Growing energy consumption, driven by population growth, industrialization, and economic development, continues to be a significant driver for the oil and gas industry. The industry’s growth is further fueled by increased transition toward technologies like AI and big data analytics.
Amid this backdrop, it could be wise to add quality gas stocks Cheniere Energy Partners, L.P. (CQP), Transportadora de Gas del Sur S.A. (TGS), and NGL Energy Partners LP (NGL) to your portfolio for solid returns.
Gasoline prices have witnessed a sharp rise lately due to recent U.S. refinery constraints and increasing oil prices. According to Tom Kloza, global head of energy analysis at OPIS, “US refining has been stunted by severe weather and some power losses at key plants. We may in the next few days see US retail gas prices at a higher number than year-ago.”
The recent surge in oil prices is due to high demand driven by economic growth and constrained supplies. As per a monthly report by the Organization of the Petroleum Exporting Countries (OPEC), global oil demand is projected to rise by 2.25 million barrels per day (bpd) in 2024 and by another 1.85 million bpd in 2025.
Besides, OPEC+ members recently agreed to extend their voluntary cuts to oil production through the second quarter of this year. This move is aimed at the group’s balancing act to stabilize crude oil prices by lowering supply.
The oil and gas market is expected to grow from $7.19 trillion in 2023 to $7.62 trillion in 2024 at a CAGR of 6.1%. Further, the market is expected to expand to $9.35 trillion by 2028, growing at a CAGR of 5.2% during the forecast period (2024-2028).
Moreover, natural gas consumption in the U.S. is spiking, which is evident as more than 118 Bcf/d of natural gas was consumed in January, a new monthly record driven by the electric power sector, as reported by the U.S. Energy Information Administration (EIA).
Also, it is forecasted that the U.S. natural gas consumption will surge by 5% during the first quarter of 2024 compared with 1Q23, remarked one of the warmest first quarters on record.
According to The Business Research Company report, the liquefied natural gas (LNG) market is expected to reach $192.57 billion by 2028, growing at a CAGR of 7.5%.
Given the industry’s robust outlook, investing in quality gas stocks CQP, TGS, and NGL could be wise now.
Let’s discuss the fundamentals of these stocks in detail:
Cheniere Energy Partners, L.P. (CQP)
CQP offers LNG to integrated energy companies, utilities, and energy trading companies worldwide. It owns and operates a natural gas liquefaction and export facility at the Sabine Pass LNG Terminal located in Cameron Parish, Louisiana. It also owns a natural gas supply pipeline that interconnects the Sabine Pass LNG terminal with various interstate pipelines.
On January 26, 2024, CQP declared a cash distribution of $1.03 per common unit to unitholders of record as of February 7, 2024, comprised of a base amount equal to $0.775 and a variable amount equal to $0.260, and related distribution to its general partner. These distributions were paid on February 14, 2024.
CQP pays an annual distribution of $0.78 per unit, which translates to a dividend yield of 1.59% on the current share price. Its four-year average dividend yield is 1.97%.
On November 29, 2023, CQP and Cheniere Energy, Inc. (LNG) announced that Sabine Pass Liquefaction Stage V, LLC entered into a long-term Integrated Production Marketing (IPM) gas supply agreement with ARC Resources U.S. Corp., a leading natural gas producer in Canada.
The IPM agreement with ARC Resources is expected to support the Sabine Pass Expansion project and secure increased LNG supplies into Europe.
During the fourth quarter that ended December 31, 2023, CQP reported total revenues of $2.69 billion, and its income from operations was $1.10 billion for the same period. The company’s net income came in at $906 million, or $1.42 per share, respectively.
Analysts expect CQP’s revenue and EPS for the second quarter (ending June 2024) to increase 10.8% and 23% year-over-year to $2.14 billion and $1, respectively. For the fiscal year 2025, the company’s revenue is expected to grow 19.1% year-over-year to $11.10 billion.
CQP’s stock has plunged 2.2% over the past month to close the last trading session at $48.66.
CQP’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Quality, Sentiment, and Momentum. It is ranked #9 out of 24 stocks in the A-rated MLPs – Oil & Gas industry.
Click here to access additional CQP ratings for Value, Stability, and Growth.
Transportadora de Gas del Sur S.A. (TGS)
Headquartered in Buenos Aires, Argentina, TGS engages in the transportation of natural gas and production & commercialization of natural gas liquids in Argentina and internationally. It operates through four segments: Natural Gas Transportation Services; Liquids Production and Commercialization; Other Services; and Telecommunications.
