Natural Gas Demand - Sept 17
Posted: Mon Sep 17, 2018 12:44 pm
Nilanjan Choudhury at Zacks - September 17, 2018
The EIA predicts global demand for the commodity to grow 43% from 2015 to 2040. Countries in Asia and in the Middle East – led by China’s transition away from coal – will account for most of this increase.
And as the world’s largest gas producer, the United States has emerged as one of the key players – competing with Russia and Australia among others – to meet this soaring demand. With domestic prices struggling to break the $3 per million Btu threshold, American natural gas companies see a big opportunity in selling cheap U.S. production at attractive enough prices to rest of the world. In fact, more than 50% of the domestic volume growth in the near future will be used for export in the form of liquefied natural gas (LNG). As per Paris-based International Energy Agency (IEA), the United States will vie with Australia and Qatar as the top LNG exporter by 2022.
New pipelines to Mexico, together with large-scale liquefied gas export facilities like Cheniere Energy, Inc.’s Sabine Pass terminal and Dominion Energy Inc.’s (D) newly constructed Cove Point export plant, have meant that exports out of the U.S. are set for a quantum leap.
As per the Energy Department, gross liquefied natural gas exports are set to average 2.93 Bcf per day in 2018, increasing more than 50% from last year. Apart from surging exports, the replacement of coal-fired power plants and higher consumption from industrial projects will likely ensure strong natural gas demand.
Finally, if the upcoming (2018-2019) winter turns out to be colder-than-normal, the surge in expected demand in the face of relative deficit of natural gas inventory could trigger a large rally in the commodity's price.
Want to Own a Natural Gas Stock Now?
The secular tailwinds mentioned above could see natural gas eventually settle well above the $3 per MMBtu mark before the end of the winter. The perceived price strength augurs well for natural gas-heavy upstream companies like Cabot Oil & Gas Corporation COG, Chesapeake Energy Corporation CHK, Comstock Resources, Inc. CRK, Eclipse Resources Corporation ECR, Gulfport Energy Corporation GPOR and Southwestern Energy Company SWN.
However, if you are looking for a near term natural gas play, SilverBow Resources, Inc. (SBOW) may be a good selection. This company has a Zacks Rank #2 (Buy).
SilverBow is engaged in the exploration and production of oil and natural gas properties in the Eagle Ford shale located in South Texas. The company’s production consists of 86% natural gas. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 7.5% in the same period.
The EIA predicts global demand for the commodity to grow 43% from 2015 to 2040. Countries in Asia and in the Middle East – led by China’s transition away from coal – will account for most of this increase.
And as the world’s largest gas producer, the United States has emerged as one of the key players – competing with Russia and Australia among others – to meet this soaring demand. With domestic prices struggling to break the $3 per million Btu threshold, American natural gas companies see a big opportunity in selling cheap U.S. production at attractive enough prices to rest of the world. In fact, more than 50% of the domestic volume growth in the near future will be used for export in the form of liquefied natural gas (LNG). As per Paris-based International Energy Agency (IEA), the United States will vie with Australia and Qatar as the top LNG exporter by 2022.
New pipelines to Mexico, together with large-scale liquefied gas export facilities like Cheniere Energy, Inc.’s Sabine Pass terminal and Dominion Energy Inc.’s (D) newly constructed Cove Point export plant, have meant that exports out of the U.S. are set for a quantum leap.
As per the Energy Department, gross liquefied natural gas exports are set to average 2.93 Bcf per day in 2018, increasing more than 50% from last year. Apart from surging exports, the replacement of coal-fired power plants and higher consumption from industrial projects will likely ensure strong natural gas demand.
Finally, if the upcoming (2018-2019) winter turns out to be colder-than-normal, the surge in expected demand in the face of relative deficit of natural gas inventory could trigger a large rally in the commodity's price.
Want to Own a Natural Gas Stock Now?
The secular tailwinds mentioned above could see natural gas eventually settle well above the $3 per MMBtu mark before the end of the winter. The perceived price strength augurs well for natural gas-heavy upstream companies like Cabot Oil & Gas Corporation COG, Chesapeake Energy Corporation CHK, Comstock Resources, Inc. CRK, Eclipse Resources Corporation ECR, Gulfport Energy Corporation GPOR and Southwestern Energy Company SWN.
However, if you are looking for a near term natural gas play, SilverBow Resources, Inc. (SBOW) may be a good selection. This company has a Zacks Rank #2 (Buy).
SilverBow is engaged in the exploration and production of oil and natural gas properties in the Eagle Ford shale located in South Texas. The company’s production consists of 86% natural gas. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 7.5% in the same period.