4 Big Energy Stocks To Play China’s Rising Natural Gas Demand

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It’s no secret that China is consuming a monster amount of energy in order to supply its rapid growth. From fossil fuels like coal and oil to renewables like solar, demand for all things energy in China continues to surge forward as it modernizes and grows.

natural gas energy stocks chinaAnd natural gas is leading the way.

According to the latest report by the International Energy Agency (IEA), China’s natural gas demand will nearly double by 2019. Driven by the power, industrial and transport sectors, in a matter of five short years, China will see its natural gas demand rise to reach 315 billion cubic meters in that time — an increase of 90%. That’s a staggering amount of growth in such a short time.

And while some of that will come from domestic sources, China will remain a huge net importer of the fuel. That means a hefty dose of liquefied natural gas (LNG), and plenty of opportunities for investors to make money on China’s natural gas addition. Here are four of the best energy stocks to buy:

Chinese Natural Gas Stocks #1: Dominion Resources (D)

natural gas energy stocks chinaWhile Dominion Resources (D) controls nearly 27,000 megawatts’ worth of generation assets and 64,000 miles of power and transmission lines, the electric utility could be a great play for growing natural gas demand in China.

The reason? One of its facilities is getting a $4 billion facelift.

Dominion has decided to turn its Cove Point LNG import facility located in Maryland into exporting one. Retrofitting import terminals for export is a quicker and cheaper option than building one from scratch. Construction is already underway, and shipments are scheduled to begin in 2017. When it’s finished, the LNG facility will be able to export 1.8 billion cubic feet per day (Bcf/d) worth of natural gas overseas.

The kicker for D stock is that Cove Point is one of a few facilities receiving the go-ahead from regulators to begin shipping LNG to nations without a free-trade agreement with the U.S. That includes China.

And by placing the facility in a new master limited partnership (MLP) facility, Dominion and D stock investors will be able to realize tax savings and additional cash flows. No dividend slouch, D stock currently yields a healthy 3.5%.

Chinese Natural Gas Stocks #2: Cheniere Energy (LNG)

natural gas energy stocks chinaWhile D stock is in the second inning of its LNG ballgame, Cheniere Energy (LNG) is rounding third base and getting ready to run home. Cheniere’s Sabine Pass is the only export project that has secured all the necessary clearances to begin exporting LNG — free trade agreement or otherwise.

That puts LNG stock in a prime spot to begin shipping LNG to China.

However, the story gets better for Cheniere. The firm isn’t a one-trick pony, as it has plans to build another export facility in Texas. Its planned Corpus Christi LNG facility will be able to process and ship around 2.1 billion cubic feet per day when it’s completed. This planned facility recently cleared a major environmental review with flying colors.

Need more reasons to own LNG stock? Try incentive distribution rights (IDRs) from owning 45% of MLP Cheniere Energy Partners LP (CQP) and 100% of its general partner Cheniere Energy Partners LP Holdings, LLC (CQH). As these products grow, cash flows from CQP and CQH will flow back into LNG’s pockets, leaving room for a juicy dividend down the road.

Chinese Natural Gas Stocks #3: Chart Industries (GTLS)

natural gas energy stocks chinaWhen it comes to LNG shipping, the major necessary component is called cryonic storage. It’s the lynchpin that makes it all possible. Providing that equipment is Chart Industries (GTLS). The firm is a specialist in all things LNG and natural gas storage. As such, its long-term potential is great, and GTLS continues to gain new orders for new equipment.

It’s worth noting that, compared to other energy stocks, GTLS has been a real stinker lately. Earnings haven’t been great in recent quarters. Chart missed analyst expectations by a wide 24 cents per share. That set up GTLS shares for a nasty fall — even more so as investors have abandoned growth stocks with abandon. GTLS stock plunged and has fallen about 14% in the past year.

That dip actually makes GTLS stock an interesting value for investors who care about the longer-term. Most of the miss could actual be attributed to weakness in its non-energy biomedical business. That business supplies respiratory products, cold storage systems, and commercial oxygen generation systems for hospitals and clinics. On the energy side, things continue to be robust and will help drive GTLs shares higher over the longer.

At a forward P/E of 20, GTLS isn’t exactly cheap … but it is much cheaper than it was last fall.

Chinese Natural Gas Stocks #4: Chevron (CVX)

natural gas energy stocks chinaIf there’s a profit to be made off something in the energy industry, one of the major integrated energy stocks will almost certainly be there. And in the case of LNG exports to China, that fact is no different. Super-major energy stock Chevron (CVX) is in the thick of LNG exporting.

However, CVX isn’t looking for facilities located here in the U.S., but those located in Australia.

According to the IEA, more than half of all new LNG exports will originate from down under, and CVX has two monster projects in Australia. Both its Gorgon and Wheatstone fields/terminals are expected to be the world’s largest once they are fully up and operational. When finished, the two projects will be responsible for nearly 28% of all of Australia’s LNG shipments. And giving the proximity to China and the rest of Asia, costs for shipping that gas could be cheaper than U.S.-based LNG exports.

That could give Chevron a huge leg up on the domestic-based completion.

Meanwhile, investors are treated to one of the largest energy stocks on the planet. That means plenty of other assets to help smooth out the wait — and pay a nice 3.4% dividend — while these terminals are finished.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

Aaron Levitt is an investment journalist living in Ohio. With nearly two decades of experience, his work appears in several high-profile publications in both print and on the web. Also likes a good Reuben sandwich. Follow his picks and pans on Twitter at @AaronLevitt.


Article printed from InvestorPlace Media, https://investorplace.com/2014/06/china-natural-gas-lng-cvx-gtls-d/.

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