The days are long gone when natural gas is just used heavily in the winter. In fact, more and more utilities are switching from coal to natural gas as it is far less polluting and much easier to access and store. Jefferies analysts took a field trip to Pittsburgh to visit some of the top Marcellus and Utica producers. They came back with some fairly bullish data points, shared in a new report.
With both shales still producing well, and demand perking up, the Jefferies team is positive on three area producers that are rated Buy. When visiting with executives at the producers, the analysts found the commentary supportive to their own view of tightening natural gas supply and demand balances and better pricing.
Here are three top natural gas producers rated Buy at Jefferies.
This company has almost been cut in half from highs printed last summer. CONSOL Energy Inc. (NYSE: CNX) is one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. CONSOL Energy deploys an organic growth strategy focused on rapidly developing its resource base. As of December 31, 2014, CONSOL Energy had 6.8 trillion cubic feet of proved natural gas reserves. The company’s premium coal assets are sold to electricity generators and steel makers, both domestically and internationally.
The Jefferies analysts point out that company management noted that operations in the Marcellus continue to become more efficient as CONSOL drills longer laterals, utilizes more stages and uses more proppant. The efficiency may be helping to drive earnings that have seen a nice streak of beating estimates over the past half year. In fact, in those reports, CONSOL has beaten estimates by at least 25% in both cases.
CONSOL investors are paid a 0.9% dividend. The Jefferies price target for the stock is $38. The Thomson/First Call consensus target is at $36.79. Shares closed Wednesday at $27.39.