Best Natural Gas Stocks To Invest In for October 2024

©Shutterstock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Energy stocks have their ups and downs like every other sector. But natural gas stocks have proven more resilient than crude oil and other energy commodities. It’s a complicated business with a lot of different players, but there’s certainly money to be made with the right investments. Here’s what you need to know about investing in natural gas.

What Are the Best Natural Gas Stocks To Buy?

If you’re looking to invest in natural gas stocks, here are 10 of the best options to consider for your portfolio:

1. Phillips 66 (PSX)
2. Ovintiv Inc. (OVV)
3. Coterra Energy Inc. (CTRA)
4. EQT Corp. (EQT)
5. Southwestern Energy Co. (SWN)
6. Tellurian Inc. (TELL)
7. Antero Resources Corp. (AR)
8. Noble Corp. (NE)
9. Kinder Morgan Inc. (KMI)
10. Kimbell Royalty Partners LP (KRP)

Best Value Natural Gas Stocks

If you’re looking for value stocks — those that produce income for investors in the form of a dividend — there are a few in the natural gas industry. Here are three to consider.

1. Phillips 66 (PSX)

• Stock price as of Oct. 1: $132.99
• Market cap: $55.67 billion
• Price/earnings ratio: 11.41
• Price/sales ratio: 0.38

Phillips 66 is an oil and gas refining and marketing company with four business segments covering midstream, chemicals, refining and marketing and specialties.

In June 2023, Phillips 66 completed its acquisition of DCP Midstream LP. This company produces and markets natural gas liquids and processes natural gas. Since then, it has announced agreements to acquire Pinnacle Midland in a $550 million cash deal that will strengthen Phillips’ natural gas processing capacity in a region of vital importance to the U.S. natural gas industry.

PSX shares have faltered lately after a long upward trend, and the company missed analysts’ earning forecasts in the first quarter of 2024. However, they exceeded estimates by $0.33 in Q2. Phillips 66 is still in the midst of a three-year capital improvement plan they announced in 2022. This plan is designed to return more money to shareholders through stock buybacks and increased dividends, which currently yield 3.46%.

Eight out of 19 analysts rate PSX a “buy” or “strong buy,” while nine recommend holding and one recommends selling. The remaining analyst rates it “underperform.” The price target is $149.88.

2. Ovintiv Inc. (OVV)

• Stock price as of Oct. 1: $40.33
• Market cap: $10.77 billion
• Price/earnings ratio: 5.73
• Price/sales ratio: 1.06

Ovintiv Inc. produces natural gas, natural gas liquids, oil and condensate. The company touts its commitment to generating free cash flow and returning money to shareholders. In September 2021, Ovintiv announced a buyback of up to 26 million shares. The program was renewed most recently in September 2024 for repurchases through October 2025. Ovintiv also distributes dividends, which currently yield 2.98%.

Make your money work for you

Get the latest news on investing, money, and more with our free newsletter.

Submit

By subscribing, you agree to our Terms of Use and Privacy Policy. Unsubscribe at any time.

Thanks!

You're now subscribed to our newsletter. Check your inbox for more details.

In the first quarter of 2024, Ovintiv’s $1.44 earnings per share beat analyst estimates by $0.12. However, Ovintiv missed estimates by $0.11 in the second quarter. Shares are down 6.53% year to date and 13.71% over the past 12 months. But analysts are generally bullish on the stock, with 19 out of 27 rating it a “buy” or “strong buy” and no analysts recommending selling. They forecast over 82% growth in share prices in the next 12 months.

3. Coterra Energy Inc. (CTRA)

• Stock price as of Oct. 1: $24.15
• Market cap: $18.25 billion
• Price/earnings ratio: 14.27
• Price/sales ratio: 3.22

Coterra Energy Inc. is an upstream oil and gas company that was created by the merger of Cabot Oil & Gas and Cimarex Energy. It currently has projects in the Permian Basin in West Texas and southeast New Mexico, Marcellus Shale in northeast Pennsylvania and Anadarko Basin in western Oklahoma. Marcellus Shale was responsible for 78% of Coterra’s natural gas production in 2023.

Coterra Energy shares have lost 3.29% so far this year. The stock is down 8.76% over the past year and appears to be a good value. The dividend yields 3.48%.

