Six Natural Gas Investments to Buy as Energy Prices Soar Amid War

Paul Dykewicz

Six natural gas investments to buy as energy prices soar during Russia’s war against neighboring Ukraine give investors a chance to profit as other stocks slide.

The six natural gas investments to buy as energy prices climb offer opportunities to tap into growing demand for alternatives to energy sources that previously had been provided by Russia before it incurred economic sanctions for its invasion of Ukraine. The United States is among many countries that have chosen to stop importing Russia’s oil and natural gas, while Germany and other nations that lack immediate access to substitute sources of energy are seeking to scale back those imports that are funding the war against Ukraine initiated by Russia’s President Vladimir Putin.

U.S. natural gas prices have rocketed higher since mid-March by rising more than $4/MMBtu to $8.80/MMBtu. The latter level of production is the highest since 2008, according to a recent report by BofA Global Research. MMBtu, a standard unit of measurement for natural gas financial contracts, equals one million British Thermal Units.

U.S. Drilling Restrictions Lift Existing U.S. Providers by Curbing Supply

President Joe Biden “aggravated the energy shortage” last week by canceling three oil & gas leasing sales in the Gulf of Mexico and off the coast of Alaska, removing millions of acres from possible drilling amid record-high gas prices, wrote Mark Skousen, PhD, to subscribers of his Forecasts & Strategies investment newsletter.

Not surprisingly, crude oil recovered after that move and is now back to $110 a barrel, boosting the share price for Houston-based pipeline and energy storage company Enterprise Products Partners (NYSE: EPD) to 52-week highs, wrote Skousen, a descendant of Benjamin Franklin. Aside from leading the Forecasts & Strategies newsletter, he also heads the Five Star Trader, Home Run Trader, TNT Trader and Fast Money Alert services.

EPD, offering a dividend yield of more than 7%, has been a stellar stock recommendation for Skousen during 2022 by rising more than 24% through Monday, May 16. In contrast, the S&P 500 has plunged 15.91% during that time. 

Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz.

EPD Is One of Six Natural Gas Investments to Buy Amid War

Enterprise Products Partners is one of the largest publicly traded partnerships and a key North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals. The company’s services include natural gas gathering, treating, processing, transportation and storage.

Plus, Enterprise Products Partners provides NGL transportation, fractionation, storage and import and export terminals. It further offers crude oil gathering, transportation, storage and terminals, along with petrochemical and refined products transportation, storage and terminals, as well as a marine transportation business.

I personally have owned Enterprise Products Partners since shortly after the 2020 stock market crash when I bought the stock as it began to rebound. At the market’s close on May 16, the stock had gained 1.46% for the past week, 0.69% for the last month, 12.23% for the past three months, 24.73% so far in 2022 and 18.42% for the last year.

Chart courtesy of www.stockcharts.com

XOM Is Another of the Six Natural Gas Investments to Buy

Irving, Texas-based Exxon Mobil Corp. (NYSE: XOM) jumped during its time as a recommendation in the Cash Machine newsletter between July 2021 and May 17, 2022, providing investors with exposure to liquefied natural gas (LNG) and strong returns. The company ranks as the world’s second-largest supplier of natural gas and jumped about 55% since its addition to the newsletter’s Safe Haven Portfolio. 

Perry, head of the Cash Machine investment newsletter, also leads the Premium Income, Quick Income Trader, Hi-Tech Trader and Breakout Options Alert advisory services, and explained he recommended its sale when the company’s dividend yield dipped below his 4% limit. With limited energy supply, Perry predicted XOM’s share price would remain well fueled by investors seeking an alternative to the sagging stock market so far in 2022, even if the stock no longer fits his requirement for a high-dividend stock.

Paul Dykewicz interviews Bryan Perry, whose services include Quick Income Trader.

Exxon Mobil reported strong first-quarter adjusted earnings of $8.8 billion, up from $2.8 billion for the same period a year ago. Adjusted earnings excluded a $3.4 billion after-tax impairment charge stemming from ExxonMobil’s Russia Sakhalin-1 operation, which the company intends to exit. Its earnings just missed meeting analysts’ consensus estimates.

XOM has continued to shine amid the market’s retreat. The company’s share price has soared 8.73% during the past week, 4.55% in the last month, 17.20% in the past three months, 51.51% thus far in 2022 and 55.44% for the last year.

