Bank of America has resumed coverage on North American leveraged natural gas exploration and production companies (E&P), expressing a positive stance on the sector. The bank considers most leveraged natural gas stocks undervalued and has given "buy" ratings to six companies: Antero Resources (AR), ARC Resources (AETUF), Comstock Resources (CRK), EQT (EQT, Financial), Exelon (EXC), and Tourmaline Oil (TRMLF).
The bank maintains an optimistic view on the long-term prospects for natural gas, despite challenges such as mild winters or escalating gas supplies that have led to fluctuating prices over the last decade. These factors have contributed to market caution. Analysts noted that market psychology has been hampered, with a reluctance to fully recognize the growing demand fueled by artificial intelligence and liquefied natural gas. However, Bank of America believes capital discipline will make 2025 different, as this year's producer discipline has clearly set a bullish foundation for the future.
EQT, the largest natural gas company in the U.S., alongside Exelon, is considered to present an attractive trading opportunity, where risk and value are well balanced. The bank anticipates a forward price of $3.20, compared to their forecast of approximately $3.75.
Smaller, well-hedged companies like Consol Energy (CNX) and National Fuel Gas (NFG) have experienced significant gains this year, leading to a rating of "underperform." Meanwhile, Antero Resources is seen to have upward potential, and Range Resources (RRC) has attracted attention due to its lower relative cost structure, earning a neutral rating. Gulfport Energy (GPOR) also holds a neutral rating, with its risk balance appearing relatively favorable, despite a tapering of the strong momentum shown in 2023 as it heads into 2024.
