ConocoPhillips (COP), Apache Corporation (APA), CNOOC Limited (ADR) (CEO): Is Natural Gas a Flaming Buy? Five Cheap Natural Gas Producers to Watch

Researching these companies leads to the surprising conclusion that CNOOC Limited (ADR) (NYSE:CEO). appears to be the best investment. While there is a premium with respect to the book value of the company, this seems to be discounted by ample growth over the previous five-year period. A possible drawback is that with lower reserves as a percentage of market capitalization further capital expenditures will be required over the next several years in order to increase the available reserves.

Another significant positive is the relatively low visibility of the stock. At present, only four analysts cover CNOOC Limited (ADR) (NYSE:CEO), with consensus earnings expectations of $19.21, even though the firm reported $22.50 in earnings last year (the prior year consensus expectation was $18.27). Dividend growth over the past 5-year period has been greater than 10% annualized. Revenue growth over the past 5-year period has also greatly exceeded the competitor investments listed above.

While CNOOC Limited (ADR) (NYSE:CEO) is not a pure play on natural gas, it has significant exposure to the resources.  It has also made purchases in the Canadian Oil Sands, and thus there is some exposure to the North American market as well. The company seems to sport excellent growth at a very reasonable price. Apache would be a more pure play in a North American turnaround for natural gas producers, and is also worth keeping an eye on.

The article Is Natural Gas a Flaming Buy? Five Cheap Natural Gas Producers to Watch originally appeared on Fool.com and is written by Brendan O’Boyle.

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