Global LNG Supply Glut Prompts ASX-Listed Oil & Gas Explorers To Play The Volume Game

  • Sep 08, 2019 AEST
  • Team Kalkine
Global LNG Supply Glut Prompts ASX-Listed Oil & Gas Explorers To Play The Volume Game

The LNG markets are currently facing a supply glut, with Australia, Qatar, and the United States topping the global LNG export. The demand for natural gas across the globe for energy generation is on the rise; however, the oversupplied conditions have maintained a check on the price gains, which is prompting the ASX-listed oil & gas explorers to play the volume games.

The ASX-listed oil & gas explorers are ramping up the production to offset the fall in natural gas prices in the international market and provide cushion to their balance sheets.

The ramped-up production from the ASX-listed oil & gas explorers had pushed the Australian LNG export above Qatar, and the increased use of the natural gas for energy generation in the global market could further propel the ASX-listed energy players as predicted by the industry experts previously.

Also Read: S&P 500 To Inch Further; Energy Sector To Leap And Push The ASX-Listed Energy Players

Role of Natural Gas in the United States Power Sector

The United States hit a record high daily consumption of natural gas in July 2019 with the regular consumption in the electric power plants reaching 44.5 billion cubic feet surpassing the previous record high of 43.1 billion cubic feet in July 2016.

The higher than average temperature coupled with lower natural gas price prompted the energy generation plants to increase the production utilising natural gas.

In the United States, many natural gas-fired generators came online throughout the country recently, especially in the PJM Interconnection- Regional Transmission Organisation which is responsible for managing wholesale electricity in many states in the U.S.

Since the beginning of 2018, over 12 gigawatts of new natural gas-fired electric generation capacity have entered service in PJM. The natural gas-fired capacity in the PJM regulated regions zoomed by 17 per cent.

Natural Gas Net Generation (Source: EIA)

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Australia LNG Trade Scenario:

Australia exported around $50 billion of LNG from 2018 to 2019, up by 61.29 per cent as compared to the export value of $31 billion in 2017-2018. Furthermore, the Wheatstone, Ichthys, and the Prelude LNG prospects are ramping up the production.

The Australian Department of Industry, Innovation and Science (or DIIS) estimates the LNG exports to touch $54 billion in 2019-20 as the production from the projects as mentioned earlier ramp-ups.

In June 2019, the Shell-operated Prelude LNG prospect shipped its first LNG, which is further anticipated to increase in the present year, when the Train 2 of Inpex-operated Ichthys LNG project also comes online.

Further estimations from DIIS are as below:

Also Read: Australia Set to Surpass Qatar Over LNG Exports; Domestic Natural Gas Conditions To Derail the Projections?

ASX-Listed Oil & Gas Explorers:

Woodside Petroleum Limited (ASX: WPL)

WPL is an ASX listed stock, and the company is the operator of the Wheatstone, NWS, and Pluto LNG projects.

Pluto LNG (90 % Interest):

The prospect delivered 14.2 million barrels of oil equivalent (WPL’s share) during the HY2019 and witnessed a major turnaround in the second quarter of the year 2019 to support the proposed Pluto-NWS Interconnector.

Woodside completed a truck loading facility in HY2019, which will enable the company to transport the LNG across Western Australia for use in remote power generation and heavy transport for local Australian mining companies.

Wheatstone (13 % Interest):

Wheatstone delivered production of 6.8 million barrels of oil equivalent (WPL’s share) during the HY2019 with a decreased unit production cost.

The unit production cost for the prospect during the FY2019 stood at $4.4 per barrel of oil equivalent as compared to the FY2018 production cost of $6.8 per barrel of oil equivalent.

Also Read: WPL at the Risk of Ouster from Senegal Project

Santos Limited (ASX: STO)

STO is an ASX-listed oil and gas explorer, who entered into an agreement with the Australian government to address the domestic natural gas shortage issue, especially in Queensland and Victoria.

The company recently posted an interim record underlying profit of $411 million with a 71 per cent increase in interim dividend.

On the production counter, Santos produced 2.66 per cent higher barrels of oil equivalent in HY2019 as compared to HY2018 with 7.76 per cent increase in sales volume from Cooper Basin.

The Western Australia operations marked a production hike by 166 per cent in HY2019 against HY2018, which is in line with the DIIS forecast of increased LNG volumes from Western Australia.

Origin Energy Limited (ASX: ORG)

ORG is an ASX-listed oil and gas explorer, who recently entered into an agreement with Bid Energy (ASX: BID) for the Bid’s Robotic Process Automation platform (or RPA platform).

The company delivered a strong performance with a Statutory Profit of $1,211 million for FY2019, up by over 332 per cent as compared to the Statutory Profit of $280 million in FY2018.

The other performance metrics for FY2019 are as below:

Oil Search Limited (ASX: OSH)

OSH is an ASX-listed oil and gas explorer, who recently got the endorsement from the PNG Government and the Government completed an inclusive review of the Papua LNG Gas Agreement and confirmed the Agreement as executed in April this year.

OSH is now waiting for the finalisation of the P’nyang Gas Agreement to complete the proposed integrated three LNG train development. Once signed the duo of PRL 15 and 3 along with PNG LNG JV will proceed into FEED.

ASX-listed Junior Oil & Gas Stocks:

While the above-addressed oil and gas stocks are among a few who showed promising progress recently and are increasing the production capacity, there are few junior oil and gas sector-related stocks on ASX with decent development to enhance the production capacity.

Senex Energy Limited (ASX: SXY)

Senex is an ASX-listed natural gas explorer, who recently secured an acreage from the Queensland government to encounter the domestic natural gas shortage issue.

To Know More (Click Here!!)

Further, the company recently in the finished the production test of its Gemba1 gas exploration well.

Surat Basin Update:

SXY drilled five wells at its Project Atlas and ten at the Roma North prospect under the~ 110-well Surat Basin campaign and the company continues to deliver the natural gas development projects in the Surat Basin on schedule and budget.

Bid Energy Limited (ASX: BID)

Bid is an ASX-listed energy technology development company with a market capitalisation of 73.32 million (as per the closing on 5 September).

The company recently secured a three-year agreement with Origin to deploy its RPA platform across ORG’s Commercial and Industrial customers post a successful pilot completion earlier this year.

Once the 14,500 customers of ORG adopt the RPA platform of the company, the revenue generated would further increase by 12.8 per cent to the last ASR reported figure by the company as at 30 June 2019.

Also Read: ASX-Listed Energy Stocks to Relish Over Improved Crude Oil Figures; SXY and BID Eyeing Domestic Opportunities

Strike Energy Limited (ASX: STX)

STX recently confirmed a gas discovery by Strike – Warrego joint venture in the Perth Basin, which is among the most prolific gas region in Australia.

The company intersected large units of clean sand of high quality below 4,790 metres onward at the West Erregulla.

To Know More (Click Here!!)

Carnarvon Petroleum Limited (ASX: CVN)

CVN is an ASX-listed junior oil & gas player who recently got added to the S&P/ ASX All Australian 200 index (effective from 23 September 2019).

The company recently confirmed the presence of hydrocarbons bearing reservoir within the Caley, Baxter and Crespin intervals through wireline logging of the Dorado-3 well.


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