Five North American Natural Gas Buys

Five large cap buy recommendations concentrated on North American natural gas, Anadarko Petroleum (APC), Devon Energy (DVN), Encana (ECA), EOG Resources (EOG) and XTO Energy (XTO), have demonstrated volume growth on a basis that takes account of financing (see chart Volume per Share, Adjusted for Debt and Dividends, below). All have low McDep Ratios ranging from 0.72 to 0.91 with the top growers of the latest quarter coincidentally having the higher McDep Ratios.

Stock prices are in an uptrend by the 200-day average measure despite intense short-term pressure on the price of the companies’ main product, clean natural gas. Potentially rebounding economic activity in 2010 may demand the new volumes not needed today for industrial production or power generation. The large cap North American natural gas independents account for 5 of our 28 buy recommendations. We suggest that one or more might account for 18% of enterprise value in a McDep Energy Portfolio, or perhaps 24% if you like the prospects for natural gas as much as we do.