LNG inventories: can this leader report a profit in the second quarter while demand in Europe remains high?
LNG inventory Golar LNG (GLNG) made gains on Tuesday ahead of quarterly results due later this week. The liquefied natural gas carrier is making a profit in the second quarter as Freeport LNG said its main export terminal, which has been offline since an explosion in early June, is expected to resume partial operations in October.
LNG inventories have largely consolidated since April, although LNG demand has soared over the past year. Even before Russia invaded Ukraine, electricity prices in Europe had skyrocketed. However, now that natural gas supplies from Russia are largely irrelevant in Europe, supply is severely constrained.
In 2021, Russia supplied nearly half of the European Union’s gas imports. So far in 2022, 75% of total US LNG shipments have gone to Europe, up from 34% in 2021, according to federal data. The United States is the world’s largest producer of natural gas.
US natural gas prices rose nearly 3% to around $7.80 per million British thermal units on Tuesday. Data from the U.S. Energy Information Administration (EIA) showed utilities added 41 billion cubic feet of gas to storage in the last week of July. This increase was higher than expected, but total natural gas stored is still down 10% year-over-year.
On August 4, Freeport LNG announced that it had reached agreement with US regulators on the steps needed to reopen its export terminal in Quintana, Texas. In a statement, the company said it could complete repairs and operate the export terminal by early October.
The private company had previously estimated that its export terminal, one of the biggest in the country, would only be offline for three weeks after a fire and explosion on June 8 shut it down. The facility is not expected to operate at full capacity until late 2022 at the earliest.
The Freeport LNG plant can produce approximately 2 billion cubic feet per day (bcf/d) of LNG. This represents more than 15% of US LNG export capacity. Total U.S. LNG export capacity in 2021 was about 12.98 billion cubic feet/d, according to the EIA.
Earnings of Golar LNG
Estimates: Analysts predict Golar LNG will earn 22 cents per share for its second quarter, compared to a loss of 12 cents a year ago. Revenue estimates were $81.1 million, down from $104.4 million in the first quarter.
Earnings: Come back Thursday morning.
Shares of Golar LNG were up 3.3% at 12:11 a.m. at the close of trading on Tuesday. The stock is back above its 10-week moving average as it strives to add a fourth week to its recent advance. Stocks are 10 weeks into a consolidation with a buy point of 27.62, according to IBD MarketSmith charts.
Golar LNG, based in Hamilton, Bermuda, announced first quarter financial results well below analysts’ expectations. The global LNG transportation company reported a loss of 35 cents per share and revenue of $79.7 million. For the full year, Wall Street expects GLNG to earn 52 cents per share and $324.2 million in total sales. If it reached this threshold, it would be the first time since the 2013 financial year that the company had recorded a profit.
GLNG stock has a composite rating of 81 out of 99. It has a relative strength rating of 98, an exclusive IBD Stock Checkup gauge for stock price movement with a score of 1 to 99. The rating shows how a stock’s performance over the past 52 weeks is consistent with all other stocks in IBD’s database. The EPS rating is 46.
Overview of LNG stocks
LNG companies Energy Cheniere (LNG) and New Fortress Energy (NFE) released mixed results last week. Both missed earnings views but exceeded earnings estimates.
Cheniere, based in Houston, is the largest liquefied natural gas producer in the United States and one of the largest LNG operators in the world. Its services range from the supply and transportation of gas to the chartering and delivery of vessels. Cheniere owns and operates liquefied natural gas terminals near Corpus Christi, Texas.
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New Fortress Energy ranks second on the IBD 50 stock list. The company ranks third in the Oil & Gas-Integrated industry group. Along with its profits, NFE announced on Thursday that it had entered into a partnership with Plug hole (PLUG) for a 120 megawatt industrial-scale green hydrogen plant near Beaumont, Texas. The plant would be one of the largest green hydrogen plants in North America, according to NFE.
PLUG will release its second-quarter results on Tuesday after the market closes. Plug Power’s relative IBD strength rating was recently increased to 92.
A stock excluding LNG — natural gas producer Devon Energy (DVN) – also recently beat Wall Street forecasts, with Q2 earnings up 331% to $2.59 per share. Revenue increased 133% to $5.6 billion.
DVN raised its full-year production forecast by 3% to a range of 600,000 to 610,000 barrels of oil equivalent per day. Devon Energy also adjusted its upstream capital forecast to between $2.2 billion and $2.4 billion, down from $2.1 billion.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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