We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Time to Buy These 3 Stocks as Natural Gas Bulls Run Rampant
Read MoreHide Full Article
Natural gas prices moved past $9 per million British thermal units (MMBtu) in trading last week and finished at $9.336 on Friday. That was the highest settlement since August 2008 and primarily reflected hotter-than-normal weather, slack domestic output and strong LNG shipments.
Building on this bullish narrative, there is significant upside in natural gas-focused firms like EQT Corporation (EQT - Free Report) , Cheniere Energy (LNG - Free Report) and SilverBow Resources (SBOW - Free Report) .
What Drove the Rally?
Investors might note that changes in temperature and weather forecasts can precipitate natural gas price swings. The latest models anticipate strong temperature-driven consumption (especially in most regions of the West), which is a positive for prices. A heat wave is expected to keep temperatures above average over the next few days, leading to a spike in cooling load demand.
Natural gas also remained supported by a stable demand catalyst in the form of continued strong liquefied natural gas (“LNG”) feedgas deliveries. LNG shipments for export from the United States have been robust for months on the back of environmental reasons and record-high prices of the super-chilled fuel elsewhere. Now, with the Russia-Ukraine conflict, LNG has become even more coveted. As a matter of fact, the United States recently entered into a partnership with the EU to export additional LNG to wean the bloc off its dependence on Russian natural gas supplies. This means LNG deliveries are poised to rise further, especially with Moscow squeezing natural gas supplies to Europe by partly closing its key Nord Stream pipeline.
Looking at the supply side, production levels have struggled to match the peak levels achieved in early 2022 and late 2021. Over the past few months, natural gas output has consistently averaged under the 97 Bcf per day high of the last year-end. This pattern has led to a sizeable inventory deficit to its five-year average, which currently stands at nearly 13%. With the big upstream operators concentrating on free cash flow over production, volumes seem unlikely to recover heading into the winter demand season.
The tight stockpile levels have pushed up the price of the energy commodity with the apprehension that the market might enter the winter withdrawal season with supplies in storage well below normal. This can compound further if the cold turns out to be intense.
Buy These Gas-Heavy Names
Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. The upward trend should aid gas-weighted producers.
To guide investors to the right picks, we highlight three companies that carry a Zacks Rank #2 (Buy). The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
EQT Corporation: EQT is primarily an explorer and producer of natural gas, with a primary focus on the Appalachian Basin in Ohio, Pennsylvania and West Virginia. In terms of average daily sales volumes, EQT Corp is the largest natural gas producer in the domestic market.
The company has an expected earnings growth rate of 32.5% for the current year. The Zacks Consensus Estimate for EQT’s 2022 earnings has been revised 22% upward over the last 60 days. EQT — valued at around $17.7 billion — has soared 188% in a year.
Cheniere Energy: With the dramatic growth of natural gas exports and being the first company to receive regulatory approval to ship LNG from its Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
The firm is valued at around $41.4 billion. The Zacks Consensus Estimate for LNG’s 2022 earnings has been revised 23% upward over the last 60 days. Cheniere has rocketed 93.3% in a year.
SilverBow Resources: SilverBow has operations across roughly 130,000 net acres in the Eagle Ford and more than 80% of its total output comprises natural gas. The company’s exposure to premium markets and focus on costs and margins should help it to benefit from high natural gas prices.
SilverBow beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 36.1%. Valued at around $850.7 million, SBOW has gained some 177.5% in a year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Time to Buy These 3 Stocks as Natural Gas Bulls Run Rampant
Natural gas prices moved past $9 per million British thermal units (MMBtu) in trading last week and finished at $9.336 on Friday. That was the highest settlement since August 2008 and primarily reflected hotter-than-normal weather, slack domestic output and strong LNG shipments.
Building on this bullish narrative, there is significant upside in natural gas-focused firms like EQT Corporation (EQT - Free Report) , Cheniere Energy (LNG - Free Report) and SilverBow Resources (SBOW - Free Report) .
What Drove the Rally?
Investors might note that changes in temperature and weather forecasts can precipitate natural gas price swings. The latest models anticipate strong temperature-driven consumption (especially in most regions of the West), which is a positive for prices. A heat wave is expected to keep temperatures above average over the next few days, leading to a spike in cooling load demand.
Natural gas also remained supported by a stable demand catalyst in the form of continued strong liquefied natural gas (“LNG”) feedgas deliveries. LNG shipments for export from the United States have been robust for months on the back of environmental reasons and record-high prices of the super-chilled fuel elsewhere. Now, with the Russia-Ukraine conflict, LNG has become even more coveted. As a matter of fact, the United States recently entered into a partnership with the EU to export additional LNG to wean the bloc off its dependence on Russian natural gas supplies. This means LNG deliveries are poised to rise further, especially with Moscow squeezing natural gas supplies to Europe by partly closing its key Nord Stream pipeline.
Looking at the supply side, production levels have struggled to match the peak levels achieved in early 2022 and late 2021. Over the past few months, natural gas output has consistently averaged under the 97 Bcf per day high of the last year-end. This pattern has led to a sizeable inventory deficit to its five-year average, which currently stands at nearly 13%. With the big upstream operators concentrating on free cash flow over production, volumes seem unlikely to recover heading into the winter demand season.
The tight stockpile levels have pushed up the price of the energy commodity with the apprehension that the market might enter the winter withdrawal season with supplies in storage well below normal. This can compound further if the cold turns out to be intense.
Buy These Gas-Heavy Names
Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. The upward trend should aid gas-weighted producers.
To guide investors to the right picks, we highlight three companies that carry a Zacks Rank #2 (Buy). The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EQT Corporation: EQT is primarily an explorer and producer of natural gas, with a primary focus on the Appalachian Basin in Ohio, Pennsylvania and West Virginia. In terms of average daily sales volumes, EQT Corp is the largest natural gas producer in the domestic market.
The company has an expected earnings growth rate of 32.5% for the current year. The Zacks Consensus Estimate for EQT’s 2022 earnings has been revised 22% upward over the last 60 days. EQT — valued at around $17.7 billion — has soared 188% in a year.
Cheniere Energy: With the dramatic growth of natural gas exports and being the first company to receive regulatory approval to ship LNG from its Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
The firm is valued at around $41.4 billion. The Zacks Consensus Estimate for LNG’s 2022 earnings has been revised 23% upward over the last 60 days. Cheniere has rocketed 93.3% in a year.
SilverBow Resources: SilverBow has operations across roughly 130,000 net acres in the Eagle Ford and more than 80% of its total output comprises natural gas. The company’s exposure to premium markets and focus on costs and margins should help it to benefit from high natural gas prices.
SilverBow beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 36.1%. Valued at around $850.7 million, SBOW has gained some 177.5% in a year.