Temperatures may be hot right now but Europe is already looking forwards to winter. Yesterday, Russia announced that it would be taking further action against Europe. State-owned energy producer Gazprom confirmed that it will be reducing its exports to Europe through the Nord Stream pipeline. This cut off means that natural gas flows to Germany, currently at a 40% reduction, will be lowered to 20%. According to The Wall Street Journal, this policy will take effect as soon as Wednesday, July 27. The threat of gas supplies becoming even more limited overnight poses a unique challenge for European leaders. But for natural gas producers, it provides a new market opportunity. Investors should be assessing the best natural gas stocks to buy before Russia implements this new policy.
Gas prices throughout Europe were already rising prior to this news. Since it’s announcement, though, they have surged by more than 20%. The Financial Times reports that: “The higher gas prices indicate the mounting pressure on Europe to seek alternative supplies to keep homes warm and industry producing through the coming winter.” In this case, alternative supplies will likely come from companies that produce natural gas in other countries, such as the United States. And U.S. liquified natural gas, or LNG, producers with operations in Europe will be at a significant advantage.
Let’s take a look at the the natural gas stocks to buy to stay ahead of Europe’s looming energy crisis.
Cheniere Energy (LNG)
This stock’s trading symbol reminds investors exactly what Cheniere Energy (NYSEAMERICAN:LNG) does. Not that investors have needed much reminding lately. The trend of Russia cutting off its European energy exports has been a significant boon for LNG which has gained 30% since Russia invaded Ukraine. Its last major growth catalyst came when Russia cut off its natural gas supply to Denmark in early July 2022. In keeping with this trend, LNG is up 2% today and is likely to continue rising even higher as demand for its products spikes.
As the world’s second largest LNG producer, Cheniere has significant market implications. Experts touted it as a winner of the early 2022 energy boom but growing global demand has shown a new light on it. InvestorPlace contributor Josh Enomoto notes that: “With the new paradigm in the global energy sector, greater investments toward exploration and production are well within reason.” For that reason, he considers it one of the market’s best natural gas stocks to buy. Cheniere has already helped supply LNG to Europe and its CEO has implied that the company intends to continue. This makes it a stock that investors seeking LNG plays should be watching closely.
This oil giant may be about see a new catalyst after a difficult month. ConocoPhillips (NYSE:COP) has been struggling since its early June plunge. But while this company is known for oil drilling, it is also a leading LNG producer with global reach. As Enomoto notes, it “cynically enjoys domestic political tailwinds,” meaning that political conditions have been favorable to it. As he sees it, “the western world’s simmering tensions with Russia effectively shelves a significant portion of global hydrocarbon supplies.” And as a leading in the hydrocarbon space, ConocoPhillips is well positioned to benefit from a global economy in which Europe is turning to international LNG producers.
What truly earns ConocoPhillips a place among natural gas stocks to buy is its global reach across the sector. The company’s Norway operations include two pipelines, one that sends natural gas liquids (NGLs) directly to Great Britain and another that sends dry gas to Germany. It is already well-positioned to continue supplying the fuels that Europe needs to make it through the looming winter ahead.
Coterra Energy (CTRA)
This smaller-cap stock has also been flagged by experts such as Enomoto among natural gas stocks to buy. Corterra Energy (NYSE:CTRA) doesn’t have the global reach of ConocoPhillips but it comes with plenty of reasons for investors to be excited. “Coterra is a diversified energy firm, commanding the ability to adjust to weather industry cycles, pivoting between the best oil and natural gas assets in the country,” Enomoto reports. “Given the geopolitical environment we find ourselves in, hydrocarbon exploration will likely take on greater relevance in the years ahead.”
In the two days since that prediction, hydrocarbon exploration has already taken on a greater relevance on the global scale. That means that a company like Coterra will only see more demand in the days ahead. It’s also worth noting that in April 2022, it sent representatives to meet with delegates from Europe to “discuss solutions for reducing reliance on Russian energy imports.” Coterra had its sites set on securing a piece of the European LNG market share for itself. It now has the perfect opportunity to do exactly that, sending CTRA stock up in the process. Its low price should make it a tempting play for investors before the next price-driven surge.
EQT Corporation (EQT)
While some experts have expressed concern regarding the U.S.’ natural gas supplies, one company is working to stay ahead. EQT Corporation (NYSE:EQT) is the country’s leading gas producer and it boasts some ambitious plans. As Enomoto reports, “EQT has an ambitious plan to promote U.S.-sourced liquefied natural gas exports.” And “EQT is pushing to quadruple U.S. LNG capacity to 55 Bcf/d by 2030 to replace international coal at an ‘unprecedented pace’ and cut global emissions.” While that goal is still years away from being reached, the sentiment remains that EQT will be tapped to help provide LNG to Europe in the short-term.
Bloomberg reports that EQT has been discussing deals with buyers “across various geographies,” making clear that the company wants to tap into international markets. In April 2022, its CEO stated that EQT “will play a key role in meeting both domestic and global natural gas demand growth for the foreseeable future.” It seems that his prediction has been proven correct. And with its dynamic natural gas operations, EQT is in an excellent position to help supply what Europe is about to need. This makes it a clear choice among natural gas stocks to buy.
Kinder Morgan (KMI)
The last stock on this list isn’t an LNG producer but it too important not to include. Kinder Morgan (NYSE:KMI) is the U.S. leader in energy infrastructure. Today KMI is up alongside many U.S. LNG producers and for good reason. Any opportunity for the companies that producer natural gas is an opportunity for the company that makes their operations possible. And while the LNG production field is somewhat crowded in the U.S., Kinder Morgan’s sector is not. Its pipelines transport 40% of the country’s natural gas. Enomoto reports that “the company either has an interest in or operates approximately 83,000 miles of pipelines and 141 terminals.”
That impressive market share earns Kinder Morgan a spot on the list of best natural gas stocks to buy. And while KMI has been volatile lately and remains beaten down, its low price point provides an opportunity for investors seeking a bullish play on the incoming natural gas boom. Regardless of which U.S. companies see the most business from Europe, they will likely have ties to Kinder Morgan.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.