In this article, we discuss 10 LNG stocks to watch amid the Ukraine crisis. If you want to skip our detailed analysis of these stocks, go directly to 5 LNG Stocks to Watch Amid Ukraine Crisis.
Even though governments in the Western world have largely exempted energy exports from sanctions targeting Russia after the invasion of Ukraine, energy prices have still soared as businesses limit their dealings with Russian companies and absorb the impact of sanctions on large Russian banks. International Brent crude futures have topped $100 per barrel for the first time since 2014 and gas prices have soared almost 76%. Russia and Qatar provide almost 70% of the LNG needs of Europe. Qatar has already said it cannot fully fill the energy gap left by Russia in Europe should sanctions target energy exports of Moscow as well.
What Will Europe Do If Russian Energy Exports Are Halted?
As the US, Canada, Britain, the European Union, Australia, and Japan announce the first wave of sanctions against Russia, countries in Europe, like Germany, are also rethinking their dependence on Russian energy. Berlin has halted work on Nord Stream 2, a system of offshore natural gas pipelines in Europe, running under the Baltic Sea from Russia to Germany. If Russia halts the supply of natural gas to Europe, there are fears of large-scale health and economic consequences, especially in the context of the pandemic.
Kateryna Filippenko, an analyst at Wood Mackenzie, has told news platform CNBC that there are some measures that European countries can take to mitigate the crisis. These include reducing gas burn, increasing output from nuclear and coal plants, maximizing indigenous gas production and pipeline imports, and engaging Asian buyers to use coal and free up LNG. However, the analyst has cautioned that all these are “temporary solutions”.
In this crisis situation, the prices of LNG stocks have surged. Investors eager to profit from this boom for the energy sector in general should consider some top energy stocks to buy now that include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), among others discussed in detail below.
Our Methodology
The companies that operate in the LNG sector and have been affected by the Russian invasion of Ukraine were selected for the list. Data from around 900 elite hedge funds tracked by Insider Monkey at the close of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Oleksandr Kalinichenko / Shutterstock.com
LNG Stocks to Watch Amid Ukraine Crisis
10. FLEX LNG Ltd. (NYSE:FLNG)
Number of Hedge Fund Holders: 2
FLEX LNG Ltd. (NYSE:FLNG) transports LNG worldwide. The company owns nine M-type electronically controlled gas injection LNG carriers and three generation X dual fuel LNG carriers for the purpose. The stock has climbed more than 150% in the past twelve months as energy prices rise, supply chain problems persist, and demand continues to surge. The invasion on Ukraine will bolster the stock as European countries seek alternative LNG supply routes.
The hedge fund interest in FLEX LNG Ltd. (NYSE:FLNG) remains mixed. At the end of the fourth quarter of 2021, 2 hedge funds in the database of Insider Monkey held stakes worth $7.3 million in FLEX LNG Ltd. (NYSE:FLNG), compared to 3 in the previous quarter worth $7.7 million.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), FLEX LNG Ltd. (NYSE:FLNG) is one of the stocks on the radar of investors as energy prices rise.
9. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 17
TotalEnergies SE (NYSE:TTE) is an integrated oil and gas firm based in France. The company owns a 20% stake in Yamal LNG, an energy company majority owned by Novatek in Russia. TotalEnergies SE (NYSE:TTE) has played down the concerns that this ownership will negatively affect earnings as sanctions are imposed on Russia, affirming that an offshore discovery in Namibia and alternative supplies of LNG to Europe will mitigate the crisis.
Elite hedge funds hold large stakes in TotalEnergies SE (NYSE:TTE). Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in TotalEnergies SE (NYSE:TTE), with 24 million shares worth more than $1.2 billion.
8. Golar LNG Limited (NASDAQ:GLNG)
Number of Hedge Fund Holders: 21
Golar LNG Limited (NASDAQ:GLNG) provides services related to the liquefaction, transportation, and regasification of LNG. There is positive hedge fund sentiment around the stock. At the end of the fourth quarter of 2021, 21 hedge funds in the database of Insider Monkey held stakes worth $365 million in Golar LNG Limited (NASDAQ:GLNG), up from 20 the preceding quarter worth $317 million.
