ASX Natural Gas Stocks: Investment Insights 2023
Team Veye | 24-Aug-2023
Natural gas is a fossil fuel, which is formed when accumulations of organic matter are buried and exposed to increasing heat and pressure over geological time. Liquefied natural gas (LNG) is a natural gas that has been cooled to minus 162°C, a process that is commonly done for gas export purposes as it reduces the volume of the transported gas. Australia has massive natural gas resources, the largest of which are situated offshore and onshore gas resources. Australia ranks the 7th largest gas producer in the world as reported by Geoscience Australia. Exports of liquefied natural gas (LNG) have increased notably over the past decade, with numerous new facilities commencing production. In 2020, Qatar and Australia were the world’s largest LNG exporters as reported by Geoscience Australia. Gas production in Australia has continued to increase substantially. This is primarily driven by a rapid expansion of the Australian LNG industry, with a number of projects on both the west and east coasts. The gas-producing basins of the North West Shelf accounted for 65% of Australia’s annual gas production to the end of 2019, at 4,051 PJ (3.60 Tcf). Gas production in the Bowen and Surat basins accounted for 26% of the 2019 total, at 1,608 PJ. World gas production increased by 3.4% in 2019 to a total of 143,557 PJ (140.88 Tcf; BP, 2020).Approximately 40%of this production came from the US and Russia. Australia ranks seventh in the world for gas production, accounting for 3.8% of total gas production in 2019 as reported by the Geoscience Australia.
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Investing in Natural Gas Stocks
In FY2022, the value of natural gas across Australia was estimated at over $366.43 billion, an increase of 34.59% from the previous year's $272.3 billion. In FY2020, the value of natural gas was $289.24 billion. The invasion of Russia in Ukraine, which led to war in early 2022, created a supply shock in Europe, which subsequently raised gas prices to an unbearable level and left the whole world grappling with supply chain bottlenecks for commodities. When gas prices are high, investors in ASX gas stocks can benefit from attractive dividend rewards along with share price appreciation. Australia is a substantial net exporter of natural gas, as per the Department of Industry, Science, Ener
The gas grid connects Australia’s eastern, northern, and southern states and other territories. This market has been restructured as the Queensland gas export industry has developed. These changes have resulted in changes to the direction of pipeline flows, the domestic supply and demand balance, and gas contract prices.
As the whole world is stepping ahead towards renewable sources of energy generation, oil and gas remain high priorities.
Top Natural Gas Stocks in 2023
Australia has a list of natural gas production companies listed on the ASX, which can give investors exposure to natural gas prices. In particular, here are some of the biggest ASX natural gas stocks by market cap dated as of August 21, 2023, as follows:
BHP Group Limited (ASX: BHP); market cap: $221.83B
Woodside Energy Group Limited (ASX: WDS); market cap: $73.14B
Santos Limited (ASX: STO); market cap: $25.33B
Origin Energy Limited (ASX: ORG); market cap: $14.95B
AGL Energy Limited (ASX: AGL); market cap: $7.38B
Beach Energy Limited (ASX: BPT); market cap: $3.56B
Gold Road Resources Limited (ASX: GOR); market cap: $1.64B
Advantages of Investing in Natural Gas Stocks
The natural gas producing companies have direct advantages over the natural gas price appreciation to significantly impact positive return profitability. Investors are expected to benefit from getting natural gas as a commodity exposure to realize gains in the gas price rise.
Therefore, gas-producing companies that are ASX gas stocks make tremendous profits when there is a substantial increase in demand for gas, and thereby, gas prices as a commodity can potentially generate returns with attractive profits and cash flows for the investors. Surplus income generated makes it possible to increase efficiency in operational jobs to boost production levels to meet supply needs, repay debt, repurchase ASX shares, and pay good dividends for shareholder commitment.
ASX Oil and Gas Stocks: The Biggest Companies in 2023
Gas prices have soared to their highest level on account of supply chain bottlenecks created due to the Russia-Ukraine war in early 2022, which led to a massive correction to a standstill price range. Here are the biggest companies in 2023 that are ASX gas stocks:
Origin Energy Limited (ASX: ORG)
Origin Energy Limited (ASX: ORG), which has a market cap of $14.95 billion and a current market price of $8.68 as of August 21, 2023, is in the operation of energy businesses, including exploration and production of natural gas, wholesale and retail sale of electricity and gas, and sale of liquefied natural gas (LNG).
