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The natural gas industry may now be hurting from rock-bottom prices, but if it is able to fully exploit fracking technology and estimates of massive shale gas reserves turn out to be accurate, there will be few losers and many winners — from exploration and extraction companies to pipeline construction and services companies.
Much of the recent weakness in gas prices, which hammered industry-players' stock prices, was from lack of demand caused by an exceptionally mild winter, says Morningstar analyst Mark Hanson.
He believes normal weather conditions in the future should double the price to $5 per 1,000 cubit feet, a level that will provide healthy profits and isn't at odds with the supply boom
“There are sufficient opportunities within most companies’ portfolios that if gas prices recover meaningfully, they can ramp up production fairly easily,” he says.
Such a scenario suggests investors willing to ride out a rocky 2012 may find plenty of opportunity among companies in the sector, which has been trading at multi-year lows.
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