Natural Gas to be Second-Leading Global Energy Source by 2030: 5 Picks

 

Natural gas could replace coal as the second-largest energy source in the world by 2030, driven by the growing usage of liquefied natural gas (LNG) globally in order to curb air pollution, International Energy Agency (IEA) said earlier this week.

The IEA’s World Energy Outlook 2018 report states energy demand is estimated to grow more than 25% by 2040, which will require more than $2 trillion annual investments in new energy supplies.

The major reason behind growing energy demand could be geopolitical and economic issues, which are exerting complex influences on the energy markets. The ongoing trade war between the United States and China, Brexit, U.S. sanctions on Iranian oil triggering conflicts in the Middle-East are some of the factors driving the energy markets at present.

China’s emergence as the largest consumer of natural gas could reach European Union’s level by 2040, making the Asian nation the largest importer of oil, coal and gas. China is preceded by the United States and Russia as the largest importers of natural gas at present but the scenario is likely to change in the next two decades.

The course of future energy systems will be mainly decided by government policies, thus the need for right policies will become imperative to secure energy supplies, reduce carbon emissions and improve air quality in urban centers, the IEA’s energy outlook stated.

“Our analysis shows that over 70% of global energy investments will be government-driven and as such the message is clear – the world’s energy destiny lies with government decisions,” IEA’s Executive Director, Dr Fatih Birol, said.

The need to curb air pollution will take center stage, thus pushing the demand for sustainable natural gas. Renewable fuel sources will constitute two-thirds of global capacity additions by 2040, backed by helpful government policies and lower costs.

The present scenario, therefore, is favorable for investing in LNG companies.

Why Invest in U.S. Natural Gas Companies Now

According to a world energy report by BP Global, U.S. produced 734.5 billion cubic meters of natural gas in 2017, accounting for 20% of the world’s natural gas production.

U.S. natural gas industry witnessed production jump of 51% in 2005-2015 because of shale gas, making the country one of the leading producers of natural gas. U.S. consumption of natural gas has grown rapidly too, as more power plants are switching to renewable alternatives from coal.

U.S. natural gas exports reached 1.7 billion cubic feet per day in 2017, equivalent to 2.4% of the country’s daily production. Pipeline exports accounted for 6.3 billion cubic feet per day last year, corresponding to 8.9% of U.S. production.

Given United States’ total natural gas reserves of 8.7 trillion cubic meters at the end of 2017, the country’s natural gas industry has a healthy outlook. Therefore, investing in the same will be sensible.

5 Stocks to Buy

We have chosen a couple of oil and natural gas exploration companies based in the United States that you can consider investing in. All the stocks boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Antero Resources Corporation AR is an independent oil and natural gas company that carries a Zacks Rank #2.

Antero Resources’ expected earnings growth rate for the current year is 236.4% compared with the Zacks Oil and Gas Exploration and Production industry’s  projected rise of 20.3%. The Zacks Consensus Estimate for the company’s earnings has risen 5.7% in the past 60 days.

Energen Corporation EGN is an independent oil and gas exploration and production company that operates exclusively in the Permian Basin of west Texas and New Mexico. The company carries a Zacks Rank #1.

Energen’s expected earnings growth rate for the current year is 376% compared with the industry’s projected rise of 20.3%. The Zacks Consensus Estimate for the company’s earnings has increased 3.7% in the past 60 days.

Range Resources Corporation RRC is a leading U.S. independent oil and natural gas producer with operations focused in stacked-pay projects in the Appalachia Basin and Northern Louisiana. The company carries a Zacks Rank #2.

Range Resources’ expected earnings growth rate for the current year is 103.4% compared with the industry’s projected rise of 20.3%. The Zacks Consensus Estimate for the company’s earnings has risen 11.3% in the past 60 days.

Cimarex Energy Co XEC is an independent oil and gas exploration and production company that carries a Zacks Rank #2.

Cimarex Energy’s expected earnings growth rate for the current year is 53.8% compared with the industry’s projected rise of 20.3%. The Zacks Consensus Estimate for the company’s earnings has increased 5.4% in the past 60 days.

Matador Resources Company MTDR is an energy company engaged in the exploration, development and acquisition of oil and natural gas resources in the United States. The company carries a Zacks Rank #2.

Matador Resources’ expected earnings growth rate for the current year is 130.6% compared with the industry’s projected rise of 20.3%. The Zacks Consensus Estimate for the company’s earnings has risen 13.6% in the past 60 days.

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Symbols: AR EGN MTDR RRC XEC
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