US natural gas prices hit a New low for six weeks, to close at $7.75/MMBtu on Monday with the Wall Street Journal saying the market lost momentum as U.S. production topped 100 billion cubic feet/day for the first time ever. The odds are now that ample US production will be enough to meet domestic demand in the final months before winter sets in. Prices are likely to remain low unless there is an outbreak of storm activity in the Gulf of Mexico that could disrupt production.
Meanwhile, record European gas prices continued to fall, dropping nearly 9% on Monday to their lowest in two months thanks to improved European energy markets due to a combination of successful policy measures as well as Demand response caused by price. In fact, German Economy Minister Robert Habeck revealed that country Natural gas storage levels are close to 90% Giving her a chance to beat the winter. However, he warned that gas stocks will likely be empty by the end of winter.
Naturally, natural gas and LNG stocks have lost some momentum along with the commodities they follow. For example, file United States Natural Gas Fund, LP (NYSEARCA:LNG) It’s down 20.3% in the past 30 days but is still up 108.9% year-to-date. However, structural tailwinds are likely to continue to outpace ‘cyclical headwinds’ Strategas Securities LLC Christopher Veron, Partner and Head of Technical Analysis, told Bloomberg. So investors should use the latest drop in gas stocks as a buying opportunity. Here are some of the best picks.
Market value: 42.1 billion
Returns to date: 64.0%
Cheniere Energy, Inc. (NYSE: LNG) is an energy infrastructure company primarily engaged in the liquefied natural gas (LNG) related business in the United States. Cheniere is one of the few 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 connects the Sabine Pass LNG terminal with several interstate pipelines; It operates the Corpus Christi Pipeline, a 21.5-mile natural gas supply pipeline that connects the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines.
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back in March, The Department of Energy 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. Chener says the facilities are already producing more gas than covered by previous export permits.
Market value: 13.6 billion
Returns to date: 78.0%
EQT . company (NYSE: EQT) operates as a natural gas production company in the United States. The company produces natural gas and natural gas liquids including ethane, propane, isobutane, butane and natural gasoline.
As of December 31, 2021, EQT had 25.0 trillion cubic feet of proven natural gas, natural gas liquids, and crude oil reserves across approximately 2.0 million total acres, including 1.7 million total acres at the Marcellus Theatre.
EQT Corp. has unveiled a plan centered around producing more LNG by significantly increasing natural gas exploration in the Appalachian region and around the country’s shale basins, as well as the capacity of pipelines and export terminals, which it said would not only enhance energy security in the country. The United States, but also helps break global dependence on coal and on countries like Russia and Iran.
Market value: $12.6 billion
Yield to date: 40.0%
Ovintiv Inc.(NYSE: OVV) is a Denver, Colorado-based energy company that, along with its subsidiaries, explores, develops, produces and markets natural gas, oil and natural gas liquids.
The company’s principal assets include Permian in West Texas and Anadarko in West Central Oklahoma. and Montney in northeastern British Columbia and northwest Alberta. Its other upstream assets include Bakken in North Dakota, and Uinta in central Utah; and the Horn River in northeastern British Columbia, and Wetland in southern Alberta.
Back in June, Mizuho upgraded the OVV to $78 from $54 (good for nearly 60% of the current price), citing improved tailwinds.
#4. Devon Energy
Market value: $43.2 billion
YTD Yield: 47.8% BofA analyst Doug Leggate advised investors to focus on oil companies that have the ability to increase free cash flow through mergers or other cost-cutting measures, Devon Energy (NYSE: DVN), Pioneer Natural Resources (NYSE: PXD), and EOG موارد Resources (NYSE: EOG).
Devon fits this playbook into a tee, and while Leggett issued his advice earlier in the year, the case is only getting stronger.
DVN was one of the top performing energy stocks thanks to strong earnings and ongoing cost discipline including a variable dividend structure.
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After merging with WPX Power Last year, the company announced a fixed-plus-variable dividend, which has gone well with Wall Street. In the second quarter, Devon paid out up to 50% of the free cash as variable dividend, bringing the total dividend to $1.55 per share. The stable segment has been indifferent, currently yielding just over 1%. But if the latest convertible payments are a sign of the future, shareholders can get close to 10% overall.
Some Wall Street analysts earlier indicated that DVN could achieve a dividend yield of up to 8% by the end of the year. Devon has already outgrown that, and now it has an estimated 9.7% dividend yield.
#5. Chesapeake Power Company.
Market value: $12.4 billion
YTD Yield: 65.8%
Commodity price hedging is a popular trading strategy frequently used by oil and gas producers as well as large energy commodity consumers such as airlines to protect themselves from market volatility. During times of low crude oil prices, oil and gas producers usually use a short-term hedge to stabilize oil prices if they believe prices are likely to fall in the future.
Unfortunately, hedging also means that these companies are unable to enjoy the benefits of higher gas prices and can actually result in hedging losses. However, some intrepid producers are betting on the commodity rise hedge only little or not at all.
Theodore Pickering rates Chesapeake Energy (NYSE: CHK) Buy, saying the company It’s still one of the few producers still relatively underrated.
This might seem like an odd choice given the history of the Chesapeake, but it somehow makes sense at this point.
Chesapeake Energy, widely seen as a pioneer in fracking and the king of unconventional drilling, is in tatters after taking on a lot of debt and expanding aggressively. For years, the Chesapeake borrowed heavily to fund the massive expansion of its shale projects. The company has only managed to survive through asset sales rounds (management shunned), debt restructuring and merger and acquisition But he couldn’t prevent the inevitable – Chesapeake made a request Chapter 11 in January 2020, to become the largest oil and gas producer in the United States seeking bankruptcy protection in recent years.
Luckily, Chesapeake emerged from bankruptcy In the past year with the continuous rise of commodities that provides the company a major lifeline.
The new Chesapeake Energy has a strong balance sheet, lower leverage and a more disciplined CAPEX strategy.
The company is targeting long-term leverage <1x in an effort to maintain balance sheet strength, target production is 400+ thousand barrels/day and intends to limit capex to $700-750 million in annual capex and positive cash flows. CHK says it expects to generate more than $2 billion in FCF over the next five years, enough to significantly improve its financial position.
By Alex Kimani for Oilprice.com
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