Raymond James Top Picks for Natural Gas

[dan_s]

RJ has lowered their natural gas price forecast for 2023 (to $6.00/MMBtu), but they agree with me that the long-term outlook for natural gas producers is much better than it has been for over two decades.

From yesterday's RJ update:
"From an E&P perspective, Strong-Buy rated Antero Resources (AR) remains our favorite way to play our bullish natural gas outlook vs. the
strip. AR sports virtually no hedges in 2023 (just ~2% of total nat gas volumes), offering investors peer-leading exposure to strip. Having kicked
off an aggressive stock buyback program earlier this year (~50% of 2022 FCF dedicated towards repurchases), we expect AR to materially increase
this number in 2023 (~14% of outstanding shares), as debt reduction no longer takes FCF priority (YE22E leverage of just ~0.3x). In terms of comps,
AR screens tops amongst RJ large caps on a forward FCF yield basis (~22%). Additionally, AR’s substantial LNG firm access capacity (~2.3 Bcf/d;
only 1.0 Bcf/d committed) further separates the firm from peers. On the minerals side, Strong-Buy rated Black Stone Minerals (BSM) provides
investors exposure to several gassy resource plays. Nearly 75% of BSM’s production is gas, with 2023 hedges encompassing just ~25% of total gas
production (down from ~60% in 2022). All-in, we’re forecasting a robust 2023 distribution yield of ~11%.

BSM is in our High Yield Income Portfolio. It is the only MLP, which makes it more appropriate for a taxable account.