Gas Sector a Bargain

Somebody will eventually make a great profit from the 2008 collapse in natural-gas prices.  Take a look at the chart of SPDR S&P Oil & Gas Explore & Prod. (ETF) (NYSE:XOP) and you will see that it absolutely fell off a cliff between July and September 2008.  Ouch if you were hanging on to gas or oil stocks, although this provides a great value play opportunity in 2009.  The problem is that no one knows when these stocks will start to recover, how long it will take for that recovery and which ones will actually recover.

This sector seems like it is due for a recovery, although it may be a bit slower than desired.  Stocks to keep your eye out for include XTO Energy Inc. (NYSE:XTO), Devon Energy Corporation (NYSE:DVN) and Ultra Petroleum Corp. (Public, NYSE:UPL) since these companies placed smart hedges to lock in higher prices for their natural gas sales to its customers.  This will help their longer term cash flow and may keep their heads above water in the next few months while waiting for the sector recovery.

Another company to keep your eye on is Chesapeake Energy Corporation (NYSE:CHK) which unfortunately is more highly leveraged with long-term debt, but has weathered the storm well with intense deal making and brilliant asset management.

More resources regarding natural gas stocks.