Naturally Volatile
Much of the recent upside in natural-gas prices reflects the unusually hot summer weather, expectations for a cold winter and modest supply growth, as oil and gas producers have curbed their drilling and completion activity in prolific US shale plays. However, our intermediate- to long-term outlooks for gas supply and demand remain unchanged–nor has our investment strategy.
We prefer to buy shares of high-quality producers that have strong balance sheets and high-quality acreage in leading basins–names that will take market share over the long term.
However, timing is a critical component of our strategy.
Investors should buy when gas prices inevitably tumble because of excess production and an unusually warm winter–a confluence of events that has occurred on several occasions over the past decade. You might also consider taking smaller positions in some higher-beta names that we wouldn’t regard as the best long-term holdings.
It’s equally important to take some profits off the table when natural-gas prices rip higher. The time for such a move is imminent.
Investors should also maintain exposure to well-positioned midstream operators that stand to benefit from accelerating production growth in low-cost basins. With natural-gas demand expect to climb in coming years and the US boasting a world-class resource base, the potential volumetric growth is truly impressive.
3 Reasons Why US Natural-Gas Prices Will Remain Low
Unless we stand on the cusp of a new ice age, investors shouldn’t expect a sustainable rally in US natural-gas prices.
More CAPEX, More Problems: A Survey of Big Oil
When casual investors think of the energy stocks, one of the Seven Sisters—BP (NYSE: BP) NYSE: BP), Chevron Corp (NYSE: CVX), Eni (NYSE: E), Exxon Mobil Corp (NYSE: XOM), Royal Dutch Shell (NYSE: RDS B), Statoil (NYSE: STO) and Total (NYSE: TOT)—likely springs to mind.
But these Western energy giants have come in for a great deal of criticism over the past several years, as investors lose patience with the industry’s massive capital investments and limited production growth.
Robust Injections Validate Our Call for Retrenchment in US Natural-Gas Prices
Far too many investors and commentators mistook last winter’s surge in natural-gas prices as the start of a durable rally. But unless last winter marked the onset of a new ice age, the underlying supply and demand trends that prevailed before the polar vortex were always going to win out.
GasLog Partners LP: A Virtuous Cycle
The creation of GasLog Partners LP provides GasLog with a cost-effective means of recycling capital to fund additional growth opportunities. This virtuous cycle involves GasLog selling LNG carriers in its fleet to GasLog Partners at prices that are accretive to the MLP’s distributable cash flow. The parent then redeploys some of the proceeds into ordering or acquiring new vessels that can be dropped down to the MLP once they obtain longer-term contracts.
Canada’s LNG Potential
Investors looking to profit from Canadian LNG exports today should curb their expectations and focus on names that offer near-term upside, as well as exposure to this longer-term opportunity.
Betting on US Energy Exports
Given the expenses, uncertainties and extended timelines associated with building liquefaction infrastructure, our inclination is to steer clear of pure plays on LNG exports. We prefer names that offer exposure to this trend but also stand to benefit from other upside drivers in the near term.
The Appeal of US LNG Exports
The appeal of US LNG exports is simple: Companies that own idled import (regasification) capacity are eager to unlock value from these assets, while international customers seek to diversify their supply base and lower their energy costs
Japan and the Global LNG Market
Japan accounts for 37 percent of the global LNG market and remains the world’s leading importer by a wide margin.
Global LNG Market Stagnates in 2013, But Poised for Growth
Global LNG volumes have stagnated over the past two years, reflecting a lull in the completion of new liquefaction capacity.
Live Chat with
Elliott and Roger on Sep. 30, 2020
Portfolios & Ratings
Model Portfolios
Balanced portfolios of energy stocks for aggressive and conservative investors.
Producers and Drillers
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
MLPs and Midstream
Our assessment of every energy-related master limited partnership.
International Coverage
Roger Conrad’s coverage of more than 70 dividend-paying energy names.
Experts
-
Elliott H. Gue
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor
-
Roger S. Conrad
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor