Five liquified natural gas investments to buy should benefit as Russian President Vladimir Putin’s unrelenting attack of Ukraine pushes importers of its energy products to find alternative sources.
The five liquified natural gas (LNG) investments to buy appear positioned to help fill the void left by Russia’s invasion of Ukraine, which has drawn international outrage from countries in all regions of the world that have imposed economic sanctions aimed at pressuring Putin to call his troops home. The transition to non-Russian energy suppliers is underway as Putin’s military forces cause mayhem and thousands of civilian deaths in neighboring Ukraine that its President Volodymyr Zelenskyy and many other world leaders have called “war crimes.”
Global demand is climbing for liquified natural gas (LNG) to replace what Russia had been supplying to Europe. In 2021, Russia provided 40% of the natural gas consumed in the European Union (EU).
“This is a staggering statistic,” Bryan Perry wrote in the May 2022 issue of his Cash Machine investment newsletter.
Five Liquified Natural Gas Investments to Buy as America’s LNG Exports Rise
The United States is exporting record amounts of LNG as nations rapidly convert to gas-burning utilities from far less environmentally friendly coal-fired plants. The burning of natural gas to produce energy causes fewer emissions of nearly all kinds of air pollution and carbon dioxide (CO2) than using coal or petroleum products to produce an equal amount of energy, according to the U.S. Energy Information Agency (EIA).
“U.S. exports of liquefied natural gas (LNG) set a record high in 2021, averaging 9.7 billion cubic feet per day (Bcf/d),” reported the latest edition of the EIA’s Natural Gas Monthly. “U.S. LNG exports increased by 50% from 2020. The increase in U.S. LNG exports was driven by rising demand in both Europe and Asia, particularly China, and by expanding U.S. liquefaction capacity. In 2021, liquefaction at the six U.S. LNG export terminals averaged 102% of nameplate (or nominal) capacity and 89% of peak capacity, according to our estimates.”
Nominal capacity specifies the amount of LNG produced in a calendar year under normal operating conditions, based on the engineering design of a facility. With U.S. LNG production at near capacity, prices should remain high as the supply/demand equation heavily favors producers and shippers of LNG to foreign buyers.
Five Liquified Natural Gas Investments to Buy as Europe Seeks New Suppliers
The United States committed on March 25 to boost LNG shipments to Europe to help reduce or remove dependence on Russia. The Biden administration is proposing to send up to 15 billion cubic meters (bcm) to Europe, but that amount is only about 10% of the 150 bcm Europe used in 2021.
U.S. LNG export capacity has grown quickly since America’s 48 contiguous states first began exporting the energy source in February 2016. In 2019, the United States became the world’s third-largest LNG exporter, trailing Australia and Qatar. Once the new LNG liquefaction units Sabine Pass and Calcasieu Pass in Louisiana are put into service by the end of 2022, the United States will have the world’s largest LNG export capacity.
The United States, United Kingdom, European Union, Canada, Japan, South Korea, Australia and other countries have imposed economic sanctions on Russia in an attempt to compel Putin to stop his invasion and withdraw his troops. However, Putin’s persistence has led to stinging criticism of him from U.S. President Joe Biden, U.K. Prime Minister Boris Johnson and other leaders for brutally bombing civilian targets such as hospitals, schools, residential buildings and cultural sites. Biden said publicly on April 12 for the first time that Putin was committing “genocide,” after previously citing evidence that Russia’s leader was perpetrating war crimes against Ukrainian civilians since he launched the invasion of the neighboring nation on Feb. 24.
Perry Picks Exxon Mobil as One of Five Liquified Natural Gas Investments to Buy
One recommendation that Perry has included in his Cash Machine newsletter since July 2021 that offers exposure to the LNG opportunity is Irving, Texas-based Exxon Mobil Corp. (NYSE: XOM). The company ranks as the world’s second-largest supplier of natural gas, pays a 4.9% dividend yield and already has jumped more than 53% since Perry began recommending it during July 2021 in his newsletter’s Safe Haven Portfolio.
Germany is among the European countries that are not ready to transition completely from importing oil and LNG from Russia, but it is seeking alternative producers that include the United States. Europe is looking at LNG as its main energy substitute, with a plan to reduce Russian energy imports by two-thirds this year.
