Demand for clean and sustainable energy a boon for New Fortress Energy

While we’ve seen some massive price fluctuations in global markets the past few weeks, some sectors have defied overall market jitters.

Given the current global environment including the geopolitical instability in Ukraine and Russia, it’s no wonder that companies in the resources, energy, oil and gas sectors are performing well.

And with continuing focus and clamour for clean and sustainable energy sources, chances are that companies who can deliver on this front will reap the benefits in terms of rising share price and sustained investor support.

As we search for outstanding market performers, we found New Fortress Energy (NASDAQ: NFE) among the ranks of energy companies delivering solid results for shareholders.

Who is New Fortress Energy and what does it do?

New Fortress Energy (NFE) is a liquefied natural gas (LNG) company founded in 2014 by Wes Edens, an American billionaire businessman and private equity investor.

According to the company’s mission statement, NFE’s goal is to reduce carbon emissions and foster economic development through universal access to cleaner, affordable and reliable energy.

Based in the US, NFE maintains a global operation with presence in the Caribbean, Europe, Latin America and Asia.

As an LNG facility builder, NFE built Florida’s first liquefied natural gas (LNG) production facility. The company also made a significant investment and played a critical role to deliver Jamaica’s first liquefied natural gas (LNG).

In terms of customers, NFE works with utilities, universities, hotels, manufacturers, breweries and distilleries, and food and beverage companies. Some of their customer base require replacement of oil-based fuel operations with LNG while others need turnkey solutions.

Strong financials

A slew of recent wins and partnerships is expected to boost NFE’s performance for the financial year and beyond.

Recently, the company announced that the US Coast Guard has affirmed the completeness of NFE’s deepwater port license application.

This is an important development as NFE proposes the ownership, construction and operation of a deep-water port that would allow for the export of approximately 145 billion ft3/y of natural gas.

Commenting on the announcement, Wes Edens, chairman and CEO of New Fortress Energy was quoted as saying, “This is a significant step forward for our effort to build the first Fast LNG facility in the US.”

He added, “With rapid deployment, this project can help address the energy crisis in Europe and support our efforts to reduce energy poverty by providing more affordable, reliable, and cleaner fuel to our growing portfolio of customers.”

In early May, NFE also announced that it has executed a binding agreement to charter a floating storage and regasification unit (FSRU) to N.V. Nederlandse Gasunie (Gasunie).

According to a company statement, the 5-year charter agreement will begin in the third quarter of 2022 and provide storage and regasification capacity for Gasunie’s new LNG import terminal in the port Eemshaven, The Netherlands.

This new terminal capacity will increase energy security for The Netherlands and create sufficient LNG import capacity to meet the country’s gas needs without relying on pipeline imports, including gas from Russia.

In his statement, Mr Edens said “We are pleased to be working with Gasunie, one of Europe’s leading energy infrastructure companies, to add LNG import capacity and strengthen the energy security of the Netherlands and surrounding European countries.”

“We look forward to a successful, long-term partnership with Gasunie and see other areas for collaboration to enhance energy security and accelerate the energy transition in Europe,” he added.

Both announcements are expected to add to NFE’s pipeline of projects and anticipated revenue streams for 2022 and 2023.

During its latest financial reporting in early May, NFE reported:

• Revenue of US$505.10 million during the quarter
• US$1.13 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.37 by $0.76.
• Return on equity of 23.65% and a net margin of 22.19%. During the same quarter in the prior year, the firm posted ($0.21) earnings per share.

What Analysts are saying about New Fortress Energy?

A recent review of analysts’ ratings on NFE showed that the seven brokerage firms have rated the company a ‘Buy’ while one analyst rated the stock with a ‘Hold’ rating. On average, the analysts set a 1-year price objective of US$49.40 for NFE stocks.

Technical Analysis – what the charts say about NFE

The market staged a strong rally away from the late January lows in the US$20 region to probe the US$35 region by early March. A brief corrective dip was quickly defeated with bulls extending the dramatic gains to see prices closing above US$48 by early April.

The subsequent two months has seen prices consolidating between this high and support in the US$38-US$40 region. A series of higher lows is giving this band of consolidation the appearance of an ascending triangle, which is suggestive of a bullish breakout.

Such a move would initially target resistance around US$57 and the record high closing price of 7 January 2021 at US$59.18.

Outlook

The global LNG market was valued at USD 30.34 billion in 2020, and is expected to reach USD 66.13 billion by 2027, at a CAGR of 6.92% during 2022-2027.

Despite record-high spot prices for LNG that pushed demand lower late last year to early this year, it is expected that more Asian countries will be buyers of LNG from 2022 onwards.

Industry analysts believe more buyers will lead to strong prices over the next few years.

Given NFE’s technical capabilities, strong focus on innovation and breadth of operation and the ongoing demand for cleaner and more sustainable energy sources, we believe the company is in a strong position for more growth.