Chart courtesy of www.stockcharts.com

Pension Fund Leader Picks Two of the Six Natural Gas Investments to Buy

Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter, added Cohen & Steers MLP & Energy Opportunity Fund (MLOAX) to all the portfolios in his latest issue. 

“Natural gas should continue to be a good investment, as long as Europe is looking for ways to reduce dependence on Russia,” Carlson told me. “In addition, the natural gas drillers in the U.S. are focused on increasing cash flow and earnings. They’re not inclined to maximize drilling expenses in the short run to increase output.”

Bob Carlson, who leads Retirement Watch, meets with Paul Dykewicz.

Good investment opportunities can be found with companies that provide the pipelines, storage facilities and other infrastructure needed to supply the world with natural gas and other energy sources, Carlson told me. 

“One of the attractive qualities of these investments is that their revenues are independent of the prices of the commodities,” Carlson counseled. “The firms charge fees for their services, and the fees often are adjusted for inflation. Their revenues and earnings depend on the volume of commodities passing through their facilities, not the price of the commodity.”

“Leading” energy service companies provide total returns, aided by current income and price appreciation, through investments in energy-related master limited partnerships (MLPs) and securities of industry companies, Carlson said. Those businesses are expected to derive at least 50% of their revenues or operating income from exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, crude oil and other energy resources.

Chart courtesy of www.stockcharts.com

Cohen & Steers Fund Makes List of Six Natural Gas Investments to Buy

The Cohen & Steers MLP & Energy Opportunity Fund recently held 53 positions and had 50% of the fund in the 10 largest positions. Top holdings of the fund were Enbridge (NYSE: ENB), Cheniere Energy (NYSEAMERICAN: LNG), Williams Companies (NYSE: WMB), TC Energy (NYSE: TRP) and Energy Transfer (NYSE: ET).

The fund has notched strong returns since April 2020. It is up 3.70% in the last week after dipping 1.09% in the past month. It also rose 12.88% in the last three months, 21.78% so far in 2022 and 29.20% in the last year.

UNG Makes List of Six Natural Gas Investments to Buy

Carlson’s second LNG recommendation is the ETF United States Natural Gas (UNG). The fund invests in natural gas futures contracts and related contracts on natural gas prices. The contracts are collaterized with cash and treasury securities.

The fund has zoomed 12.71% in the past week, 7.03% in the last month, 73.20% during the previous three months, 119.38% for the year to date and 157.52% over the last year.

Chart courtesy of www.stockcharts.com

Connell Chooses Two of Six Natural Gas Investments Worth Buying

U.S. LNG inventory is currently below its five-year average for this time of year by double-digit percentages, said Michelle Connell, CFA, president and owner of Portia Capital Management, of Dallas, Texas. A key issue for the U.S. LNG industry is that production of the energy source has never been profitable on its own, but it is as a byproduct of oil production, she added.

“There isn’t enough oil being produced,” Connell said. “Currently, only 11.6 million barrels/day are being produced. Pre-pandemic, we produced 13 million barrels/day.”

Instead of investing to expand capacity, oil companies have been focusing on hiking their dividends, Connell continued. If they pivot, these companies face a backlash from investors who could sell their shares, Connell added.

“Their market value could get crushed,” Connell said.

Former portfolio manager Michelle Connell, CEO, Portia Capital Management

EOG Resources Lands on List of Six Natural Gas Investments to Buy

LNG companies cannot ramp up production quickly, Connell cautioned. It takes oil companies a minimum of six to eight months to increase their oil and LNG production, Connell counseled. 

Production of oil via shale recently created the largest share of the America’s natural gas reserves, Connell continued. Unfortunately for proponents of increasing output to meet soaring demand, shale production has “decreased exponentially” since the pandemic began and the buildup of LNG reserves has declined, Connell explained.

However, Houston-based EOG Resources Inc. (NYSE: EOG) is producing substantial amounts of oil via shale, and thus considerable LNG. The company’s Chief Executive Officer Ezra Yacob called its recent financial results “outstanding” and said 2021 was a “tremendous year” for EOG with record earnings, record free cash flow and return of cash that places it among industry leaders.

