United States Natural Gas Fund, LP (UNG), Range Resources Corp. (RRC) & Cabot Oil & Gas Corporation (COG): Invest In Nat Gas Or Nat Gas Stocks?

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Alternative to Direct Nat Gas Investment

The issue with a sustained recovery in natural gas prices is one of that was often seen in mining during the 1980s; there are a relatively large number of small players in gas. Higher prices quickly bring on increased production which in turns lowers the price. The industry will likely see an increase in M&A activity and a consolidation of natural gas assets. While prices are uncertain, this can be a positive for potential consolidators. Cabot Oil & Gas Corporation (NYSE:COG) and Range Resources Corp. (NYSE:RRC) are two such companies that could benefit and may be a better way to play natural gas. Cabot Oil & Gas Corporation (NYSE:COG) has property in Pennsylvania, Texas, and Oklahoma and proved reserves of 3,842 billion cubic feet of natural gas equivalent.

Range has reserves in the Appalachian Valley and other areas in the US with a total proved reserves of 6,500 billion cubic feet of natural gas equivalent Cabot Oil & Gas Corporation (NYSE:COG) has an operating margin of 22.6% and an increasing revenue base of $1.31 billion. Range Resources Corp. (NYSE:RRC) is experiencing sales increasing by 30% too in the last 12 months. Range Resources Corp. (NYSE:RRC)’s ROA is lower than Cabot’s at 1.26% vs 4.06%. Cabot Oil & Gas Corporation (NYSE:COG) has a lower PE and lower debt than Range Resources Corp. (NYSE:RRC) too. Overall Cabot seems more attractive as a company today but Range has much more in proved reserves for the future. Betting on these companies could be better than betting on weather trends focused around 2013/14’s winter as the other pricing catalyst.

The article Invest In Nat Gas Or Nat Gas Stocks? originally appeared on Fool.com.

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