However, prices in general are climbing up sharply as Consumer Price Index (CPI) rose at an annualized 8.5% in March, compared to a year ago, to mark the fastest annual jump since December 1981. The increase was one-tenth of a percentage point above what had been expected.
Chart courtesy of www.stockcharts.com
Pension Head Names Fund Among Five Liquified Natural Gas Investments to Buy
A good way to tap the LNG trend is to invest in energy service companies, said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter. Investment opportunities exist with companies that provide the pipelines, storage facilities and other infrastructure needed to supply the world with natural gas and other energy sources, he added.
“One of the attractive qualities of these investments is that their revenues are independent of the prices of the commodities,” Carlson counseled. “The firms charge fees for their services, and the fees often are adjusted for inflation. Their revenues and earnings depend on the volume of commodities passing through their facilities, not the price of the commodity.”
A diversified way to invest in the growing demand for LNG energy is Cohen & Steers MLP & Energy Opportunity Fund (MLOAX). This open-end mutual fund invests primarily in energy master limited partnerships and in former partnerships that have converted to corporations. These “leading” energy service companies provide total returns, aided by current income and price appreciation, through investments in energy-related master limited partnerships (MLPs) and securities of industry companies. Those businesses are expected to derive at least 50% of their revenues or operating income from exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, crude oil and other energy resources.
Chart courtesy of www.stockcharts.com
Cohen & Steers Fund Makes List of Five Liquified Natural Gas Investments to Buy
The Cohen & Steers MLP & Energy Opportunity Fund recently held 53 positions and had 50% of the fund in the 10 largest positions. Top holdings of the fund were Enbridge (NYSE: ENB), Cheniere Energy (NYSEAMERICAN: LNG), Williams Companies (NYSE: WMB), TC Energy (NYSE: TRP) and Energy Transfer (NYSE: ET).
The fund has notched strong returns since April 2020. It is up 22.53% so far in 2022 and almost 7% in the last month, while offering a dividend yield of 2.81%.
Bob Carlson, head of Retirement Watch, speaks with columnist Paul Dykewicz.
Carlson’s second LNG recommendation is the ETF United States Natural Gas (UNG). The fund invests in natural gas futures contracts and related contracts on natural gas prices. The contracts are collaterized with cash and treasury securities.
The fund is up 37.46% in the last four weeks, 76.86% for the year to date and 138.04% over 12 months.
Chart courtesy of www.stockcharts.com
Connell Chooses Two of Five Liquified Natural Gas Investments to Buy
U.S. LNG inventory is currently 17% below its 5-year average for this time of year, said Michelle Connell, CFA, president and owner of Portia Capital Management, of Dallas, Texas. The biggest issue for the U.S. LNG industry is that production of the energy source has never been profitable on its own but is a byproduct of oil production, she added.
“There isn’t enough oil being produced,” Connell said. “Currently, only 11.6 million barrels/day are being produced. Pre-pandemic, we produced 13 million barrels/day.”
Instead of investing to increase capacity, oil companies have been focusing on boosting their dividends, Connell continued. If they pivot, these companies face a backlash from investors via the sale of their stock, Connell added.
“Their market value could get crushed,” Connell said.
Michelle Connell, CEO, Portia Capital Management
EOG Resources Gains Place With Five Liquified Natural Gas Investments to Buy
Even if the oil companies started to invest more into production, it will take six to eight months at a minimum to increase their oil and LNG production, Connell counseled. Most recently, the production of oil via shale created the largest share of the America’s natural gas reserves, Connell continued.
Unfortunately for proponents of increased output to meet rising demand, shale production has “decreased exponentially” since the pandemic began and the build-up of LNG reserves has declined, Connell explained.
However, Connell conveyed that she found two investments that produce substantial amounts of oil via shale, and thus considerable LNG. One of them is Houston-based EOG Resources Inc. (NYSE: EOG).
“The outstanding fourth-quarter results cap off a tremendous year for EOG — record earnings, record free cash flow and return of cash that places EOG among the leaders in our industry and across the broader market, said Ezra Yacob, chief executive officer of EOG, in reporting those results. “Reflecting these results, we are continuing to deliver on our long-standing free cash flow priorities with another $1.00 per share special dividend while further strengthening the balance sheet.”
