After popping to an intra-day high near $5/thousand cubic feet (tcf) in early June, natural gas prices have dropped back to around $4/tcf and hovered there for about six weeks. It’s not likely that the coming heating season is going to improve the price much, mainly due to the glut of natural gas available now from horizontal drilling and hydraulic fracturing technology.

In our continuing hunt for value stocks, we
looked at the largest producers of natural gas in the US and screened for the seven with market caps larger than $20 billion. These are Exxon Mobil Corp. (NYSE: XOM), BP plc (NYSE: BP), ConocoPhillips Corp. (NYSE: COP), Anadarko Petroleum Corp. (NYSE: APC, Devon Energy Corp. (NYSE: DVN), EOG Resources Inc. (NYSE: EOG), and Chesapeake Energy Corp. (NYSE: CHK). Production and reserves figures are based on information from the US Energy Information Administration and reflects 2009 totals. The agency has not yet released data for 2010.

Many of these companies are primarily crude oil producers, but all produce some amount of liquids and it is that liquids production that is keeping profits up at companies like EOG and Chesapeake which are primarily natural gas producers. The seven companies are listed below in market cap order.

Looking for value can be very tricky, particularly in commodity-related stocks and particularly when a sector is in a state of flux.  As we are still preparing for herder times, 24/7 Wall St. is searching for individual companies where their valuation already reflects much of the uncertainty in the markets even if the broader market cannot factor in forward events.  Having the term “value” does not imply immediate gains, but value investors invest ahead of, during, and after recessions.  They even invest when there are no obvious catalysts.

Exxon Mobil Corp. (NYSE: XOM) moved to the top of the list of natural gas producers with its purchase of XTO Energy. The company’s reserves total about 24 trillion cubic feet (Tcf) of natural gas. Combined production in 2009 totaled about 1.5Tcf. Exxon shares recently traded at $71.84 and its market cap is $349 billion. The stock’s 52-week trading range is $58.95-$87.16. The current value is trading at a price-to-book ratio of about 2.25 to 1. Its forward price earnings multiple is 8.05. The company currently pays a dividend yield of 2.62% to investors. Thomson Reuters has a consensus price target of $92.38, implying roughly 29% upside to the most recent price.

BP plc (NYSE: BP) reserves now total about 13.5Tcf and the company produced about 1Tcf in 2009. The company is still recovering from its Gulf of Mexico disaster in April 2010, and its 3 billion barrels of crude reserves are the largest among the seven companies in this list. BP’s shares recently traded at $36.43 and its market cap is $115 billion. The stock’s 52-week trading range is $35.15-$48.16. The current value is trading at a price-to-book ratio of about 1.07 to 1. Its forward price earnings multiple is 5.30. The company currently pays a dividend yield of 4.61% to investors. Thomson Reuters has a consensus price target of $55.76, implying roughly 53% upside to the most recent price.