GLNG - Golar LNG: Natural Gas Export Boom Waning Bearish Chart Ahead Of Earnings

Summary

• BP disappointed energy bulls recently with a negative outlook on LNG demand over the long term.
• Golar LNG has improving earnings, but there are risks to meeting those targets given a volatile market, and an earnings date revision could be a bearish clue.
• With a bearish chart pattern unfolding and negative free cash flow in 2023 and '24, I would avoid the stock at this time.

Natural gas prices are having their worst month in 22 years. While the prompt-month wavers, LNG demand appears to be hanging in there. But could that be about to change? BP ( BP ) says the future is not so bright. The LNG demand projections below are based on various green energy initiatives. If an acceleration toward net-zero shows up, then LNG exporters could be at risk. That's a long-term outlook and just one take - let's assess the near-term situation with Golar LNG ( GLNG ).

Less LNG Demand in the Decades Ahead?

According to Bank of America Global Research, Golar LNG is one of the world's largest independent owners and operators of LNG carriers and floating storage and regas units (FSRUs). GLNG has 14 vessels in its fleet, 2 FLNG vessels (1 operational, 1 slated for conversion), 10 LNG carriers, and 1 FSRU. With the completed sale of its 31% interest in GMLP and 50% interest in Hygo Energy to NFE, Golar has simplified its structure to focus on FLNGs.

The Bermuda-based $2.5 billion market cap Oil, Gas & Consumable Fuels industry company within the Energy sector has negative trailing 12-month GAAP earnings and does not pay a dividend, according to The Wall Street Journal .

On valuation , analysts at BofA see earnings rocketing higher in 2023 after roughly flat total EPS from 2021 through last year amid a volatile LNG market. Per-share profits are then seen as climbing at a still-elevated rate in 2024. The Bloomberg consensus is less sanguine about 2023-24 EPS, though.

Still, GLNG's operating and GAAP P/Es turn quite favorable in the coming quarters with its growth projections, but free cash flow is seen as being steeply in the red over the next two years, and no dividends are expected. Overall, I would like to wait for a profit turnaround to show itself before speculating from the long side.

Golar LNG: Earning, Valuation, Free Cash Flow Forecasts

Looking ahead, corporate event data from Wall Street Horizon show a confirmed Q4 2022 earnings date of Tuesday, February 28 BMO with a conference call immediately after results cross the wires. You can listen live here . Reading between the lines, I see bearish risks with the earnings report, considering that the company pushed back its reporting date from February 23rd to 28th. That could portend poor news.

Corporate Event Risk Calendar

The Options Angle

Digging into the upcoming earnings report, data from Option Research & Technology Services (ORATS) show a consensus EPS forecast of $0.52, which would be a strong reversal from $0.44 of per-share losses reported in the same quarter a year ago. Shares have generally not moved too much post-earnings relative to expectations.

As for the Q4 report ahead, options traders have priced in a 7.4% earnings-related swing using the at-the-money straddle expiring soonest after the reporting date. That is less costly compared to prior quarters, but with several muted post-earnings reactions over the last two years, I am not inclined to be long premium into the release.

The Technical Take

While profits are on the mend with GLNG, I see bearish technical risks. Notice in the chart below that shares have formed a bearish rounded top pattern, with key support in the $20 to $22 range. Should that zone break, then there's downside risk to the low teens, with initial support near $14. The stock's long-term 200-day moving average is about to turn negative after a protracted period of rising action - indicative of a bullish to bearish reversal. That comes as momentum RSI is stuck in a bearish range.

Overall, the bulls want to see $20 hold.

GLNG: Bearish Rounded Top

The Bottom Line

LNG exporters had a strong run during the pandemic, but their time might be over . With earnings uncertainty ahead and a bearish chart, I would shy away from this energy name.

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