Back to top

Can ExxonMobil's New LNG Import Facility Benefit Australia?

Read MoreHide Full Article

Exxon Mobil Corporation (XOM - Free Report) recently disclosed its intention to import liquefied natural gas (LNG) through the east coast of Australia. The largest publicly traded energy company is one of the leading gas suppliers in the southeastern part of Australia and the move is expected to retain its hold in the market, while staying ahead of competitors. The primary reason for the import is gas shortage, which is anticipated to hit the market in 2021.

The Requirement for LNG Imports

Although Australia is presently the second-largest global LNG provider, the domestic market has witnessed a price hike due to lower supplies. Supply from coal-seam gas reserves has failed to keep up with growing demand. Moreover, plummeting supply from the Gippsland Basin Joint Venture between ExxonMobil and BHP Billiton Petroleum (Bass Strait) Pty Ltd, a subsidiary of BHP Billiton Ltd. (BHP - Free Report) , is an added concern.

As it is, long-term export deals have left reduced LNG for the domestic market. The market situation has made LNG import profitable for the companies, which ExxonMobil can address with its new plan.

AGL Energy, an Australian utility, is also planning on a similar import project, which can come online in 2021. Moreover, a consortium between Australian Industrial Energy, JERA, a Japanese energy trader and Marubeni Corp. expects to start LNG import from 2020.

Backup Plans

To address the shortage of LNG in the market, ExxonMobil is considering other measures including imports in Victoria, an Australian state. The company is intensifying exploration offshore Victoria. Additionally, it is also looking to develop the West Barracouta gas field, which can become a feasible remedy for gas shortage in Australia.

ExxonMobil expects its new import facility to come online by 2022. Notably, the company also has the option of using its existing Longford infrastructure in Victoria for imports.

Price Performance

Irving, TX-based ExxonMobil has lost 2.5% of its value in the past year against 15.7% rally of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, ExxonMobil carries a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Delek US Holdings, Inc. (DK - Free Report) and HollyFrontier Corp. (HFC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 293.7%.

Dallas, TX-based HollyFrontier is an independent refining company. For 2018, its bottom line is likely to be up 153%. In the last four reported quarters, the company delivered an average positive earnings surprise of 41.3%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

More from Zacks Analyst Blog

You May Like