When the price of methane tanked, many natural gas producers set their sights on increasing natural gas liquids production. NGLs, or "wet gas," sell at much higher prices than dry gas. Devon Energy (NYSE: DVN ) is a great example of this. The company just announced it increased liquids production for the sixth consecutive quarter, led by growth in oil production and an 80% year-over-year increase in liquids production in the Cana Woodford shale.

Devon isn't the only company finding success with natural gas liquids, but that doesn't necessarily mean that every company pursuing NGLs is worth investing in. Let's take a closer look at some of our investing options.

Success!
One of the best ways to play increased NGL production is to invest in midstream companies. ONEOK Partners (NYSE: OKS ) is about the eighth largest North American pipeline operator by market cap. In 2011, the company's stock price grew 45% year over year. ONEOK is down 1.1% so far this year, but its first-quarter performance was impressive, largely because of its NGL segment.

EBTIDA was up 35% over last year to $344 million. Operating income from the NGL unit increased 73%. Perhaps most importantly, analysts have highlighted increasing NGL volumes that will provide a lasting foundation for success. NGL gathering and fractionating volumes were both up 20% year over year.

As a result, the partnership has increased its distributions 4.1% to $0.635 per unit, good for an annual 4.6% yield.

ONEOK isn't the only one cleaning up in the NGL market. Enterprise Products Partners (NYSE: EPD ) reported gross operating margins for its NGL segment climbed 30% to $655 million and set records for gas processing and NGL sales margins.

Failure!
Chesapeake Energy (NYSE: CHK ) can't do anything right lately. Though most people expected the company to suffer from basement prices for natural gas, Chesapeake intended to make up at least some of the difference by targeting NGL production. That, apparently, will not go as planned.

Chesapeake reported liquids production growth of 69% year over year, but it also readjusted its expectations for total liquids volumes for 2012 and 2013. The company now expects midpoints for liquids production of 42 million barrels in 2012, instead of 55 mmbbls, and 57 mmbbls in 2013, down from 76 mmbbls.

The reduced production will likely be chalked up to looming asset sales in the Permian Basin and other monetization in the Mississippi Lime and Mid-Continent regions that the company needs to bridge its funding gap. In light of Chesapeake's $1.77 realized price of natural gas in the first quarter, it may be a case of cutting off its nose to spite its face -- what little it has left.

Foolish takeaway
Midstream companies often get overlooked, but when it comes to NGLs they really are one of the best ways to take advantage of increased production and the requisite processing that comes with it. However, if you are worried about the high debt loads midstreams typically carry, you should check out this report that shows, three great stocks that thrive when oil is over $100 barrel. This report is free, but only for a limited time. Be sure to get a copy now.


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