Birchcliff Energy is a Bargain now But will not be when LNG Canada comes Onstream
LNG Canada is due to come onstream in 2025.There will be two phases and phase 1 will be commissioning by June 2025. It will have an annual capacity of 28 million tons of LNG.The export terminal will be in the port of Kitimat.B.C.But work is also progressing on two other plants,namely, Woodfibre LNG and Cedar LNG.The capacity of LNG Phase1 and Woodfibre LNG and Cedar LNG will be 19 million tons.Work has not started on LNG Canada Phase 2.While Woodfibre and Cedar are expected to be producing LNG for export in 2027.
The difference in the price of natural gas in Canada and Japan and South Korea is dramatic.The recent price in Japan is $12.00-$15.00 per MMBtu compared to $2.25 per MMBtu in Canada in the summer of 2024.But the price has risen from $2.50 in August to $3.989 per MMBtu in January.As it gets closer to June 2025 the price has already escalated and will rise further to equalize market prices.
Birchcliff Energy
Birchcliff Energy (BIR) is one of the top 7 producers of natural gas in western Canada.And it has properties in the northern Montney area of B.C. that can connect to the Coastal Gaslink pipeline and on to Kitimat..This pipeline feeds into LNG Canada.In 2022 and 2023 Birchcliff did not perform well financially.But in December the share price of BIR has moved up by almost 20% as investors have already seen the price of natural gas and the future price climb.It is easy for this blog to predict a price of natural gas of $5-$6.00 per MMBtu by March of 2025.
Q3 Results
Birchcliff has benefitted from the almost 60% increase in the price of natural gas since Q2 (August).It still showed a small loss of $.04 per share but was able to declare a dividend for Q4.Production has come up to 75,400 boe/day from 74,000 boe/day in Q3 2023.Their guidance shows that they expect average annual production of 76,000-79,000 boe/day in 2025.In addition, BIR has a new contract operating agreement with Altagas whereby they will operate their facility called Gordondale which will reduce BIR's operating expenses.This together with the higher gas prices in Q4,means that this blog expects a small profit of $.05-$.10 for Q4. How about 2025
This blog feels that the impending increases in natural gas from now until June of 2025 will make for a slight net income per share in Q1 and even higher e.p.s. in Q2 of 2025.Perhaps $.20-$.25 per share in Q2.However Q3 and Q4 are harder to predict as there will be a limit on how high the domestic price will increase because of the rising exports and export price to Japan and Korea. As these two markets are closer to the port of Kitimat,B.C.An educated guesstimate of annual e.p.s. would be $.50-$.80per share.However these new exports will also cause the P/E ratio to rise because of expected future growth.Consequently this blog sees the share price rising to the $9-$12 per share area by late summerThis blog also believes that the rising price of natural gas will even have a positive impact on the price of oil.Natural gas is the main competition to oil as a source of energy.As natural gas prices rise
surely the price of oil will follow .Especially as oil is already exported through the newly-opened Trans-Mountain pipeline to higher-priced Asian markets.
Dale Mcintyre is a freelance writer that chiefly writes for Yahoo Finance and Marketbeat.com.He has a M.A in Economics
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