Analysts like the stock. It has a “strong buy” rating from five of 27 analysts watching it and a “buy” rating from 14 analysts. The rest recommend holding. The price target is $31.25, which is about 26% higher than the current share price.

Best Growth Natural Gas Stocks

Growth stocks are those that tend to make money for investors by appreciating in price over time, compared to value stocks that generate income. When looking at growth stocks, you’ll want to choose those that will grow faster than the overall market. Here are some natural gas growth stocks to consider.

4. EQT Corp. (EQT)

• Stock price as of Oct. 1: $36.25
• Market cap: $21.9 billion
• Price/earnings ratio: 24.09
• Price/sales ratio: 3.48

Until the Oct. 1 merger between Southwestern Energy and Chesapeake Energy, EQT Corp. was the largest producer of natural gas in the United States. The company is focused on replacing international coal with domestic natural gas in order to address climate change. In a move toward that end, EQT announced in March that it will acquire Equitrans Midstream, creating “America’s only large-scale, vertically integrated natural gas company prepared to compete on the global stage,” according to a press release.

EQT gets a “buy” or “strong buy” rating from 11 of 18 analysts weighing in, and the consensus price target is $40.97, representing nearly 11% upside. But the real news is the projected earnings growth — 123.10% next year, making this a good prospect for buy-and-hold investors.

5. Southwestern Energy Co. (SWN)

• Stock price as of Oct. 1: $7.15
• Market cap: $7.84 billion
• Price/earnings ratio: N/A
• Price/sales ratio: 1.39

Southwestern Energy Co. is a natural gas exploration and production company. The company focuses on developing natural gas and natural gas liquids in Pennsylvania, Ohio, West Virginia and Louisiana. It also transports oil, natural gas and natural gas liquids.

In a $7.4 billion all-stock deal announced in January, Southwestern Energy and Chesapeake Energy joined forces to become America’s largest natural gas producer. The combined company, which has been rebranded as Expand Energy Corp., completed the merger on Oct. 1.

Not surprising considering the uncertainty mergers bring, 22 of the 33 analysts watching the stock have rated it a “hold.” Analysts are optimistic about earnings, projecting 30% growth in the current quarter and 17.60% growth next quarter. The first post-merger earnings release is scheduled for Oct. 29.

6. Tellurian Inc. (TELL)

• Stock price as of Oct. 1: $0.9722
• Market cap: $869.03 million
• Price/earnings ratio: N/A
• Price/sales ratio: 4.04

Tellurian Inc. is an upstream natural gas company with over 400 drillable locations. It produced 19.5 billion cubic feet of natural gas in the third quarter of 2023 alone, according to a February Securities and Exchange Commission filing.

With a share price below $1, TELL is an extremely risky stock. Its also has a 4.04 price/sales ratio, so it’s not particularly cheap. Analysts aren’t giving up on it yet, however. Both analysts weighing in so far in October rate it a “buy” and predict an increase of over 20% in the next year. They also expect earnings to grow in the short term — 66.70% in the current quarter before falling 100% in Q4. Investors might have to hold onto TELL for a long time to see an appreciable return, but at less than $1 per share, it might be worth the risk.

7. Antero Resources Corp. (AR)

• Stock price as of Oct. 1: $28.66
• Market cap: $9.19 billion
• Price/earnings ratio: 113.69
• Price/sales ratio: 2.14

Antero Resources Corp. is an exploration and production company for natural gas, natural gas liquids and oil in the Appalachian Basin. It provides midstream services through Antero Midstream.

AR’s sky-high P/E ratio is likely to give most investors pause, but the stock is getting positive attention from Wall Street. S&P Global Ratings gave it an investment-grade BBB credit rating and upgraded its corporate and issuer credit ratings to BBB with a stable outlook, according to Marcellus Drilling News. What’s more, Roth MKM initiated a “buy” rating on Aug. 27, a week after Scotiabank upgraded its rating to “sector outperform.”

Antero has a “moderate buy” consensus rating, as reported by MarketBeat. It also has a consensus price target of $32.63, which is 11.46% higher than its current share price. Needless to say, this is a high-risk stock that sits firmly in buy-and-hold territory. The earnings growth forecast for next year is a staggering 1,446.70%. That prediction might be driving the large investment firms’ largely positive sentiment.

