Vanguard Natural Resources, LLC (VNR), Cheniere Energy, Inc. (LNG), Clean Energy Fuels Corp (CLNE): The Future of Natural Gas in 2 Slides

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This potential imbalance is good news for natural gas producers, like the nation’s No. 2 producer, Chesapeake Energy Corporation (NYSE:CHK), as well as other natural gas heavy producers like SandRidge Energy Inc. (NYSE:SD). While both companies are focused on growing oil and natural gas liquids production, as the supply and demand dynamics shift over time, it should lead to higher prices.

Chesapeake Energy Corporation (NYSE:CHK) currently produces about 3.1 Bcf/d of natural gas, which is nowhere near as profitable as the oil and NGLs it produces. However, for some perspective, Chesapeake Energy Corporation (NYSE:CHK) could earn 10% more money this year if gas stays above $5 for the rest of the year. It’s a similar story for SandRidge Energy Inc. (NYSE:SD). In its case, 55% of its Mississippian Lime production is natural gas, yet the company derives 80% of its revenue from the 45% of its production that’s oil-focused. Bottom line: Higher natural gas prices means higher revenue and earnings for both companies.

All this is not to say that Americans should expect a natural gas price spike leading up to 2018. On the contrary, as the price rises, so should production. Several natural gas basins are currently not economical, but they would be if the price of natural gas rose to between $5 and $6 per Mcf. In fact, that price just might be the long-term happy-medium price that everyone can live with, much as $100 oil is today.

For investors and consumers alike, the future is clear: Demand and therefore the price for natural gas is likely to head higher over the longer term. That’s quite positive for everyone involved, especially smart companies like Vanguard Natural Resources, LLC (NASDAQ:VNR) that are getting in early on the natural gas revolution.

The article The Future of Natural Gas in 2 Slides originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of SandRidge Energy and is also short September 2013 $5 puts on SandRidge Energy. The Motley Fool recommends Clean Energy Fuels and has options on Chesapeake Energy.

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