How to Buy Natural Gas Stocks
Natural gas is one of the most important energy sources on our planet, and its demand is set to grow in the coming years as the world transitions away from the more harmful alternatives. In this article, we will look at investing in natural gas stocks, highlighting two stocks to watch this year, before explaining how to buy natural gas stocks in 5 steps.
Table of Contents
Why Invest in Natural Gas?
Before we look at some of the top natural gas stocks in 2022, let’s first look briefly at why investors would want to invest in natural gas stocks in the first place.
Despite the much vocalised global transition away from fossil fuels to greener energy solutions, both crude oil and natural gas still account for the majority of the world’s energy consumption. In 2020, natural gas alone generated around 24% of total global energy1.
The Net Zero Emissions Scenario
In order to comply with the Paris Agreement, where 192 states and the EU agreed to limit global warming to no more than 1.5°C, the world must reach net zero emissions by 2050.
Although natural gas is a fossil fuel, and its use has a negative impact on the environment, it is actually the cleanest-burning fossil fuel, meaning that it has a key role to play on the road to net zero as a “bridge-fuel” whilst we wean ourselves of the more harmful alternatives.
According to the International Energy Agency (IEA), even in a net zero by 2050 scenario, power generation by natural gas will increase in the short-term, as it replaces coal, before falling in the late 2020s. They further project that, in this net zero scenario, by 2030, natural gas will still account for around 17% of total global energy production, falling to just 0.4% by 2050.
If all goes to plan, then natural gas will be more or less redundant by 2050. However, that is quite far in the future. Furthermore, even in this best case scenario, until the end of this decade at least, natural gas stocks still have the potential to benefit, and perhaps even thrive, as coal use is phased out.
Renewable Energy Sources Set to Rise
Of course, investing in natural gas stocks will not appeal to everyone, especially the more environmentally conscious of us. According to the same research by the IEA, renewable energy sources could account for more than 60% of global energy production by 2030, meaning renewable energy stocks could also be a great play for the future.
If you want to find out more about investing in renewable energy, check out our other article: ‘The Best Renewable Energy Stocks to Watch in 2022’.
Top Natural Gas Stocks to Watch
For those who think that natural gas stocks could have a place in their portfolio in the near future, we have taken a look at the industry and landed on 2 top natural gas stocks to watch in 2022. In the following sections, we will examine both of these natural gas shares in more detail.
- Cheniere Energy
- Kinder Morgan
Cheniere Energy is the largest Liquified Natural Gas (LNG) producer in the US and the second largest LNG operator in the world.
The company buys natural gas from the US market, before processing it into LNG in order to be delivered to customers who cannot take delivery of the commodity in its gas form (overseas customers for instance).
As Europe takes steps to end their reliance on Russian gas, natural gas stocks from the US which produce and export LNG could benefit by filling the void. Given Cheniere’s pedigree and experience in this field, they are certainly worth considering for those looking to invest in natural gas stocks.
As with many companies operating in this industry, Cheniere has reported bumper revenue recently, with total revenue in the first quarter of 2022 reaching $7.5 billion, a year-on-year increase of 145%. However, despite revenue surging, the company posted a loss of $613 million for the quarter, down from $1 billion in Q1 20212.
This loss was mostly due to a $3.5 billion charge on LNG-related derivative losses on positions which were designed to hedge against price volatility. Cheniere were not unique in this, with several other natural gas stocks taking similar hits in Q1.
Despite the loss, Cheniere’s revenue growth is impressive, and they remain optimistic for the remainder of the year, revising their earnings guidance for 2022 to up to $8.7 billion, having previously been up to $7.5 billion. Furthermore, this natural gas stock currently has a dividend yield of just over 1%.
Kinder Morgan is one of the largest energy infrastructure companies in North America, operating or owning an interest in around 70,000 miles of natural gas pipelines, which transport around 40% of the natural gas consumed in the US3.
As well as natural gas, Kinder Morgan also operates and owns an interest in pipelines which transport refined petroleum products, crude oil and carbon dioxide, to name a few.
Kinder Morgan mainly provides its essential service to clients under long-term fee-based contracts, meaning that the company generates a reliable and stable income. As well as steady revenue, this approach also means the company is fairly well insulated from volatility in the price of natural gas.
Whilst this means that, unlike some other natural gas stocks, Kinder Morgan has missed out on record breaking revenue amidst rising gas prices, it also means their downside is limited when prices are low.
In the economic uncertainty which we find ourselves currently, companies which can generate reliable income are a big plus for investors. Furthermore, in this case, that reliable income translates into a healthy dividend distribution, with Kinder Morgan’s dividend yield currently sitting at an attractive 6.3%.
How to Buy Natural Gas Stocks in 5 Steps
With an Invest.MT5 account from Admirals, you can buy shares in both the top natural gas stocks examined in this article! For those interested, simply follow our 5 steps for how to buy natural gas stocks below:
- Open an Invest.MT5 account with Admirals and log in to the Trader’s Room
- Next to your Invest.MT5 account details, click ‘Invest’ in order to open the WebTrader
- Scroll to the bottom of the Market Watch window on the left of the screen, search for natural gas stocks you want to buy and add it to the Market Watch
- Once added, click and drag the natural gas stock onto the chart to open its price chart
- Right-click on the chart, select ‘Trading’ and then ‘New Order’ to bring up an order screen. Here, you can select the amount of natural gas shares you want to buy or sell and send your order to the market!
Investing with Admirals
With an Invest.MT5 account from Admirals, you can buy both natural gas stocks examined in this article, as well as shares in over 4,300 companies and over 300 Exchange-Traded Funds (ETFs). Other benefits of this account include:
- Competitive transaction fees and no account maintenance fee
- The ability to purchase fractional shares in 700 of the world’s leading companies
- Exclusive access to our Premium Analytics portal, where you can find the latest market news, sentiment and technical insight
To start enjoying all these benefits and others, open an account by clicking the banner below:
- International Energy Agency – Natural Gas
- Cheniere Energy Inc. – Form 10Q
- Kinder Morgan – Natural Gas
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.