Key insights
- The author argues that Venture Global is a strong energy play due to the closure of the Strait of Hormuz, leading to supply disruptions in Asia. While US oil producers may already be priced in, Venture Global, as an LNG exporter, stands to benefit from increased demand in Asia as countries seek alternative energy sources. This could positively influence US LNG markets.
Feel free to scroll past the less important background information until you get to "WHY VENTURE GLOBAL IS THE PLAY." TL;DR at end.
Hello retards,
Everyone knows that the Strait of Whore-moose 💁♀️🫎 remains closed. But oil futures have been fairly muted lately considering the size of the disruption (Thanks, Axios!), which has led the market to move on and overlook certain names in the energy sector as huge beneficiaries of recent developments. The market doesn't seem to realize that the Strait staying closed is much, much worse than any quibbling between the US and Iran. Physical crude is still very expensive--it has averaged a spread as high as $38 above futures price over the past couple weeks (and in some third-world countries, there have been reports of oil selling for $200 a barrel!). This will only get worse as countries burn through their reserves and have to start buying more at elevated prices. Here are some fun visuals that help illustrate the outsized impact of this supply disruption.
In some stocks, namely US oil producers, this situation has already been effectively priced in. BP recently announced that their quarterly profits more than doubled compared to Q1 2025, and yet the stock was unmoved. But this does not mean that there are not GREAT opportunities ripe for the taking. Let me explain:
ASIA
Asia is having a very rough time right now, as they normally get the majority of their oil from Gulf states.
China has big oil stockpiles, but every other country is nearing or already having supply shocks. And the thing about Asia is that they are big buyers of liquefied natural gas (LNG). However, they normally have most of their LNG imported from the Persian Gulf, which isn't possible right now. Here's some excerpts from an article that support this fact:
As a result, they have to look elsewhere to satisfy their energy needs. In this case, "elsewhere" is the world's largest LNG exporter--the US.
LIQUEFIED NATURAL GAS
I believe that the US LNG sector is a HUGE 🫲🫱 winner that has somehow gone under the radar. But first, let me try and explain the LNG business model:
In other words, RIGHT NOW is an extremely profitable time for US LNG companies. They get cheap feedgas domestically, convert it to LNG, and then ship it to places like Asia that desperately need natural gas (with the Gulf states being unable to export anything) and don't have access through pipelines. To be more specific, profit depends on three things.
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Spread between domestic feedgas price and price of natural gas in foreign countries
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Liquefaction fee
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Cost of transportation (longer distance = higher cost)
With Asia being forced to buy LNG from US exporters as long as the Strait 💁♀️🫎 is closed, these companies are raking in money.
IS 🥭 DOING THIS ON PURPOSE?
Here's a graph that shows how much more dependent the rest of the world has become on US Oil/LNG since before the start of the Middle East conflict. It makes sense--with Gulf states out of commission, the main options are the US/North Sea/Russia, and WTI is cheaper than Brent by about $5-10/barrel.
I'm starting to genuinely believe that 🥭 wants the Strait to stay closed for a while longer, at least to try and make countries think twice about buying so much from Gulf states (energy security, blah blah blah). With this Iran conflict, he's able to completely block Asian countries from buying oil from the Persian Gulf for however long he wants. I mean, he has a fucking naval blockade waiting just outside the Strait. Doesn't seem like something you'd do if you wanted things to return back to normal. As a result, Asian countries come running to the US for their energy needs-- they don't really have any other choice. I guess his angle is that he's helping the US fossil fuel industry (that donated to his campaign) make lots of money. Who cares about 6% YoY PPI, anyway?
WHAT ABOUT THE LONG-TERM?
So far, I've laid out the case for US LNG companies making a ton of money as a result of the Iran conflict. But this isn't just a short-term play. Future LNG demand is expected to quickly outpace supply in the coming years--and because infrastructure is so expensive and takes so long to come online, this is not a supply shortage that can be fixed overnight. So, companies who are currently investing in additional LNG infrastructure will be paid out many times over in the coming years.
WHY VENTURE GLOBAL IS THE PLAY
There are three relevant pure-play LNG stocks in the US. $LNG, $NEXT, and $VG.
$LNG: Mature company, not focused on aggressively expanding their production capacity over next couple years. Your stereotypical boring fossil fuel company.
$NEXT: Small company, no existing production, will start making money in H1 2027. They also have shitty payout structures where they get like 20-40% of the LNG terminal revenue for the first few years of operation. Basically, it's a way for their joint venture partners to quickly get their investments back (because as I said earlier, the infrastructure is very very expensive). Not ideal for shareholders.
$VG: The clear choice, in my opinion. They have plenty of existing production AND are aggressively expanding to prepare for sustained increases in demand in the future. But don't just take my word for it--look at what Rupert Murdoch's rag has to say:
I'm providing some visuals from their most recent investor presentation. For reference, an LNG cargo sells for anywhere from $20M to $100M depending on supply and demand, and 1 MTPA ≈ 14-18 cargos. Key thing to take away is how fast they are going to be growing over the next couple years.
Look at this recent growth... Absolutely insane. The market has not priced this in, somehow.
Here's my favorite chart of the entire post:
As you can see, VG is expected to soon have the second-largest share of LNG capacity in the entire world, behind QatarEnergy. Unfortunately, QatarEnergy recently got hit with a double whammy--courtesy of Iran. Not only are they currently unable to export anything due to the Strait being closed, but they also endured a drone attack which kneecapped their capacity by 17% (this is not reflected in above chart). So even when the Strait eventually opens back up, they aren't going to be able to satisfy as much demand. More business for US LNG.
Another great thing about LNG companies is that they sign multi-decade contracts with customers, so their revenue always has a stable floor. The prices still fluctuate based on demand/feedgas price/shipping/etc, but these contracts provide some insulation to price spikes and supply shocks. The customers want energy security, and the LNG companies want guaranteed revenue. For VG, around 70% of their production is tied up in long-term agreements with the remaining 30% available to sell on the spot market to the highest bidder.
(Ironically enough, VG recently got in trouble with some Europoor customers because they decided to reroute some shipments to sell on the lucrative spot market during the Israel-Iran fiasco last summer. They've been settling those disagreements in arbitration, and the stock has rebounded from its recent lows as a result of that incident being in the rearview mirror.)
Another advantage VG has over both foreign and domestic competitors is that they are able to use the cheapest feedgas possible (lowering operational costs = higher profit margin). They buy their natural gas from the Permian Basin, which is notorious for high nitrogen content. Because nitrogen is a non-combustible gas, it's presence lowers the amount of energy that can be produced from a given volume of natural gas. However, VG has large-scale nitrogen removal infrastructure that allow them to remove all of this nitrogen at a very low cost. Thus, they are able to spend