How These 6 Natural Gas Stocks Make Money

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It has invested $50 billion to develop two LNG export facilities along the U.S. Gulf Coast, with 16 LNG trains currently operating, totaling about 55 million tonnes per annum…

Natural gas stocks Cheniere Energy (NYSE: LNG), EQT (NYSE: EQT), Expand Energy (NASDAQ: EXE), Antero Resources (NYSE: AR), Kinder Morgan (NYSE: KMI), and Williams (NYSE: WMB) all focus on the same fuel. However, they don't make money the same way. One liquefies it and ships it overseas, a few drill it out of the ground, and others operate pipelines and gas-related infrastructure. This difference matters.

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Cheniere Energy is the U.S. leader in liquefied natural gas (LNG). It has invested $50 billion to develop two LNG export facilities along the U.S. Gulf Coast, with 16 LNG trains currently operating, totaling about 55 million tonnes per annum (mtpa) of LNG production capacity. It's the country's top LNG producer and the second-largest globally.

The company makes money by liquefying natural gas and exporting it through its LNG terminals, primarily under long-term, take-or-pay contracts (covering 95% of its capacity). Those contracts provide it with very stable, predictable cash flows. That supplies the company with steady cash to invest in expanding its LNG capacity, repay debt, and return cash to shareholders. The stability of its cash flows makes it a lower-risk way to invest in natural gas.

EQT, Expand Energy, and Antero Resources are three of the largest pure-play U.S. gas producers. They produce gas from wells and typically sell it at the prevailing market price. Gas prices can be highly volatile, significantly impacting cash flows. That's why many gas producers use hedging contracts to lock in pricing on a portion of their contracts. Low-cost operations enable a gas producer to earn more money than their higher-cost peers at lower gas prices.

EQT is about to become the country's largest and lowest-cost producer after…

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