The fallout from the novel coronavirus pandemic left many industries across the globe reeling, specifically crude oil that saw prices go negative. However, the decline gave rise to natural gas stocks looking to take control of the energy market in coming years.
The decrease in demand for oil was a boon for other energy sources. This is because fuel like renewable natural gas comes at a lower production cost than traditional fossil fuels and has favorable regulatory rules.
But that’s not to say that natural gas companies were not impacted by the Covid-19 economy. Producers in the Appalachian region were especially hard-hit but natural gas companies were able to stay afloat despite the dim prices.
Here are three natural gas stocks to put your money in:
Natural Gas Stocks: NextEra Energy (NEE)
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In today’s uncertain environment, investors on the lookout for stocks that are a safe bet and provide long-term stability. NextEra Energy, a Florida-based energy company, provides this.
Next Era Energy is the largest generator of wind and solar power in the U.S. This accounts for 70% of the company’s revenue. However, it also operates a number of natural gas pipelines that served as a financial cushion. The pipelines generate steady income from long-term leases and contracts at fixed purchase rates.
As green energy powers on, NextEra Energy is fairly optimistic about its future growth. The company estimates that it can increase annual return by 10% to 12% by 2022. In addition to this, it believes that demand for renewable energy will increase by 80 GW in the next two years.
Although it fell back on analysts’ second-quarter revenue expectations with sales 21% below forecast, the earnings per share were better than expected at $2.59. Analysts remain bullish about NextEra Energy’s future earnings.
According to Yahoo Finance, growth is forecasted to accelerate at 9.5% along with a revenue increase of 3.1% in 2021. These predictions are much higher than the industry average. With optimistic Q2 results and rosy predictions, NextEra Energy is a natural gas stock that is worth investing in.
Clean Energy Fuels (CLNE)
Clean Energy had a rough couple of years and the natural gas stock was on many investors’ “no-buy” list. As a major producer, the fall in oil prices decimated revenue and pushed the company into major debt.
Clean Energy was forced to sell shares at throw-away prices to reduce the debt. This didn’t do much for the company’s growth prospects. However, it did increase the cash balance on the balance sheet and pulled Clean Energy out of the red.
Nevertheless, the Covid-19 pandemic was a major turning point as many investors turned to renewable energy companies in their hour of need. Thanks to low cost, zero-emission fuels, renewable sources gained momentum as demand for crude oil declines.
Clean Energy is a major producer of renewable natural gas and operates over 50 stations across the nation. As demand for natural gas increases, the company’s strong position makes this stock a buy.
Clean Energy’s financials are not too shabby either. In the past quarter (reported end of March 2020), the company earned a net profit of $33.07 million and revenue increased by $86.01 million. Its EBITDA was well-above the industry average at $14.32 million.
Dominion Energy (D)
Like its counterparts, Dominion Energy strongly believes natural gas will help power the company’s future growth.
The Virginia-based energy company hopes to achieve net-zero emissions from its production plants by 2050. To accelerate its green footprint, Dominion Energy sold its natural gas transmission business to Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) for $10 billion.
The company hopes to continue the production of natural gas, which is the fossil fuel with the lowest carbon emission. According to the company’s CEO, Thomas Farrell, natural gas will serve as a fall-back source when wind and solar power don’t work. The sale of the pipeline business resulted from federal policy that impacted the financing of the operation.
Although Dominion Energy’s stock price fell when the sale was announced, the deal represents a step in the right direction. Natural gas production will remain in the company’s portfolio but a larger part of its operations will focus on renewable energy.
As oil and gas companies cut back production, the future of the energy industry is mostly green. Companies realize the importance of emissions and are pushing investments in renewable energy.
Dominion Energy’s green energy efforts will set the company up for long-term success. This natural gas stock is definitely a buy.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks.