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Focus on These 5 Stocks to Profit Off the Growing LNG Trend
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Shipments of liquefied natural gas (“LNG”) for export from the United States reached a new all-time high in March. Recovering from the multi-month lows of last August, volumes flowing to LNG terminals have experienced a sustained increase over the past few months on the back of a better demand outlook. Evidently, data suggests that U.S. LNG feed gas volumes will continue to grow for a long time to come.
Strong Demand Growth
Per the Anglo-Dutch energy giant Royal Dutch Shell’s 2020 LNG Outlook, demand for natural gas chilled to liquid form reached 360 million tons last year, up by two million tons from 2019 even amid the coronavirus-led plunge in fuel demand and significantly higher than the 100 million traded in the year 2000.
Data from the Energy Information Administration’s ("EIA") also reflects the positive momentum. According to the agency, U.S. LNG exports have increased sharply since 2015. Over the past six years (2015-2020), shipments from America surged from 28,381 million cubic feet to 2,389,838 million cubic feet – a new record.
The Trend is Set to Continue
Global LNG demand is likely to continue growing for a long period and is projected to nearly double to 700 million tons per annum by 2040. While increasing demand for gas in the European power sector will be a key factor in the near-term LNG supply rise, the consumption boost is primarily set to come from Asian importers like China, South Korea and India as part of efforts to switch from coal and heating oil for environmental reasons. Being the third-biggest supplier of LNG to global markets, the United States is well positioned to leverage the boom.
Further, domestic natural prices remain constrained on the back of abundant supplies, which provides attractive opportunity to exporters in selling U.S. natural gas production at higher prices overseas (Europe and Asia).
5 Companies to Capitalize on this Opportunity
With the dramatic growth of natural gas exports and investors’ strong appetite for LNG stocks, we present four companies that investors should watch out for.
Royal Dutch Shell: Shell’s long-term strategy revolves around LNG.The Zacks Rank #1 (Strong Buy) Anglo-Dutch firm bought BG Group for $50billion in 2016 to become the world’s largest producer and shipper of LNG. With LNG export demand likely to rise significantly in the near-to-medium term, Shell’s position as a major supplier of LNG should help the company meet the fuel’s growing demand and help cash flow to improve.
Chevron (CVX - Free Report) : Chevron, also carrying a Zacks Rank of 1, is another world class operator of LNG. Part of Chevron’s long-term strategy, the giant Gorgon and Wheatstone developments in Australia are its flagship LNG developments. These mega projects allow the supermajor to tap into the strong Asian LNG demand. Chevron is the operator of both the projects — with 64.14 % stake in Wheatstone and 47.3% in the Gorgon development.
Cheniere Energy (LNG - Free Report) : Being the first company to receive regulatory approval to export LNG from its Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage. Given first-mover advantage in the LNG export market, the Zacks Rank #3 (Hold) firm is primed for significant revenue and earnings growth on the back of long-term contracts and solid operations. Presently, Cheniere Energy’s substantial LNG asset platform includes the Sabine Pass Liquefaction facility with a total production capacity of 30 million tons per annum and Corpus Christi LNG Terminal having a capacity of 15 million tons per annum. The premier LNG provider has a proven track record of execution and operations.
Kinder Morgan (KMI - Free Report) : As U.S. LNG exports continue to increase, Kinder Morgan will be another firm to reap benefits. In particular, the #3 Ranked company’s network of pipelines and storage assets help it to leverage the growing feedgas deliveries to liquefaction terminals. Apart from providing the infrastructure to facilities operated by others, Kinder Morgan started full commercial operations at its 51%-owned $2-billion Elba Island export plant in 2020.
