The Pullback In Natural Gas Has Created An Opportunity

Meanwhile, benchmark prices in Europe continued to fall, falling nearly 9% on Monday to the lowest level in two months, thanks to improving European energy markets due to a combination of successful policy action as well as price-driven demand response.  Indeed, German Finance Minister Robert Habeck revealed that the country’s natural gas storage levels are approaching 90%, giving it a chance to see through the winter season.  However, it has warned that natural gas storage will likely be empty by the end of winter.

Of course, natural gas and LNG stocks have lost some momentum alongside the commodity they track. For example, United States Natural Gas Fund, LP (NYSEARCA: LNG ) has fallen 20.3% over the past 30 days, but is still 108.9% higher year-to-date. However, structural tailwinds are likely to continue to offset “cyclical headwinds,” Strategas Securities LLC partner and head of technical analysis Christopher Verrone told Bloomberg. Therefore, investors should use the latest pullback in natural gas stocks as a buying opportunity. Here are some top picks. Market capital: 42.1 billion YTD Returns: 64.0%
Cheniere Energy, Inc. (NYSE: LNG) is an energy infrastructure company primarily engaged in businesses related to liquefied natural gas (LNG) 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 that interconnects the Sabine Pass LNG terminal with several interstate pipelines. and operates the 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. In March, 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 are already producing more gas than what was covered by previous export licenses. Purchase capital: 13.6 billion YTD Returns: 78.0% EQT Corporation (NYSE: EQT ) operates as a natural gas producer 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 proven natural gas, NGL and crude oil reserves in approximately 2.0 million gross acres, including 1.7 million gross acres in the Marcellus play. EQT Corp. unveiled a plan focused on producing more liquefied natural gas by dramatically increasing natural gas drilling in Appalachia and around the nation’s shale basins, as well as pipeline and export terminal capacity, which he said would not only strengthen the energy security of the United States States. but also to help break the world’s dependence on coal and countries like Russia and Iran. Market capitalization: $12.6 billion YTD Returns: 40.0% Ovintiv Inc. (NYSE: OVV) is a Denver, Colorado-based energy company that, together with its subsidiaries, engages in the exploration, development, production and marketing of natural gas, oil and natural gas liquids. The company’s primary assets include the Permian in west Texas and the Anadarko in west-central Oklahoma. and Montney in northeastern British Columbia and northwestern Alberta. Its other upstream assets include the Bakken in North Dakota and the Uinta in central Utah. and the Horn River in northeastern British Columbia and the Wheatland in southern Alberta. In June, Mizuho upgraded the OVV to $78 from $54 (good for nearly 60% upside from the current price), citing improving tailwinds. #4. Devon Energy Corp Market capitalization: $43.2 billion YTD returns: 47.8% BofA analyst Doug Leggate has advised investors to focus on oil companies with the potential to increase free cash flow through consolidation or other cost-cutting measures, calling Devon Energy (NYSE: DVN ), Pioneer Natural Resources (NYSE: PXD ), and EOG Resources (NYSE: EOG ). Devon is fitting this book to a tee, and while Leggate gave his advice earlier in the year, the case for it is only getting stronger. DVN stock was one of the best performing energy stocks thanks to strong earnings and continued cost discipline, including a variable dividend structure. After merging with WPX Energy last year, the company announced a fixed plus variable dividend, which went down well with Wall Street. In the second quarter, Devon paid out up to 50% of free cash as a variable dividend, bringing the total dividend to $1.55 per share. The fixed portion has been indifferent, currently yielding just over 1%. However, if the latest convertible payment is a sign of things to come, shareholders could receive nearly 10% in total. Some Wall Street analysts had earlier pointed to DVN’s potential for a dividend yield of up to 8% by the end of the year. Devon has already surpassed that and now has a juicy projected dividend yield of 9.7%. #5. Chesapeake Energy Corp. Market capitalization: $12.4 billion YTD Returns: 65.8% Commodity price hedging is a popular trading strategy often used by oil and gas producers as well as heavy consumers of energy commodities such as airlines to hedge against market fluctuations. During periods of falling crude prices, oil and gas producers typically use a small hedge to lock in oil prices if they believe prices are likely to fall even lower in the future. Unfortunately, hedging also means that these companies cannot enjoy the benefits of rising gas prices and can actually lead to hedging losses. However, some bold producers are betting on a commodity rally hedge little or nothing. Tudor Pickering rates Chesapeake Energy (NYSE: CHK ) a Buy, saying the company remains one of the few producers that remains relatively unhedged. This may be an odd choice given Chesapeake’s history, but somehow it makes sense at this point. Widely considered a pioneer in fracking and the king of unconventional drilling, Chesapeake Energy is in dire straits after taking on too much debt and expanding too aggressively. For years, Chesapeake borrowed heavily to finance an aggressive expansion of its shale projects. The company managed to survive only through rounds of asset sales (which management denies), debt restructuring, and mergers and acquisitions, but it couldn’t stave off the inevitable — Chesapeake filed for Chapter 11 in January 2020, and it the largest oil and gas producer in the US that has sought bankruptcy protection in recent years. Fortunately, Chesapeake successfully emerged from bankruptcy last year with the ongoing commodity rally providing the company with a major lifeline. The new Chesapeake Energy has a strong balance sheet with low leverage and a much more disciplined CAPEX strategy. The company aims <1x μακροπρόθεσμη μόχλευση σε μια προσπάθεια να διατηρήσει την ισχύ του ισολογισμού, η παραγωγή στόχος είναι 400+ χιλιάδες βαρέλια / ημέρα και σκοπεύει να περιορίσει το CAPEX στα 700-750 εκατομμύρια δολάρια ετήσιων κεφαλαιουχικών δαπανών και θετικό FCF. Η CHK λέει ότι αναμένει να δημιουργήσει >$2 billion FCF over the next 5 years, enough to significantly improve its financial position. By Alex Kimani for Oilprice.com More top reads from Oilprice.com: