Natural Gas Giveth and Taketh Away

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Rapid adoption of fracking for natural gas has boosted natural gas production beyond its current demand. That has been both a positive and negative, depending on your line of business. The same can be said for natural gas liquids, which are commonly found in the same rock formations as dry gas.

During periods of profitable prices, this is great for producers and midstream companies, but because of an abundance of supply, liquids such as ethane have seen prices plummet. Much to the delight of companies such as Dow Chemical and Weslake Chemical , ethane prices muddled through the first half of 2013 at just 45% of where they rang up a year ago. Margins have been rising rapidly for both as a result.

Unfortunately for companies such as ONEOK and its subsidiary MLP ONEOK Partners , prices at these levels just are not economically viable to continue separating the liquid out. It has gone into ethane rejection mode, which we detail in the following video. While increased transportation volumes have helped, ethane rejection led to flat earnings for the second quarter versus 2012. 

One thing ONEOK Partners has been trying to accomplish lately is to weed out the affects of volatile commodity prices by going toward a more fee-based model of revenue generation. For investors, buying stocks that benefit from higher oil prices can have the same affect on your portfolio, since most companies are hurt in a rising energy-price environment. If you're on the lookout for some currently intriguing energy plays, check out The Motley Fool's "3 Stocks for $100 Oil." For free access to this special report, simply click here now.

The article Natural Gas Giveth and Taketh Away originally appeared on

Joel South and Taylor Muckerman have no position in any stocks mentioned. The Motley Fool recommends ONEOK and ONEOK Partners. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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