Is it safe to go back into the oil and gas stocks yet?
2015 will be a monumental year for LNG exports since three projects in Queensland are expected to begin shipping LNG over the next twelve months.
The first out of the chute will be the Queensland Curtis LNG project headed by BG Group plc (LON: BG), which will load up its first shipment this month for Asian markets. Next should be the Australia Pacific LNG project with Origin Energy Ltd (ASX: ORG), projected to begin exports in mid-2015.
Around the same time the Gladstone LNG project involving Santos Ltd (ASX: STO) should have shipments going out in the second quarter of 2015.
In what should be a great year for LNG producers, the sudden and deep fall in oil prices has upset projected revenues and returns. Projects like the PNG LNG have 95% of its output already locked into contracts. The three Queensland projects are not at that level yet, so investors are worried about the exposure to weaker demand and low pricing.
All of the major oil and gas companies took a hard hit in share price. WTI and Brent crude prices have slowed in their fall, so there may be some relief to come soon.
Woodside Petroleum Limited (ASX: WPL) would be my choice out of the majors to follow. The $30.9 billion energy company already has two projects producing LNG and with ample funds it is looking for more acquisitions and investments. It will be buying a stake in Chevron's Wheatstone LNG project from the US-based Apache Corporation (NYSE: APA), which will start producing soon. That will improve cash flows and give Woodside extra revenue for further acquisitions.
What's more is that the company will be entering the energy trading market, where it can buy and sell other world producers' third-party uncontracted oil and gas. If producers can't secure contracts for all their production, they will turn to the energy markets to get the best price possible.
Before Woodside's share price recovers, investors have a chance now to lock in a huge 6.3% yield fully franked. Just one more big reason to build a position up in the energy giant. When resources markets are heading down, sticking with the market leaders can give you more stable investments.
