Analyst Note| Stephen Ellis |
The International Energy Agency, or IEA, recently raised what was until recently, an unthinkable scenario for Europe. Europe is now forced to consider the end of Russian gas imports as soon as this winter, exacerbating the existing economic and humanitarian crisis. Recent Russian actions have escalated the risks as well as the loss of a key U.S. LNG supplier, totaling about 57 billion cubic meters, or bcm, of supply that needs to be replaced nearly immediately in the European Union. Gas supplies could fall further as the Nord Stream 1 enters another period of maintenance on July 11. The timing of this reduction is particularly critical as Europe is rapidly trying to fill its gas storage ahead of the winter season to its 80% goal by Nov. 1, 2022, to ensure there are no winter shortages. We do not see any fair value estimate or moat impacts across our midstream coverage presently. The scenario does reinforce the critical and growing importance of U.S. LNG exporters, led by wide-moat Cheniere. However, investors have certainly noticed, and we consider the stock to be fairly valued.