These Natural Gas Stocks Are Big-Time Bargains

What's the hottest energy play in the lower 48 states?

It's not Louisiana. And it's not Texas.

Try the Rocky Mountains.

The fastest-growing supply of onshore natural gas in the lower 48 states comes from the Rocky Mountains. Proved reserves of natural gas in the region have tripled since 1977, according to industry consultant Wood Mackenzie. The three key Rocky Mountain basins -- the Green River Basin in Wyoming, the Uinta-Piceance Basin in Utah and the Powder River Basin in Wyoming -- will see natural gas production climb by 22%, 56% and 10%, respectively, from 2007 through 2011.

Bet you'd like to own some stock in the companies with the biggest stakes in that region. But you're afraid they're too pricey. Have I got a buying opportunity for you.

Thanks to a lack of pipeline capacity in the region, natural gas companies are going to have to rein in growth in the second half of 2007 and into 2008. A local glut of natural gas has already driven the price of Rocky Mountain natural gas to a deep discount vs. the commonly quoted Henry Hub benchmark price.

Know what that means? The best producers in the fastest-growing production area in the lower U.S. are going to turn in comparatively lousy earnings growth over the next quarter or two. And that will be your chance to swoop -- in September or October or so -- and pick up these stocks before new pipeline segments set to open in 2008 and 2009 start to eliminate the glut and wipe out much of that discount in regional natural-gas prices.

Rock-Solid

I'm going to start with the big picture and then zoom in on three stocks that have the most potential to profit from continued growth in natural gas production from the Rocky Mountains.