Chart courtesy of www.stockcharts.com
EOG Resources has amassed a market capitalization of $70 billion and offers a dividend yield of 4.7%. Among other financial metrics that Connell tracks, she pointed out that EOG has an earnings yield of 6.29%, an adjusted cash earnings yield of 11.19% and a five-year average return on investment of 13.73%.
The company’s reserves, as of year-end 2021, reached 3.22 billion barrels, with petroleum accounting for 51%, natural gas liquid accounting for 22% and natural gas equaling 27%. Connell calculated a 12- to 18-month upside in the stock of 30-35%.
Pioneer Earns Berth Among Five Liquified Natural Gas Investments to Buy
Pioneer Natural Resources Co. (NYSE: PXD), a hydrocarbon exploration company headquartered in Irving, Texas, is the second LNG stock that Connell proposed for investment. The company has a market capitalization of $61.72 billion, offers a dividend yield of 4.2% and has never missed paying a dividend, she added.
In addition, Pioneer Natural Resources has produced an earnings yield of 3.25%, an adjusted cash earnings yield of 7.48% and a five-year average return on equity of 6.61%, Connell said. At the end of 2021, Pioneer Natural Resources had compiled 2.22 billion barrels of oil equivalent, with 44% of its proved reserves from petroleum, 30% natural gas liquid and 16% natural gas. Connell set a 12- to 18-month price target for the company of 35-40% upside from current levels.
Chart courtesy of www.stockcharts.com
Worldwide COVID-19 Cases Top 500 Million
COVID-19 cases worldwide topped 500 million for the first time on April 12, according to Johns Hopkins University. The U.S. Centers for Disease Control and Prevention found that the BA.2 subvariant of the Omicron version of COVID-19 caused 86% of new COVID-19 cases in the United States last week.
COVID-19 cases and deaths lately had been on the wane in the United States until recent days when an uptick began, cautioned Anthony Fauci, M.D., director of the National Institute of Allergy and Infectious Diseases. Dr. Fauci said the United States “certainly” is seeing the start of a surge of new infections as more locales no longer require mask wearing and people become active in traveling.
In China, Shanghai now is the country’s hotspot for the Omicron variant of COVID-19 and most of its 25 million residents remain under lockdown, with the Chinese military and extra health workers dispatched to aid in the response. The Nomura financial securities firm estimated that as many as 45 cities in China were implementing either full or partial lockdowns as of April 12, affecting more than a quarter of the country’s population.
China Reports Highest Case Numbers Since COVID-19 Originated There in 2020
China is reporting its highest case numbers since the virus originated in Wuhan during 2020 as the global pandemic began. Young children with COVID-19 have been separated forcibly from their parents, fueling public dissent, as Chinese leaders seek to stop the spread of a new, highly contagious subvariant of Omicron, BA.2. The variant also has been spreading a new wave of infections in Europe, where COVID cases are climbing in countries such as Germany, the Netherlands and Switzerland.
COVID-19 cases across the globe have jumped by 7 million in the past week to top 500,363,741. Worldwide COVID-19 deaths reached nearly 25,000 in the last week to boost the total to 6,183,944 on April 12, according to Johns Hopkins University.
U.S. COVID-19 cases, as of April 12, hit 80,476,404, with deaths rising to 986,346. America has the dubious distinction as the nation with the most COVID-19 cases and deaths.
As of April 12, 256,363,358 people, or 77.2% of the U.S. population, have obtained at least one dose of a COVID-19 vaccine, the CDC reported. Fully vaccinated people total 218,521,227, or 65.8%, of the U.S. population, according to the CDC. In addition, 98.9 million people have received a booster dose of COVID-19 vaccine.
The five liquified natural gas investments to buy hold the potential to serve customers that Putin is losing for Russia in the wake of his invasion of Ukraine and the findings that thousands of civilians there have been killed by the soldiers he ordered into the country. As European countries seek to stop purchasing oil and natural gas from Russia to avoid funding its war with Ukraine, the five liquified natural gas investments to buy seem poised to become alternative suppliers.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.