Energy Transfer LP (ET - Free Report) : Energy Transfer is also an important player in this space. The partnership’s Lake Charles LNG Terminal provides it with a strong foothold in the global LNG business. The terminal and regasification facility located on Louisiana’s Gulf Coast near Lake Charles has long-term contracts with a wholly-owned unit of Shell. The Zacks #3 Ranked partnership is also developing an LNG liquefaction project at the site.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Focus on These 5 Stocks to Profit Off the Growing LNG Trend
Shipments of liquefied natural gas (“LNG”) for export from the United States reached a new all-time high in March. Recovering from the multi-month lows of last August, volumes flowing to LNG terminals have experienced a sustained increase over the past few months on the back of a better demand outlook. Evidently, data suggests that U.S. LNG feed gas volumes will continue to grow for a long time to come.
Strong Demand Growth
Per the Anglo-Dutch energy giant Royal Dutch Shell’s 2020 LNG Outlook, demand for natural gas chilled to liquid form reached 360 million tons last year, up by two million tons from 2019 even amid the coronavirus-led plunge in fuel demand and significantly higher than the 100 million traded in the year 2000.
Data from the Energy Information Administration’s ("EIA") also reflects the positive momentum. According to the agency, U.S. LNG exports have increased sharply since 2015. Over the past six years (2015-2020), shipments from America surged from 28,381 million cubic feet to 2,389,838 million cubic feet – a new record.
The Trend is Set to Continue
Global LNG demand is likely to continue growing for a long period and is projected to nearly double to 700 million tons per annum by 2040. While increasing demand for gas in the European power sector will be a key factor in the near-term LNG supply rise, the consumption boost is primarily set to come from Asian importers like China, South Korea and India as part of efforts to switch from coal and heating oil for environmental reasons. Being the third-biggest supplier of LNG to global markets, the United States is well positioned to leverage the boom.
Further, domestic natural prices remain constrained on the back of abundant supplies, which provides attractive opportunity to exporters in selling U.S. natural gas production at higher prices overseas (Europe and Asia).
5 Companies to Capitalize on this Opportunity
With the dramatic growth of natural gas exports and investors’ strong appetite for LNG stocks, we present four companies that investors should watch out for.
Royal Dutch Shell: Shell’s long-term strategy revolves around LNG.The Zacks Rank #1 (Strong Buy) Anglo-Dutch firm bought BG Group for $50billion in 2016 to become the world’s largest producer and shipper of LNG. With LNG export demand likely to rise significantly in the near-to-medium term, Shell’s position as a major supplier of LNG should help the company meet the fuel’s growing demand and help cash flow to improve.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron (CVX - Free Report) : Chevron, also carrying a Zacks Rank of 1, is another world class operator of LNG. Part of Chevron’s long-term strategy, the giant Gorgon and Wheatstone developments in Australia are its flagship LNG developments. These mega projects allow the supermajor to tap into the strong Asian LNG demand. Chevron is the operator of both the projects — with 64.14 % stake in Wheatstone and 47.3% in the Gorgon development.
Cheniere Energy (LNG - Free Report) : Being the first company to receive regulatory approval to export LNG from its Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage. Given first-mover advantage in the LNG export market, the Zacks Rank #3 (Hold) firm is primed for significant revenue and earnings growth on the back of long-term contracts and solid operations. Presently, Cheniere Energy’s substantial LNG asset platform includes the Sabine Pass Liquefaction facility with a total production capacity of 30 million tons per annum and Corpus Christi LNG Terminal having a capacity of 15 million tons per annum. The premier LNG provider has a proven track record of execution and operations.
Kinder Morgan (KMI - Free Report) : As U.S. LNG exports continue to increase, Kinder Morgan will be another firm to reap benefits. In particular, the #3 Ranked company’s network of pipelines and storage assets help it to leverage the growing feedgas deliveries to liquefaction terminals. Apart from providing the infrastructure to facilities operated by others, Kinder Morgan started full commercial operations at its 51%-owned $2-billion Elba Island export plant in 2020.
Energy Transfer LP (ET - Free Report) : Energy Transfer is also an important player in this space. The partnership’s Lake Charles LNG Terminal provides it with a strong foothold in the global LNG business. The terminal and regasification facility located on Louisiana’s Gulf Coast near Lake Charles has long-term contracts with a wholly-owned unit of Shell. The Zacks #3 Ranked partnership is also developing an LNG liquefaction project at the site.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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