To get a deal done between the Biden administration and Congress to extend the United States’ borrowing authority, the final debt-ceiling bill included a provision to approve the remaining permits needed to complete a controversial natural gas pipeline between West Virginia and Virginia.
Environmentalists worried about water pollution and climate change were outraged at the greenlighting of the Mountain Valley Pipeline, but the deal kept the U.S. from defaulting on its debt.
The deal offers insight into the complicated politics of natural gas. Environmental activists say no new fossil-fuel projects should get the go-ahead if the world is to successfully limit warming to 1.5 degrees Celsius (2.7 F) above pre-industrial levels to stave off the worst of climate change.
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That clashes with oil and gas developers, who say the world will need natural gas as a transition fuel to wean itself from fossil fuels to renewable energy.
Whichever camp you fall into, it seems that natural gas is here to stay for some time. There aren’t enough renewable energy sources online to fully replace natural gas-fired power plants, and there isn’t enough large-scale battery storage to keep the lights on when the wind isn’t blowing or the sun isn’t shining.
“While carbon-heavy methods of energy generation, like coal burning, may be on their way to obsolescence, more palatable alternatives — particularly liquefied natural gas — continue to enjoy support for pro-development as an essential source of power,” says James Hill, CEO of MCF Energy Ltd., a firm involved in the exploration and development of natural gas resources in Europe.
With that backdrop in mind, here are five stocks for investing in natural gas, followed by an exchange-traded fund, or ETF, that provides a diversified approach as well as a natural gas commodity fund:
| Natural gas stock | Dividend yield | YTD return as of June 6 |
| EQT Corp. (ticker: EQT) | 1.7% | 11.5% |
| Cheniere Energy Inc. (LNG) | 1.1% | -4.9% |
| Plains All American Pipeline LP (PAA) | 7.9% | 20.7% |
| Enbridge Inc. (ENB) | 7.0% | -0.4% |
| Kinder Morgan Inc. (KMI) | 6.7% | -3.8% |
EQT Corp. (EQT)
With operations in the Marcellus and Utica shales of the Appalachian Basin, EQT is the largest U.S. natural gas producer.
Like many U.S. energy companies, EQT has been focusing on share buybacks. In the first quarter, the company repurchased $200 million of its stock.
“EQT is America’s largest natural gas provider and has a healthy balance sheet and great logistics to deliver natural gas to Europe,” says Sankar Sharma, CEO of RiskRewardReturn.com, an investing resource hub. “Future demand comes from Europe, and EQT is best placed to profit from the demand.”
Cheniere Energy Inc. (LNG)
One reason Europe is a hot spot for natural gas at the moment is that it is trying to wean itself off of Russian supplies amid the war in Ukraine.
To transport natural gas to global markets from the U.S., the gas needs to be cooled into a liquid to create liquefied natural gas, or LNG.
Cheniere Energy — which operates LNG terminals and liquefaction projects — is the biggest U.S. exporter of LNG. The company has one of the biggest liquefaction platforms in the world, with facilities in Louisiana and Texas, and it says it is also pursuing liquefaction expansion opportunities.
Plains All American Pipeline LP (PAA)
This energy infrastructure company owns pipelines, transportation, terminaling, storage and gathering assets for crude oil, natural gas liquids and natural gas. It has operations in the Permian Basin, a fossil fuel-producing area in Texas and New Mexico that is expected to expand.
The company is structured as a master limited partnership, or MLP, and makes quarterly distributions of available cash to unit holders. In the third quarter of 2022, its distribution per common unit rose 23% year over year.
Enbridge Inc. (ENB)
This company transports about 20% of the natural gas consumed in the U.S. It also operates North America’s third-largest natural gas utility in terms of customers, giving it some cushion against fluctuations in natural gas prices.
In addition to natural gas, the company also invests in renewable energy projects, such as wind and solar. Straddling the fossil fuel market and the green energy market seems like a solid strategy for Enbridge as the energy transition gains steam.
The company recently bought a natural gas storage facility that expands its LNG-related footprint in British Columbia, Canada. It also has been awarded a contract to design and construct an offshore wind farm to supply renewable electricity to France.
[READ: 11 Best Energy Stocks to Buy in 2023]
Kinder Morgan Inc. (KMI)
This pipeline operator runs major interstate and intrastate natural gas pipeline and storage systems; natural gas gathering systems and processing and treating facilities; natural gas liquids fractionation facilities and transportation systems; and LNG regasification, liquefaction and storage facilities.
In short, Kinder Morgan stands to benefit from growth in demand for more LNG from the U.S.
In the first quarter, Kinder Morgan increased its dividend for the sixth consecutive year and bought back about 6.8 million shares for $113 million.
“Shareholders continue to benefit from our long-standing corporate strategy: maintaining a strong investment-grade balance sheet, internally funding expansion opportunities, paying an attractive and growing dividend and further returning value by repurchasing our shares on an opportunistic basis,” Executive Chairman Richard Kinder said in a press release accompanying the company’s first-quarter results.
Natural Gas Funds to Buy in 2023
iShares U.S. Oil & Gas Exploration & Production ETF (IEO)
Companies that produce natural gas are also often involved in extracting oil from the ground as well. So it’s no surprise that this ETF includes companies that do both. While it’s not a pure play on natural gas companies, it does give exposure to the commodity while also offering a broad array of companies under one ticker symbol.
That instant diversification can help reduce the risk of picking single stocks because it spreads out the risk of bad management decisions or projects running over budget or not coming through at all.
United States Natural Gas Fund (UNG)
If you want to bypass natural gas production company risk altogether, you can invest directly in natural gas as a commodity.
While there are different ways of doing this, one of the easiest is with this fund, designed to track natural gas price movements based on benchmark Henry Hub futures. Henry Hub is a natural gas pipeline network in Erath, Louisiana, owned by Sabine Pipe Line LLC and its affiliates, that serves as a distribution hub for major natural gas markets.
For natural gas, Sharma’s outlook is positive. “Our forecast suggests that demand is likely to return within the next 18 to 24 months,” he says. “If the investor is thinking of natural gas, they should aim for a two- to three-year holding period for getting good ROI (return on investment).”
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7 Best Natural Gas Stocks and Funds to Buy in 2023 originally appeared on usnews.com
Update 06/07/23: This story was previously published at an earlier date and has been updated with new information.