Best Momentum Natural Gas Stocks

Momentum stocks are those that are going on an upward trajectory and are expected to continue to do so. These stocks are doing well, and that should continue.

8. Noble Corp. (NE)

• Stock price as of Oct. 1: $36.42
• Market cap: $6 billion
• Price/earnings ratio: 9.08
• Price/sales ratio: 1.97

Noble Corp. is one of the world’s largest offshore drilling contractors following its 2022 merger with Maersk Drilling.

Noble shares are down in 2024 and for the year, and it’s another high-risk pick. But analysts expect an upward trend over the next year. The price target is currently $54.55, and analysts project 148.70% earnings growth next quarter and 69.60% growth for the year.

9. Kinder Morgan Inc. (KMI)

• Stock price as of Oct. 1: $22.59
• Market cap: $50.47 billion
• Price/earnings ratio: 20.867
• Price/sales ratio: 3.27

Kinder Morgan Inc. is one of the largest U.S. energy infrastructure companies, with pipelines that transport natural gas, crude oil, gasoline and carbon dioxide. Its terminals store renewable fuels, chemicals, petroleum and other products.

KMI has a consensus rating of “hold,” as reported by Nasdaq, based on 19 analyst recommendations. The consensus price target is modest, at $22.64, as are earnings growth projections — 13.20% for the year. But slow and steady is what investors look for in momentum stocks, and this one could fit the bill.

10. Kimbell Royalty Partners LP (KRP)

• Stock price as of Oct. 1: $16.05
• Market cap: $1.53 billion
• Price/earnings ratio: 33.31
• Price/sales ratio: 5.52

Kimbell Royalty Partners is an exploration and production company. But it doesn’t perform these functions itself. Instead, it buys and holds royalty interests in U.S. oil and natural gas properties.

The stock pays an impressive dividend yield of 10.47%. While a high dividend can be a red flag, it doesn’t appear to be in this case. Analysts recommend buying this stock. They predict a 28% increase in share prices over the next 12 months.

How To Invest in Natural Gas

There are four primary ways to invest in natural gas:

• Exchange-traded funds
• Master limited partnership stocks
• Individual stocks and futures

For the average investor, the easiest way is likely in ETFs or individual stocks.

Individual stocks give you complete control over the investments in your portfolio, but they’re risky. If all your eggs are in one basket and that basket fails, you lose all your eggs.

Exchange-traded funds offer the opportunity to let a manager run your natural gas portfolio for you. The funds also provide automatic diversity in your natural gas holdings, and you can add other types of energy stocks to diversify holdings across the energy sector. The energy sector makes up about 3.42% of the S&P 500 index. You can use that as a guide for determining how to allocate your own assets.

The First Trust Natural Gas ETF (FCG) is one example of a natural gas ETF. It tracks the ISE-Revere Natural Gas Index and exposes investors to 43 different stocks. So if you want to participate in the natural gas industry but don’t want to have to decide on a single stock, this might be worth a look.

Investing In Natural Gas Stocks

Natural gas is formed deep in the earth and contains methane, natural gas liquids and non-hydrocarbon gases. Like oil, natural gas needs to be extracted from the ground, processed and transported to homes and businesses where it is used to heat and cool.

The companies that provide natural gas are divided into three categories:

• Upstream companies: Also known as exploration and production companies, they find the gas and get it out of the ground.
• Midstream companies: They are responsible for processing the gas and move it from the well to the downstream companies.
• Downstream companies: These companies distribute it to consumers.

If you’re wondering how to invest in stocks issued by natural gas companies, you have a lot of options. You can choose from companies in different parts of the process — upstream, midstream or downstream. Or you can choose based on the type of stock — value, growth or momentum.

Whether you choose a specific natural gas stock — or two, or three — or decide to invest in an ETF, adding natural gas positions to your portfolio could be a wise move.

Daria Uhlig, John Csiszar and Karen Doyle contributed to the reporting for this article.

Data is accurate as of Oct. 1, 2024, and is subject to change. Unless otherwise noted, information on analyst ratings was sourced from Yahoo Finance and Nasdaq.

Share This Article: