I'm warming a bit to the idea of investing in the natural gas sector. If I do it will certainly be focused on companies with no debt, who can ride out several years of rock bottom prices.
A couple of months ago, I wrote an article for Seeking Alpha that detailed how legendary investor Jeremy Grantham thought investors should be looking in the natural gas sector for investment ideas.
Actually, what Grantham said was a little more interesting than that, so I'll use his exact words which come from his year end letter:
At the opposite end of the resource spectrum to record-priced Iowa farmland is natural gas. Natural gas is, for most purposes like home heating and electric utility plants, a better and cleaner fuel than oil or coal, but is for technical reasons in distress: there have been several recent decades in which the BTU equivalent price for natural gas did, at least for a second, reach parity with oil. But now it is at just 14% of BTU equivalency, the lowest in almost 50 years. Everyone who has a brain should be thinking of how to make money on this in the longer term.
I read that and combined the information with the fact that I have a brain, so I've been looking for investments in the natural gas sector. Recently, I continued my search by listening in on the conference call of major natural gas producer Encana (ECA). Seeking Alpha provides thetranscript if you are interested.
Much of the Capital Now Moving to Oil Drilling Is Not Coming Back to Natural Gas
Encana and Chesapeake Energy (CHK) are two of the largest natural gas producers in North America. Both have been incredibly successful in finding and producing natural gas from unconventional sources. In fact they have been too successful as they have played a large part in oversupplying the market with the cleaner fuel.