CoolCo, a subsidiary of the firm, is seeking a listing on the Oslo exchange and is expected to benefit from the energy crisis in Europe emanating from the Russian invasion of Ukraine. On February 25, B Riley analyst Liam Burke maintained a Buy rating on Golar LNG Limited (NASDAQ:GLNG) stock and raised the price target to $28 from $20.50.
In its Q3 2020 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Golar LNG Limited (NASDAQ:GLNG) was one of them. Here is what the fund said:
“At the end of August, Golar LNG’s subsidiary, Hygo Energy Transition (formerly Golar Power), announced its intention to go public through an IPO (sale of new shares issued with a capital raise). The aim of this move was to raise funds to finance its expansion in electricity generation and liquefied natural gas distribution. The valuation range released by Golar LNG Limited (NASDAQ:GLNG) for this subsidiary turned out to be significantly higher than our own valuation as well as the analyst estimates, which caused the stock to rally by 45% following the announcement.
However, on 23 September, an accusation against Eduardo Antonello, Hygo’s CEO, was made public. Specifically, he was accused of being involved in the incrimination of the oil drilling company Seadrill, where he worked until 2015, for bribes made in 2014. Following this announcement, Golar LNG’s share price plummeted by more than 30% in a single day and it was forced to suspend Hygo’s IPO, in addition to dismissing Antonello. Golar LNG Limited (NASDAQ:GLNG) claims that whatever happened to Antonello’s previous job position has no impact on Hygo. In our opinion, the tenders in Brazil conducted in recent years are especially transparent, with a computerized process, in which the submission of bids is done telematically. That said, an accusation of this nature is not good news for the company, whatever the result, since the reputational damage is high, takes some time to be repaired and may end up affecting the awarding of new contracts in this area. As of writing, Hygo’s valuation represents just over 25% of the value of the Golar LNG Limited (NASDAQ:GLNG).
Despite this, we still believe that Golar LNG Limited (NASDAQ:GLNG) has a high upside potential, not only because of the value of Hygo, but also because of other parts of the business, such as FLNGs (ships that liquefy natural gas at sea), where Golar LNG is one of the pioneers and most experienced and successful players in this market. Proof of this is that Golar LNG has restarted the manufacture of the FLNG Gimi—let’s recall that their client, BP, had asked for a 1-year delay in the manufacture, alluding to force majeure causes.”
7. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 41
Shell plc (NYSE:SHEL) is a United Kingdom-based energy company. Hedge funds have been piling into the stock in recent months. At the end of the fourth quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Shell plc (NYSE:SHEL), up from 33 in the previous quarter worth $2 billion.
Shell plc (NYSE:SHEL) is one of the biggest energy firms in Europe and although it has managed to avoid the impact of sanctions on Russia so far, the renewed calls for Russia to be banned from the SWIFT payments system and increased calls for a ban on energy imports from the country could hit the stock in the coming weeks, although some of these concerns will be offset by the rising price of oil.
In its Q3 2021 investor letter, Goehring & Rozencwajg Associates, an asset management firm, highlighted a few stocks and Shell plc (NYSE:SHEL) was one of them. Here is what the fund said:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Shell plc (NYSE:SHEL) must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell plc (NYSE:SHEL) spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell plc (NYSE:SHEL) pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell plc (NYSE:SHEL) has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
6. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 46
EQT Corporation (NYSE:EQT) is a natural gas production firm. The company is eyeing up contracts to ship natural gas abroad as tensions in Europe disrupt energy supplies. The higher energy prices have also enabled the firm to register a 53% year-over-over surge in revenue, which stood at $1.4 billion in the fourth quarter of 2021. However, the company missed market estimates on earnings over the period.
Major hedge funds hold bullish positions in EQT Corporation (NYSE:EQT). At the end of the fourth quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in EQT Corporation (NYSE:EQT), compared to 57 the preceding quarter worth $838 million.
Alongside Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), EQT Corporation (NYSE:EQT) is one of the stocks that elite investors have their eye on.
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Disclosure. None. 10 LNG Stocks to Watch Amid Ukraine Crisis is originally published on Insider Monkey.
