Considering the constant discussions about climate change and opposition to fossil fuels, one of the cleanest burning fuels is natural gas and liquified natural gas, or LNG. In fact, LNG has proven to be better than any other fossil fuel for the environment, as it generates 30% less carbon dioxide than fuel oil and 45% less than coal. While LNG still does have an environmental footprint, it contributes to far fewer carbon emissions.
In a new research report from Goldman Sachs, analysts said they are very positive on pricing for the natural gas and LNG complex and noted this.
We continue to see a favorable above mid-cycle price environment in the second half of 2021 and 2022 across the oil and gas commodity complex. For natural gas, we believe our above-mid cycle gas prices in 2021 and 2022 of ($2.99/$2.96 per MMBtu) are largely reflected in valuations and current gas futures ($3.11/$3.07 per MMBtu). However, we remain constructive on NGLs and see upside to current futures from strong demand/disciplined supply.
Five large cap stocks are ideal for growth stock investors looking to capitalize on the solid pricing and demand environment. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This is a somewhat contrarian play and makes sense for investors looking for energy exposure via services. Baker Hughes (NYSE: BKR) is an international industrial service company and one of the world’s largest oil field services companies. The company provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting. It is actually the second-largest oilfield services and equipment company in the world by market cap.
Baker Hughes prides itself on being a self-described energy technology company that provides solutions to energy and industrial customers worldwide. Built on a century of experience and with operations in over 120 countries, the firm’s innovative technologies and services are taking energy forward.
The Goldman Sachs team said this about the venerable oil field services company.
Baker Hughes is the core equipment provider and has 90%+ market share in the global LNG liquefaction development market, which we expect will drive EBITDA and margin growth.
Shareholders are paid a very solid 3.09% dividend. The $29 Goldman Sachs price target compares with a $28.23 consensus and a Friday closing print of $23.55.
This a top liquid natural gas play has made a nice move off the October 2020 lows. Cheniere Energy Inc. (NYSE: LNG) is an energy company primarily engaged in liquefied natural gas-related businesses. The company operates through two segments: LNG terminal business and LNG and natural gas marketing business.
Cheniere’s LNG terminal segment consists of the Sabine Pass and Corpus Christi LNG terminals. Its LNG and natural gas marketing segment consists of LNG and natural gas marketing activities by Cheniere Marketing.
Cheniere Marketing is developing a portfolio of long- and medium-term SPAs with professional staff based in the United States, the United Kingdom, Singapore, and Chile. The company conducts its business through its subsidiaries, including the development, construction, and operation of its LNG terminal business and the development and operation of its LNG and natural gas marketing business.
The analysts noted this when discussing the prospects.
Strong ramp in contracted US LNG export capacity and solid exposure to spot pricing for remaining volume, we see free-cash-flow ramping by ~50% from 2021 levels.
The Goldman Sachs price target is $105, and that is versus the lower Wall Street consensus of $94.24. The shares closed Friday at $87.44.
This company is expected to have a stunning percentage of its production come in as natural gas. EQT Corporation (NYSE: EQT) operates as a natural gas production company in the United States. The company produces natural gas, natural gas liquids (NGLs), and crude oil. As of Dec. 31, 2020, it had 19.8 trillion cubic feet of proved natural gas, NGLs, and crude oil reserves across approximately 1.8 million gross acres.
With more than 128 years of experience, EQT continues to be a leader in the use of advanced horizontal drilling technology. This technology is designed to minimize the potential impact of drilling-related activities and reduce the overall environmental footprint.
The analyst said this when discussing the stock.
We think EQT continues to screen favorably relative to peers for attractive free-cash-flow (FCF) from lower costs (15.5% FCF yield in 2023 estimated versus 13% for gassy E&P peers).
Goldman Sachs has set a $26 price target, while the Wall Street consensus price target for the stock is $25.63. The stock closed Friday at $22.03 up almost 3%..
This off-the-radar name has also seen strong movement since last fall but has undeniable positive prospects. Ovintiv, Inc. (NYSE: OVV), together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids. It operates through USA Operations, Canadian Operations, and Market Optimization segments.
The company’s principal assets include Permian in west Texas and Anadarko in west-central Oklahoma; and Montney in northeast British Columbia and northwest Alberta. Its other upstream assets comprise Eagle Ford in south Texas, Bakken in North Dakota, Uinta in central Utah, Duvernay in west central Alberta, Horn River in northeast British Columbia, and Wheatland in southern Alberta. The company was formerly known as Encana Corporation and changed its name to Ovintiv Inc.
Here is what the analysts had to say.
Favorable NGLs pricing in the near-term. Among upstream producers, we are Buy-rated on Ovintiv for higher NGLs price exposure.
Shareholders are paid a 1.14% dividend. Goldman Sachs has set a $38 price target versus the much lower $32.87 consensus target and Friday’s $32.87 closing print.
This top energy midstream company is actually structured as a C-Corp and is on the Goldman Sachs Conviction List of top stock picks. Targa Resources Corp (NYSE: TRGP) is a leading provider of midstream services and is one of the largest independent midstream energy companies in North America. Targa owns, operates, acquires, and develops a diversified portfolio of complementary midstream energy assets.
The company is primarily engaged in the business of: gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling NGLs and NGL products, including services to LPG exporters; gathering, storing, and terminaling crude oil; storing, terminaling, and selling refined petroleum products.
Targa Resources has one of the premier asset positions in the Permian basin. With solid management, a strong balance sheet, and exposure to some of the most attractive U.S. energy basins, it remains a top pick across Wall Street. The analyst at Goldman Sachs had this to say.
We see robust supply growth potential from the Permian/higher NGLs prices. We prefer Targa Resources on favorable exposure to Permian-led gas/NGL supply growth.
Investors are paid a small 0.88% dividend. The Goldman Sachs price objective is at $55, while the consensus is lower at $47.50. The shares closed Friday at $45.31.
Five top energy picks that are perhaps off-the-radar for some investors but are offering outstanding growth potential and reasonable entry points as compared to some of the other companies in the sector. It may make sense to buy partial positions now and see if prices don’t back up some as we could see some selling into the end of the quarter.