Underlying EBITDA for energy markets was reported at $1,038 million, up $637 million compared to the previous year. Electricity profit rose as higher wholesale energy costs in previous periods were recovered in electricity tariffs and through optimization of the energy supply portfolio. The natural gas profit reported increased on account of higher sales revenue and trading benefits.
AGL Energy Limited (ASX: AGL)
AGL Energy Limited (ASX: AGL), with a market cap of $7.38 billion and a current market price of $10.95 (as of August 21, 2023), is a well-developed energy company and owner, proactively operating and developing renewable energy generation in Australia. It has a well-diversified power generation portfolio that includes intermediate generation plants spread across traditional thermal generation along with renewable sources that include hydro, wind, landfill gas, solar, and biomass.
The company is highly committed to providing our customers with simple, fair, and accessible essential services as they decarbonize and electrify the way they live, move, and work. In Australia, the company operates the largest private electricity generation portfolio within the national electricity market, consisting of coal and gas-fired generation, renewable energy sources such as wind, hydro, and solar, batteries and other firming technology, and gas production and storage assets.
Beach Energy Limited (ASX: BPT)
Beach Energy Limited (ASX: BPT) has a market cap of $3.56 billion and a current market price of $1.563. It is an oil and gas exploration and production company headquartered in Adelaide, South Australia. The company has oil and gas production in five different basins across Australia and New Zealand.
Beach Energy Limited is highly devoted to recognizing and minimizing material environmental and climate risks affecting the business. The management has knowledge of and is regularly provided with information to ensure our practices and procedures align and integrate climate risk into project decision-making. The company has exposure to economic, environmental, and social sustainability risks.
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Frequently Asked Questions (FAQ)
What are the best natural gas stocks to buy?
Australia remains a net exporter of natural gas. Liquefied natural gas (LNG) exports dropped by 2% in 2020–21 but have grown by an average of 15% every year in the last decade. Some of the best ASX natural gas stocks are: BHP Group Limited (ASX: BHP); market cap: $221.83B; Woodside Energy Group Limited (ASX: WDS); market cap: $73.14B; Santos Limited (ASX: STO); market cap: $25.33B; Origin Energy Limited (ASX: ORG); market cap: $14.95B.
What is the biggest natural gas company in Australia?
Santos Limited (ASX: STO) has a market cap of $25.33 billion and is a low cost producer of oil and gas committed to cleaner energy and clean fuel production with operations across Australia. The company reported sales revenue of US$1.3 billion in the second quarter. Second quarter production of 22.8 mmboe was higher than the previous quarter, basically due to increased domestic gas volumes in Western Australia.
What is the largest LNG project in Australia?
The largest LNG project in the world is situated on Barrow Island in Australia as reported by Geoscience Australia. The Gorgon project consists of a three-train, 15.6 million metric tonnes per year LNG facility and a domestic gas plant with the capacity to supply 300 terajoules of gas every day to Western Australia. The Gorgon project will remain pivotal to the Australian economy as it continues to meet global demand for cleaner-burning fuel.
Who is the largest LNG trader?
Chevron is a superior energy company that operates in Australia’s largest onshore oilfield situated on Barrow Island, is a notable investor in discovery, and caters high-grade fuel products and services through Caltex and Puma Energy in Australia.
Is LNG stock a buy or sell?
Natural gas price fluctuation is a direct link to LNG Company’s profitability and impact on the business, which has consequences for the rise and fall of ASX LNG stocks. During the Russia-Ukraine war, this created a huge energy supply shock in the European market while having huge demand for it, there was a spike in the natural gas price. LNG companies made tremendous profits and distributed dividends, including a share price rise.
Post-2022, when the central banks from all over the world started taking inflationary measures through constant rate hikes, gas prices started taking a downward trajectory, and LNG stock prices also started correcting by then.
So, therefore, investors need to do a thorough assessment before buying and selling LNG stocks.
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