Cheniere Energy LNG, the largest U.S. liquefied natural gas (LNG) producer, reduced its combined feed gas intake at two of its plants by about 1 billion cubic feet per day (bcfd). This reduction comes at a time when the United States is the world's largest LNG exporter and the global demand for LNG is high.
This helped push the overall U.S. feed gas consumption to a four-week low of 11.2 bcfd. The reduction was due to a combination of factors, including a maintenance shutdown at Berkshire Hathaway Energy's Cove Point LNG plant and smaller reductions elsewhere.
Despite the reduction in feed gas intake, U.S. LNG exports remain strong. According to the U.S. Energy Information Agency (EIA), the country regained its crown as the largest LNG exporter in the world in the first half of 2023.
Implications for the U.S. LNG market
The reduction in Cheniere Energy’s feed gas intake is a short-term development. However, the fact that U.S. LNG exports remain strong despite the reduction in feed gas intake is a positive sign for the U.S. LNG market. This suggests that there is strong demand for U.S. LNG, both in Europe and Asia.
The high gas prices in these continents are also supporting the LNG exports. However, gas prices can be volatile and if they fall in either Europe or Asia, it could reduce the demand for U.S. LNG.
Impact on LNG Buyers
The buyers should be aware of Cheniere's decision to reduce feed gas intake and monitor the impact on global LNG prices. If prices continue to decline, they may be able to negotiate better contracts with the suppliers. However, buyers should also be prepared for the possibility of supply disruptions, especially if the winter is colder than expected.
Implications for LNG Investors
Investors in LNG companies should be aware of Cheniere's decision to reduce feed gas intake. If the reduction leads to lower LNG prices, it could hurt the earnings of LNG producers and exporters. However, investors should also keep in mind that the long-term outlook for LNG is still bullish. Its global demand is expected to grow significantly in the coming years, as more countries switch to natural gas for power generation and industrial use.
In conclusion, the U.S. LNG market is subject to a number of factors, including unplanned outages and maintenance shutdowns. However, the country is well positioned to meet the growing demand from Europe and Asia in the coming years. In order to remain competitive, the industry needs to address several challenges like high costs, regulatory hurdles and environmental concerns.
Zacks Rank and Key Picks
Currently, Cheniere Energy carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI, sporting a Zacks Rank #1 (Strong Buy), and Archrock AROC and Harbour Energy HBRIY, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is valued at $3.48 billion. In the past year, its shares have risen 23%.
CVI currently pays a dividend of $2 per share or 5.78% on an annual basis. Its payout ratio currently sits at 30% of earnings.
Archrock is valued at around $2.07 billion. It delivered an average earnings surprise of 15.08% for the last four quarters and its current dividend yield is 4.69%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
Harbour Energy is worth approximately $2.49 billion. HBRIY currently pays a dividend of 21 cents per share, or 6.38% on an annual basis.
The company's activities include acquiring, exploring, developing, and producing oil and gas reserves. It has ownership stakes in a number of properties in the United Kingdom, Norway, Indonesia, Vietnam and Mexico.
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