We recently published a list of What Happened to LNG Stocks and 10 Best LNG Stocks to Buy Now. In this article, we are going to take a look at where Equinor ASA (NYSE:EQNR) stands against the other LNG stocks.
Liquefied natural gas is one of the fastest-growing sectors in the energy industry. The global LNG market is changing quickly to meet the rising demand for gas in new markets. This growth is fueled by more companies getting involved and faster advancements in technology, but faces uncertainties due to supply constraints.
The 2024 World LNG Report reveals that the global LNG market now connects 20 exporting with 51 importing markets, with supply being the main constraint on growth. After two turbulent years, the market has reached a fragile equilibrium due to limited spare supply.
Geopolitical tensions have significantly shifted demand and supply dynamics, fueling price volatility and causing natural gas prices to rise across all key markets in the second quarter of 2024. These factors continue to pose challenges for the industry in 2024.
However as the industrial coal-to-gas transition gathers steam fueled by solid demand in China and Southeast Asia, demand for LNG is expected to grow by 40% by 2040.
The worldwide market for liquefied natural gas is expected to experience steady expansion until 2030 as production increases, resulting in reduced costs and a broader market reach in nations where coal is more affordable.
The total LNG supply globally is anticipated to rise by an average of 31 million metric tons annually until 2030. Production capacity is expected to grow by 30% or more from 2026 to 2028 due to the launch of new liquefaction facilities. LNG Capacity should exceed 600 million by 2030.
The increased supply comes as companies invest billions of dollars in building LNG facilities in the hope of cashing in on the exponential growth in demand. Amid the rise in LNG demand, investment opportunities are increasingly cropping up for investors looking to diversify their energy sector portfolios.
Over the last 50 years, LNG trade has grown at an average rate of 11% annually, starting from 2.6 million metric tons in 1971 and reaching 372.3 million metric tons in 2021. Given that the expansion has been consistently positive, it underscores the tremendous opportunity for grabs amid the transition from coal.
According to Julia Khandoshko, CEO of international broker Mind Money, the main trend in the LNG market is the transition to natural gas as LNG infrastructure expands, making it a preferred energy source.
The growing investments in the sector in the US and Europe affirm the sector’s long-term prospects. While US LNG exports have increased significantly since Russia invaded Ukraine, affecting key supply lines, there is still room for growth.
Japan dominates the $250 billion global LNG trade, giving it its primary role in the supply chain stage. Additionally, Japanese companies netted at least $14 billion in profit from gas-related business, affirming the booming business. Nevertheless, some of the best LNG stocks are in the U.S.
The shale oil and gas production surge has allowed the U.S. to secure the top spot in global natural gas output, contributing to stable prices at home. However, the country doesn’t require all this gas for its own use, making producers keen to sell it abroad to regions like Europe and Asia, where it fetches a premium. The U.S. Energy Information Administration anticipates a 2% increase in U.S. LNG exports this year and a further 18% rise next year as new export plants are established.
While energy stocks can be highly volatile, LNG stocks have proven more resilient than crude oil and other entry commodities. As natural gas moves to replace coal as the primary energy source amid the push to combat emissions, some of the best LNG stocks to buy now are poised to offer some of the best investment opportunities. Such stocks are of companies capable of delving low, modest LNG production growth at the lowest breakeven levels.
Companies investing billions into exploring more natural gas resources to meet the growing demand are some of the best investment plays in the sector. Additionally, companies are building LNG export and import infrastructure to benefit from the supply chain business.
Investments in building LNG infrastructure are expected to generate significant free cash flow going to the strong demand, consequently allowing the companies to pay big dividends.
Our Methodology
For our list of the best LNG stocks to buy now, we sifted through ETFs and online rankings to compile an initial list of 20 stocks. We then selected the 10 stocks that are the most popular among elite hedge funds. We have sorted the list in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A worker in a hard hat standing in front of a giant oil refinery, the stark blue sky and grey refinery in the background.
Equinor ASA (NYSE:EQNR)
Number of Hedge Fund Holders: 14
Headquartered in Stavanger, Norway, Equinor ASA (NYSE:EQNR) is an energy company engaged in oil and gas exploration, production, and transportation. It develops carbon capture and storage projects while providing transportation solutions, including pipelines, shipping, trucking, and rail.
Equinor ASA (NYSE:EQNR) is also actively involved in the liquefied natural gas (LNG) sector, operating the Hammerfest LNG plant in Norway, which produces LNG for global markets. The company has signed long-term agreements, such as a 15-year deal with Deepak Fertilizers in India, starting in 2026. Additionally, Equinor has extended its long-term contract with Finnish energy company Gasum for LNG bunkering, ensuring continued supply to Equinor’s dual-fuel chartered fleet. This agreement highlights both companies’ commitment to reducing emissions in the maritime sector.
While the stock has pulled down significantly, its underperformance has nothing to do with the weakness of the core business. The pullback comes from the broader energy sector, which is under pressure, resulting in weak oil and gas prices.
Nevertheless, despite the weakness in the energy sector, European energy prices have remained significantly high due to the impact of the Russian-Ukraine war. Consequently, Equinor remains well-positioned to continue generating shareholder value owing to its robust revenue streams.
Equinor ASA (NYSE:EQNR) delivered robust second-quarter results, which were attributed to robust LNG gas production and higher liquids prices across major segments. Nevertheless, the company could have generated more revenues and earnings had it not been subjected to lower gas prices.
Revenues in the quarter rose to $25.5 billion from $22.87 billion delivered a year ago. Earnings per share also rose to 84 cents, a share-bearing cost census estimate, and sofa 81 ends per share.
Equinor ASA (NYSE:EQNR) stands out as one of the best LNG stocks to buy owing to its over $37 billion cash and cash equivalent. Consequently, the company is well-positioned to return value to shareholders through dividends. It currently rewards investors with a 5.28% dividend yield. The company plans to return close to $14 billion to shareholders in 2024.
Additionally, Equinor trades at a discount with a price-to-earnings multiple of 7, which affirms a potential undervaluation compared to its industry peers.
At the end of Q2 2024, 14 hedge funds tracked by Insider Monkey reported having stakes in Equinor ASA (NYSE:EQNR), down from 17 in the previous quarter. The overall value of these stakes is over $158.58 million. Among these hedge funds, Balyasny Asset Management was the company’s leading stakeholder in Q2.
Overall EQNR ranks 8th on our list of the best LNG stocks to buy. While we acknowledge the potential of EQNR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EQNR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
