U.S. LNG Investing: Two Ways to Play the Boom

David Fessler By David Fessler
Energy and Infrastructure Strategist

Alternative Energy

Every president going back to Nixon has had a plan to reduce America’s dependence on foreign oil and natural gas.

Most investors know we’ve been steadily ramping up U.S. oil exports. And we’ve finally tipped the scales.

During the first week of December 2018, the U.S. shipped and exported more oil than it imported.

The credit goes to advanced directional drilling and fracking technologies. They’ve helped drillers unlock huge new deposits of natural gas trapped alongside the crude.

In addition to ramping up exports of WTI crude, drillers are doing the same with the vast excess supply of natural gas.

Be Aggressive

The U.S. exports some natural gas via pipelines to Mexican and Canadian customers. But most of it is exported as liquefied natural gas (LNG).

By the end of 2019, U.S. LNG export capacity should reach 8.9 billion cubic feet per day (Bcf/d). That will make the U.S. the world’s third-largest LNG exporter, behind Australia and Qatar.

The U.S. started exporting LNG from the U.S. mainland back in February 2016. That’s when Cheniere Energy (NYSE: LNG) started LNG exports from its first Sabine Pass liquefaction train in Louisiana.

Today, Sabine Pass has four liquefaction trains operating. In addition, the Cove Point LNG export terminal, run by Dominion Energy (NYSE: D), recently started up its first train in Maryland.

Two additional trains, Cheniere’s Sabine Pass Train 5 and its Corpus Christi Train 1, are undergoing final testing. They should ship their first LNG cargos in a few weeks.

But that’s just the tip of what’s coming from U.S. LNG producers…

Clearly there is an aggressive push underway to build up capacity through the beginning of 2021.

By then, the U.S. should have at least 10 Bcf/d of LNG export capacity.

Two Ways to Play

My favorite way to play the ramp-up of U.S. LNG is Cheniere Energy. It’s been in the LNG business longer than any other player and has a big head start on the competition.

As you can see from the chart above, six of the first seven liquefaction trains that have come online so far are owned by Cheniere. And unlike some of the other exporters, Cheniere’s only business is exporting LNG.

Another way to play America’s rise to energy independence is via Williams Companies (NYSE: WMB), a large U.S. natural gas pipeline operator.

It recently got the green light from the Federal Energy Regulatory Commission for its Gulf Connector Expansion Project. Once this project is completed, Williams will be able to ship 475 million cubic feet of natural gas per day.

That gas will supply Cheniere’s Corpus Christi trains and Freeport LNG’s terminal, located in Brazoria County, Texas. Both should be operational within 18 months.

The approval is a big deal for Williams. It’s been scrambling to connect existing gas networks to a growing list of U.S. LNG producers and exporters.

I believe the U.S. will become energy independent within a decade or so. Part of that story involves natural gas as a transition fuel to cleaner forms of energy.

The U.S., in my opinion, will become the largest LNG producer in the world. Cheniere Energy and Williams Companies – and their shareholders – should see sizable gains.

Good investing,

Dave