These companies are cashing in on the global LNG megatrend.
Global demand for liquefied natural gas (LNG) could soar 60% by 2040, fueled by economic growth in Asia, artificial intelligence (AI), and other catalysts. This growing demand for the clean-burning fuel should benefit companies focused on supporting the global LNG trade.
Kinder Morgan (KMI -0.09%) and ConocoPhillips (COP -0.70%) are in strong positions to capitalize on the anticipated surge in LNG demand. That makes them brilliant LNG stocks to buy right now and hold for the long haul.
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Supplying gas to U.S. LNG terminals
Kinder Morgan operates the largest natural gas transportation network in the U.S. It has roughly 60,000 miles of pipeline that move 40% of the country’s natural gas production. The company’s vast and strategically located gas infrastructure has helped make it a leader in supplying gas to LNG export terminals.
The pipeline company currently has long-term contracts to supply 8 billion cubic feet per day (Bcf/d) of natural gas to U.S. LNG export facilities, which accounts for approximately 40% of all feed gas to U.S. terminals. It has secured long-term contracts to increase its volumes to 12 Bcf/d by 2028 as new LNG export terminals come online (more than half the expected demand of 21 Bcf/d).
And its volume to U.S. LNG export terminals should continue growing. S&P Global Commodity Insights forecasts that LNG feed gas demand in the United States will double by 2030. “That should be a real positive for Kinder Morgan,” stated co-founder Richard Kinder on the company’s second-quarter earnings conference call. The company said that it’s pursuing a “substantial number” of additional opportunities to supply gas to LNG terminals.
The LNG-fueled growth in volume should provide the company with substantial incremental income in the coming years. That will give Kinder Morgan more fuel to invest in other expansion projects, such as new pipelines to support rising domestic gas demand from AI data centers, and increase its dividend, which currently yields more than 4%.
Building a global LNG business
ConocoPhillips has a large, diversified, global oil and gas business. The company balances short-cycle growth (U.S. shale) with longer-cycle investments (Alaska and LNG). Those longer-term initiatives put it on the cusp of a multiyear growth phase.
The company has several LNG growth catalysts. In 2022, it joined two new joint ventures with Qatar Energy to invest in the North Field East and North Field South projects. Those projects will expand Qatar’s LNG capacity to 126 million tonnes per year by 2027, up from 77 million tonnes per year. ConocoPhillips also bought a 30% interest in Sempra‘s Port Arthur LNG Phase 1 facility, and signed a sale and purchase agreement for 5 million tonnes per year from that facility. The $13 billion project should enter commercial service in 2027 and 2028.
ConocoPhillips has inked other deals to purchase LNG from various facilities and secured long-term LNG supply agreements. In 2023, the company signed 20-year deals to receive 2.2 million tonnes of LNG per year from Mexico Pacific’s Saguaro export facility. The energy giant has also secured space in several regasification facilities in Europe, enabling it to import LNG to those countries.
The company’s expanding LNG portfolio positions it to capture long-term demand growth. Alongside its Alaska investments, ConocoPhillips’ long-cycle projects could deliver $6 billion in incremental free cash flow by 2029, supporting sector-leading growth. This would give it more fuel for dividend increases and share repurchases.
Smart stocks to buy to cash in on the LNG boom
The world’s growing need for LNG favors Kinder Morgan and ConocoPhillips. Both energy companies have prepared their businesses to capitalize on this demand, which should support strong long-term returns for shareholders. That makes them brilliant stocks to buy to cash in on the LNG boom.
Matt DiLallo has positions in ConocoPhillips and Kinder Morgan. The Motley Fool has positions in and recommends Kinder Morgan and S&P Global. The Motley Fool has a disclosure policy.