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Russia-Ukraine War Puts Spotlight on 3 Natural Gas Explorers

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It is now time for investors to keep an eye on energy names since the pricing environment of natural gas is healthy. Natural gas companies are specially in the spotlight amid the war in Europe since the United States has aimed to ship 50 billion cubic meters of liquefied natural gas (LNG) every year to the continent through at least 2030.

Surge in Natural Gas Price

The price of natural gas is trading at more than $5 per million British thermal units, marking an improvement of more than 50% year to date. The recent rise in the commodity price is owing to the escalation of Russian attacks on Ukraine.

There has been massive demand for U.S. natural gas owing to the war as Russia is responsible for supplying as much as 40% of natural gas to the European Union. For supplanting the Russian supply, the United States is exporting record volumes of liquefied natural gas to the allies across the Atlantic, bumping up the commodity price in spring.

Apart from the war, natural gas price is being backed by the expectation for higher consumption of the commodity in the United States this year as compared to last year. According to the U.S. Energy Information Administration (EIA), the consumption of the commodity in the domestic market will increase 2% year over year in 2022. Improving demand in the industrial sector, thanks to higher manufacturing activities, residential sector and commercial sector is also driving the natural gas price.

Stocks in Focus

Explorers and producers of natural gas are adding rigs in prolific domestic plays to capitalize on the healthy commodity pricing scenario. In the United States, the count of rigs exploring the commodity for the week ended Mar 25 was 137, higher than the tally of 107 for the week ended Jan 7, per the weekly rig count data of Baker Hughes Company BKR. The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.

Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week figure indicates the demand trajectory for Baker Hughes’ oilfield services from exploration and production companies.

Given the healthy commodity price and rising rig count backdrop, it would be ideal for energy investors to keep an eye on three natural gas explorers. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Being a leading independent natural gas and NGL producer in the United States, Range Resources Corporation RRC, with its strong footprint in the prolific Appalachian Basin, is well-positioned to capitalize on the gas price rally. Range Resources’ production outlook is bright, given its decades of low-risk drilling inventory.

Range Resources is also focused on returning capital to shareholders. RRC has authorized a $500-million share repurchase program.

Southwestern Energy Company SWN is also a well-known name in the Unites States for being a leading producer of natural gas and natural gas liquids. Southwestern Energy’s operations spread across prolific shale plays like Marcellus and Utica, thereby capitalizing on healthy gas prices.

In order to strengthen its balance sheet, Southwestern Energy is committed in allocating its free cashflows for lowering debt loads.

Another energy name that should be on investors’ radar is EQT Corporation EQT. With operations in the Marcellus and Utica Shales in the Appalachian Basin, EQT Corporation is capitalizing on the gas price rally.

Recently, EQT Corporation announced the achievement of investment-grade credit ratings from two credit rating agencies. This reflects EQT’s strong balance sheet and the company's ability to become a better sustainable energy player.


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Range Resources Corporation (RRC) : Free Stock Analysis Report
 
EQT Corporation (EQT) : Free Stock Analysis Report
 
Southwestern Energy Company (SWN) : Free Stock Analysis Report
 
Baker Hughes Company (BKR) : Free Stock Analysis Report
 
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