U.S. Natural Gas Exports More Than Double: 4 Stocks In Focus

Adoption of alternative energy sources has increased significantly, given increasing awareness about reducing greenhouse gas emissions and lowering rate of climate change. While renewables like solar and wind are more preferred options when it comes to the development of a carbon-constrained environment, demand for natural gas is gaining steam as it is the cleanest fossil fuel.

For the United States, rising demand from emerging Asian markets is driving natural gas exports.

U.S. Natural Gas Exports Impress

Per the U.S. Energy Information Administration’s (EIA) latest report, in the first half of 2018, net natural gas exports from the United States averaged 0.87 billion cubic feet per day (Bcf/d), more than double the average daily net exports in 2017. Impressively, the United States, which became a net natural gas exporter on an annual basis for the first time in almost 60 years in 2017, continues to export more natural gas than it imports.

Currently, the country has a huge surplus of natural gas production, which has encouraged construction of pipelines and port facilities thereby enabling America to become a major exporter of the commodity. Notably, gross production of natural gas in the United States has increased lately buoyed by production enhancement in the Appalachian Basin in the Northeast, the Permian Basin in western Texas and New Mexico, and the Haynesville Shale in Texas and Louisiana. Per an EIA report, as of August 2018, these three regions collectively accounted for nearly 50% of total U.S. natural gas production compared with less than 15% in 2007.

New drilling and completion techniques, including longer well laterals that have increased well productivity, have boosted production in these regions.

LNG Demand on the Rise

Rising global demand for Liquefied Natural Gas (LNG  - Free Report) remains a major growth driver for the booming natural gas market, buoyed by increasing liquefaction capacity and utilization. Interestingly, Asia is playing a dominant role in driving LNG demand, with China taking the lead. Through 2017, the United States shipped 103,410 million cubic feet of LNG to China, surging from just 17,221 million cubic feet a year ago.

Per Bloomberg New Energy Finance’s (BNEF) latest global LNG outlook 2018 report, LNG demand is set to grow 8.5% in 2018, with half of the growth coming from China and the rest from Japan, South Korea, and India.

To tap rising demand, the United States is expanding its LNG capacity as evident from the addition of export facilities across the nation. Total U.S. LNG export capacity reached 3.6 Bcf/d in March 2018 from 1.94 Bcf/d in 2017.

Natural Gas Distributors to Gain

The shale boom has turned the United States into a net exporter of natural gas. This, in turn, is creating growth opportunities for domestic natural gas providers.

In line with this, EIA expects exports of both pipeline and liquefied natural gas from the United States to continue to increase. Exports are projected to increase to net average 2.0 Bcf/day in 2018 and 5.5 Bcf/day in 2019.

Moreover, the natural gas market is witnessing a notable price surge, thereby boosting prospects of natural gas providers. Natural gas prices have increased by about 9% over the past year.

Considering all the aforementioned factors, the time is ripe to focus on U.S. stocks, which should benefit from growing exports of natural gas.

Key Players

Exxon Mobil Corporation (XOM - Free Report) is the largest publicly traded energy firm in the world. The upstream operations of this company are based in Canada, Europe, Africa, Asia and Australia outside the United States. It carries a Zacks Rank #2 (Buy).

Exxon Mobil is expected to see earnings growth of 28.1% and 24.3% in 2018 and 2019, respectively. Its consensus estimates for 2018 earnings have increased 1% rise in the past 90 days.

BP plc (BP - Free Report) : The upstream business of this energy giant includes exploration and production of natural gas from prospective resources, with activities in the United States, the U.K., Angola, Azerbaijan, Canada, Egypt, the Russian Federation, and Trinidad and Tobago, as well as in the Asia Pacific, Latin America, and the Middle East. It carries a Zacks Rank #2.

The stock is expected to see earnings growth of 80.8% and 8.8% in 2018 and 2019, respectively. Its consensus estimates for 2018 earnings have witnessed a 1.8% rise in the past 90 days.

Cheniere Energy, Inc. (LNG - Free Report) owns and operates the Sabine Pass LNG terminal in Louisiana – North America’s first large-scale liquefied gas export facility. It is the first company to receive Federal Energy Regulatory Commission (FERC) approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal in Cameron Parish. It currently carries a Zacks Rank #3 (Hold).

The company is expected to see earnings growth of 225.3% and 107.4% in 2018 and 2019, respectively. Its consensus estimates for 2019 earnings have witnessed a 49% surge in the past 90 days.

Sempra Energy (SRE - Free Report) is involved in the sale, distribution, storage, and transportation of electricity and natural gas. Sempra LNG & Midstream has proposed a new natural gas liquefaction and export terminal in Port Arthur, TX, with direct access to the Gulf of Mexico. The proposed project facilities are anticipated to include up to two natural gas liquefaction trains for a total export capacity of approximately 13.5 million tons per annum (Mtpa). It carries a Zacks Rank of 3.

The company is expected to see earnings growth of 0.2% and 12% in 2018 and 2019, respectively. It has surpassed the Zacks Consensus Estimate for earnings in the last four quarters with an average beat of 2.8%.