During the fourth quarter of 2023, TGS’ Mercedes-Cardales natural gas pipeline began its operations. With this complementary work to the President Nestor Kirchner natural gas pipeline, carried out by Energía Argentina S.A., more flexibility is provided to transfer natural gas between the transportation systems operated by TGS and in the Great Buenos Aires area.
TGS’ trailing-12-month EBIT and EBITDA margins of 25.71% and 39.10% are 18.6% and 11.8% higher than the respective industry averages of 21.69% and 34.96%. Likewise, the stock’s trailing-12-month ROTC of 8.62% is higher than the industry average of 8.50%.
TGS’ revenue and EBITDA have grown at respective CAGRs of 75.1% and 58.5% over the past three years. The company’s EBIT has increased 48.4% over the same timeframe, while its net income and EPS have improved at CAGRs of 68% and 68.7%, respectively.
For the fourth quarter that ended December 31, 2023, TGS reported revenues of ARS 102.48 billion ($121.13 million), while its operating profit was ARS 22.65 billion ($26.77 million) for the same period. Its operating profit from the Midstream and Telecommunications segment grew 160.8% year-over-year to ARS 13.23 billion ($15.64 million).
In addition, the company’s free cash flow stood at ARS 8.54 billion ($10.10 million) during the fourth quarter, against negative free cash flow of ARS 13.56 billion ($16.03 million) during the fourth quarter of 2022.
Analysts expect TGS’ revenue and EPS to increase 14.4% and 16.5% year-over-year to $908.61 million and $0.99 during the fiscal year 2024, respectively. Shares of TGS have gained 7.2% over the past six months and 14.9% over the past year to close the last trading session at $12.26.
TGS’ POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Quality, Value, Momentum, Sentiment, and Stability. TGS is ranked #4 of 41 stocks within the A-rated Foreign Oil & Gas industry.
To see additional POWR Ratings of TGS, click here.
NGL Energy Partners LP (NGL)
NGL engages in the transportation, storage, blending, and marketing of crude oil, natural gas liquids, refined products/renewables, and water solutions. The company operates in three segments: Water Solutions; Crude Oil Logistics; and Liquids Logistics.
On February 6, 2024, NGL declared a distribution of 50% of the arrearages earned and outstanding through December 31, 2023. Accordingly, each holder of the Class B Preferred Units received $4.44 per unit. Each holder of the Class C Preferred Units received $4.07 per unit on February 27, 2024, paid to holders of record at the close of trading on February 16, 2024.
Also, the board of directors declared a cash distribution of $115.03 million, which represents 50% of the arrearages earned on the Class D preferred units through December 31, 2023. The Class D Preferred distribution payments were also made on February 27, 2024.
On January 22, NGL Water Solutions commenced expansion of its Lea County Express Pipeline System from a capacity of 140,000 barrels of water per day to 340,000 barrels per day in 2024.
The new addition of a second large-diameter pipeline, disposal wells, and facilities dramatically expands the capabilities of NGL’s existing produced water super-system. Also, it creates a significantly larger outlet for produced water disposal within the Delaware Basin.
For the nine months that ended December 31, 2023, NGL reported total revenues of $5.33 billion, of which its revenue from the Water Solutions segment grew 9.1% year-over-year to $557.85 million. Its operating income increased marginally from the year-ago value to $259.84 million. Its net income came in at $93.61 million, up 9.2% from the prior year’s period.
Further, the company’s adjusted EBITDA of $462.54 million indicates a marginal year-over-year growth. Its total current assets amounted to $1.34 billion as of December 31, 2023, compared to $1.29 billion as of March 31, 2023.
Street expects NGL’s EPS for the fiscal year (ending March 2025) to increase 190% year-over-year to $0.29. NGL’s shares have gained 54.2% over the past six months and 53.4% over the past year to close the last trading session at $5.89.
NGL’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Value and Momentum. Within the MLPs – Oil & Gas industry, NGL is ranked #8 of 24 stocks.
In addition to the POWR Ratings we’ve stated above, we also have NGL ratings for Quality, Stability, and Sentiment. Get all NGL ratings here.
What To Do Next?
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CQP shares were unchanged in premarket trading Friday. Year-to-date, CQP has declined -0.26%, versus a 8.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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