Income investors will appreciate that the company’s long-standing focus on free cash flow led to payment of another $1.00 per share special dividend while also strengthening its balance sheet.

Chart courtesy of www.stockcharts.com

Reasons why Connell likes EOG include: 

-Wall Street analysts from investment firms such as Wells Fargo and Raymond James continue to increase its future earnings estimates and target prices, despite its strong performance of rising more than 40% so far in 2022;

-Based on its fundamentals, the stock may have another 25% of 12-month upside;

-Its relatively new gas resource in the Gulf Coast could provide additional potential and cash flow for the company;

-Strong cash flow growth is expected to continue for the foreseeable future, powering annualized cash flow growth in excess of 25% per year.

EPD is up 7.14% in the past week, 2.78% in the last month, 14.62% during the past three months, 45.06% so far in 2022 and 60.64% in the past year.

Pioneer Natural Resources May Be Worth Watching for a Price Pullback 

Pioneer Natural Resources Co. (NYSE: PXD), a hydrocarbon exploration company headquartered in Irving, Texas, has zoomed in recent weeks as Connell has reconsidered her recommendation of the stock due to its increased share price. The company has a market capitalization of $61.72 billion, offers a dividend and has never missed paying a dividend, she added.

In addition, Pioneer Natural Resources has produced an earnings yield of 3.25%, an adjusted cash earnings yield of 7.48% and a five-year average return on equity of 6.61%, Connell said. At the end of 2021, Pioneer Natural Resources had compiled 2.22 billion barrels of oil equivalent, with 44% of its proved reserves from petroleum, 30% natural gas liquid and 16% natural gas. 

At PXD’s current share price, Connell is not advocating its purchase, but she still spoke positively about the company. The stock has jumped 10.27% in the past week alone, 54.12% so far this year and 77.97 in the past 12 months.

Chart courtesy of www.stockcharts.com

Supply Chains May Improve as China Starts to Lower COVID Curbs

China has begun to ease its COVID-19 restrictions during the past week, and that could indicate that goods produced in that country may start to flow normally again in the weeks ahead to smooth out supply chain snags. Lockdowns in China have affected at least 373 million people, including roughly 40% of the country’s gross domestic product (GDP). Disruption of the world’s supply chain has affected products such as rice, oil and natural gas.

Shanghai, home to the world’s largest port and 25 million residents, has strained to unload cargo due to strict regulations that have caused shipping containers to stack up. Some Shanghai residents posted videos online to complain about needing food, despite government officials attempting to block dissemination of such expressions of frustration.

Chinese authorities also drew public criticism for forcibly separating young children with COVID-19 from their parents. Chinese leaders prioritized stopping the spread of a new, contagious subvariant of Omicron, BA.2. The variant also has been causing new infections in European nations such as Germany, the Netherlands and Switzerland.

U.S. COVID Deaths Top 1-Million Milestone

U.S. COVID-19 deaths topped 1 million, with the number of lives claimed by the virus reaching 1,000,167 as of May 17, according to Johns Hopkins University. Cases in the United States, as of May 17, hit 82,720,354. America retains the dubious distinction as the nation with the most COVID-19 deaths and cases.

COVID-19 deaths worldwide totaled 6,280,921 on May 17, according to Johns Hopkins. Cases across the globe now number 524,539,523.

Roughly 77.7% of the U.S. population, or 257,942,199, have obtained at least one dose of a COVID-19 vaccine, as of May 17, the CDC reported. Fully vaccinated people total 220,682,023 or 66.5% of the U.S. population, according to the CDC. America also has given at least one COVID-19 booster vaccine to 102.4 million people.

In another development on May 17, the Biden administration opened CovidTests.gov for a third round of orders. White House officials continue to call for Congress to approve additional Covid-response funding.

American households now can order an additional eight “free” COVID testing kits to use at home. COVIDTests.gov has increased the total number of free tests available to each household to 16 since the start of the program, White House officials reported.

The six natural gas investments to buy offer an opportunity to profit from rising energy prices. Investors need to pay attention to valuations before initiating new positions but the growing risks of inflation, the Fed’s plan for further interest rate hikes to curb rising prices and increased federal deficit spending are reasons to seek portfolio protection in the form of natural gas.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

 

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