

Compared to Chesapeake and Southwestern, Petrohawk looks expensive from an earnings perspective. However, this does not show anything with respect to the future performance of the stock.

As far as future growth is concerned, Petrohawk looks the most promising among the lot with a forward PEG of 1.1. This is not really surprising as the company has been committed to organic growth in recent years. With prolific gas plays in Eagle Ford and Haynesville under its belt, growth prospects look bright. A price to book of 2.2 shows that Petrohawk's assets are of high quality, capable of generating solid earnings -- and the market is willing to pay up for them.

Foolish bottom line
Lower natural gas prices have been a bane to many companies. It has affected nearly every player in the business. While this trend may continue for the rest of the year, prices will eventually go up. I believe natural gas companies have nothing to lose. Petrohawk will perform better than what most would think in the long run.

Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Range Resources. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy and Range Resources. Motley Fool newsletter services have recommended writing puts in Southwestern Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.