Over the last couple of years, natural gas has been viewed as a critical bridge in the transition to renewable energy, thanks to its more favorable emissions profile. Five years after the United States became a net exporter of natural gas on an annual basis, the U.S. Energy Information Administration (EIA) forecasts that the United States is on track, for the first time ever, to become the world's top exporter of liquified natural gas (LNG) this year, with exports hitting a whopping 12.2 billion cubic feet per day (Bcf/d) average to surpass Australia and Qatar for the top spot.
Russia's war on Ukraine has supercharged the American LNG boom.
Europe's natural gas demand has skyrocketed as the EU tries to lower its reliance on Russian natural gas following its invasion of Ukraine. Europe has displaced Asia as the top destination for the U.S. LNG, receiving 65% of total exports for the fourth straight month in April. The EU has pledged to reduce its consumption of Russian natural gas by nearly two-thirds before the year's end, while Lithuania, Latvia, and Estonia have vowed to eliminate Russian gas imports outright. The crisis has only deepened after Russia recently cut off the gas supply to Poland and Bulgaria, ostensibly for failing to pay for gas in roubles, sending European gas prices up more than 15%. The move marks a ratcheting up of tensions and could reduce supplies to Europe, as many pipelines pass through Poland en route to the rest of the continent.
"The sooner everyone in Europe recognises that they cannot depend on Russia for trade, the sooner it will be possible to guarantee stability in European markets," Ukrainian President Volodymyr Zelensky said late on Wednesday.
The U.S. Department of Energy has just authorized additional LNG exports from the planned Golden Pass LNG Terminal in Texas and Magnolia LNG Terminal in Louisiana as the U.S. seeks to boost LNG exports to Europe.
Jointly owned by Exxon Mobil (NYSE:XOM) and Qatar Petroleum, the $10B Golden Pass LNG export project is expected to become operational in 2024, while Magnolia LNG, owned by Glenfarne Group, will come online by 2026. The two terminals are expected to produce more than 3B cf/day of natural gas, although Magnolia is yet to sign contracts with customers.
Previously, American LNG developers were unwilling to construct self-financed liquefaction facilities that are not secured by long-term contracts from European countries. However, the Ukraine war has exposed Europe's soft underbelly and the harsh reality is forcing a rethink of their energy systems. To wit, Germany, Finland, Latvia, and Estonia recently expressed the desire to move forward with new LNG import terminals.
Here are the top 3 LNG companies that are best placed to cash-in on the LNG boom.
#1. Cheniere Energy
Market Cap: $33.4B
YTD Returns: 36.8%
Cheniere Energy, Inc. (NYSE:LNG) is an energy infrastructure company that primarily engages in the liquefied natural gas (LNG) related businesses in the United States. Cheniere is one of the few pure-play LNG companies in the United States; the company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana; and the Corpus Christi LNG terminal near Corpus Christi, Texas. The company also owns the Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with various interstate pipelines; and operates Corpus Christi pipeline, a 21.5-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines.
Last month, the DoE approved expanded permits for Cheniere Energy's Sabine Pass terminal in Louisiana and its Corpus Christi plant in Texas. The approvals allow the terminals to export the equivalent of 0.72 billion cubic feet of LNG per day to any country with which the United States does not have a free trade agreement, including all of Europe. Cheniere says the facilities already are making more gas than is covered by previous export permits.
#2. EQT Corp.
Market Cap: $15.0B
YTD Returns: 81.4%
EQT Corporation (NYSE:EQT) operates as a natural gas production company in the United States. The company produces natural gas, natural gas liquids (NGLs), including ethane, propane, isobutane, butane, and natural gasoline.
As of December 31, 2021, EQT had 25.0 trillion cubic feet of proved natural gas, NGLs, and crude oil reserves across approximately 2.0 million gross acres, including 1.7 million gross acres in the Marcellus play.
Last month, EQT Corp. unveiled a plan centered on producing more liquified natural gas by dramatically increasing natural gas drilling in Appalachia and around the country's shale basins, as well as pipeline and export terminal capacity, which it said would not only boost United States energy security, but also help break the global reliance on coal and on countries like Russia and Iran.
Market Cap: $2.6B
YTD Returns: 55.8%
Tellurian Inc. (NYSE:TELL) is a Houston, Texas-based energy company that engages in the natural gas business worldwide. The company is currently developing a portfolio of natural gas production, liquefied natural gas (LNG) marketing, and infrastructure assets that includes an approximately 27.6 million tons per annum LNG export facility and an associated pipeline.
Founded in 2016, Tellurian owns interests in 11,060 net acres of natural gas assets and 78 producing wells located in the Haynesville Shale trend of northern Louisiana.
TELL is one of Jim Cramer's top LNG picks, but he says to wait for a better entry point given the stock's massive run-up.
By Alex Kimani for Oilprice.com
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