Are Natural Gas Stocks Like Southwestern, Range Resources, Chesapeake at a Bottom?

Natural gas stocks are trading like we'll never use the stuff again -- but we know that isn't true. TheStreet's Energy Contributor Dan Dicker talks with Jim Cramer.
By Daniel Dicker ,

Natural gas stocks are trading like we'll never use the stuff again -- but we know that isn't true.

While I still think that oil will be quicker to recover than natural gas, there are a few indications in the third quarter reports from some of the natural gas companies that a bottom is forming -- and with winter on the way, perhaps it is time to believe that some of the better natural gas stocks, like Southwestern (SWN) - Get Report and EQT (EQT) - Get Report won't be going much lower.

If anything, natural gas has suffered from a surplus in production even more deeply than the oil markets have. Fracking of natural gas in the Marcellus and Utica have continued to increase, despite the continuing lowered realized prices for dry gas production.

The stocks for the dedicated natural gas companies have seen even worse slides than oil companies have, to the point that even the best capitalized and best managed companies that have the most productive acreage are selling at lifetime lows.

But there are signs that perhaps some of this might be slowly changing.

In the Marcellus, production continues to grow, but the pace of that growth has finally begun to slow. Oil rigs have dropped by a thousand in the past year and we've begun to see oil production in the U.S. decrease. What we've not yet noticed is the concurrent drop in associated gas production that must come in its wake. Finally, we're seeing some predictions of a coming brutally cold winter from NOAA, an always bullish event for natural gas prices and natural gas stocks.

These three indicators aren't a lot to invest with, but with gas stocks this low, they're enough. With Range Resources (RRC) - Get Report at $33 and Southwestern at $11, there seems to me to be very little downside left in these shares -- and the possibility of getting a positive move this winter from them is a worthwhile bet.

These are very speculative ideas, but I believe that natural gas, like oil, is forming a very long-term bottom, and for those with long-term goals, the low prices on several of these good companies is worthy of your attention -- and investment dollars.

I talk more about natural gas with Jim in the video above.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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