Energy Prospectus

Time to load up the EPG Sweet 16 with more gassers

Oil names are out and gas names are in among energy investors, as traders increasingly bet on gains in gas to fuel their portfolios more than crude, Bloomberg reports.

The First Trust Natural Gas ETF (FCG) has enjoyed nine straight weeks of fund inflows, the longest streak since 2021; Comstock Resources (CRK) is the fund's top performer during the period, jumping 22%, and EQT (EQT) and Gulfport Energy (GPOR) have gained more than 15% over the same period.

J.P. Morgan analyst Arun Jayaram predicts a "role reversal" next year, in which investors should favor natural gas names over oil stocks, given expectations for an oversupplied oil market and “tailwinds” supporting the gas producers such as a boost in LNG exports from North America and rising demand for gas-fired power demand by data centers.

J.P. Morgan's favorite natgas producers to play the theme are Antero Resources (AR), EQT (EQT) and Gulfport (GPOR).

AR and RRC are likely additions to the Sweet 16. CRK is a possible addition, but higher concentration risk. CRK will be extremely profitable if Haynesville gas moves over $4.00/mcf.

All of the current Sweet 16 produce a significant amount of natural gas and NGLs.

On the Sweet 16 Summary spreadsheet, which is updated each week, go to Tab 2 and look at column Y to see the percentage of their production that is "gassy".

EQT is very close to my current valuation of $45/share, but it can move higher if the Wall Street Gang is pushing the gassers just because it the top producer in Appalachia (Marcellus + Utica Shale gas). Plus, EQT is a High Profile company.

Current Sweet 16 with over 50% of production on a Boepd basis that is Ngas and NGLs: CTRA, CRGY, DVN, EOG, EQT (99.6%), MGY, OVV, PR, SM, VRN, VTLE.

Others that will get a significant revenue boost from higher natural gas prices: JOY.TO, ROK.V, SDE.TO, BSM, KRP, CIVI, and IPO.TO. I like InPlay Oil because it pays such a nice monthly dividend AND it trades at a deep discount to my valuation.