Tianfeng: There may be a mismatch in space and time in the U.S. natural gas market.

Tianfeng released a research report stating that Permian is the second largest shale gas block in the United States, with associated gas production reaching 23.3 Bcf/d. However, according to statistics, the current pipeline capacity for transporting natural gas out of Permian is only 7.54 Bcf/d, meaning that a large portion of natural gas is still trapped within Permian. There is a price difference between the gas price in the Permian region and HH price. Expansion plans for the transportation capacity of Permian natural gas are underway. As the trapped natural gas in Permian is gradually released, the price at Waha is expected to rise; meanwhile, due to increased supply, the price at HH may decrease, narrowing the price difference between the two. As of December 6, 2024, the average annual price for HH is $2.32/MMBTU, while Waha (Permian region gas price) is only -$0.37/MMBTU. Delayed commissioning of LNG terminals: Future demand may be hindered According to the EIA, out of the 10 LNG projects scheduled for commissioning in the future, 6 have experienced certain degrees of delays. Both Golden Pass and Rio Grande have delays of over 1 year. The delayed commissioning of these LNG terminals is expected to improve the supply-demand situation to some extent. Supply and demand situation of natural gas in the United States Calculations show that the United States is expected to experience a de-stocking scenario in 2025. By 2026, due to the delayed commissioning of LNG terminals and the expansion of Permian pipelines, natural gas may continue to enter a stocking phase. Given that natural gas in the United States has been in a stocking phase in 2023-2024, as of December 5, 2024, the EIA's natural gas weekly report indicates that U.S. natural gas inventories are at a five-year high. A de-stocking process in 2025 will not have a significant impact on gas prices, with HH expected to maintain a historical average of $2-3/MMBTU in the long term. Investment recommendations Satellite Chemical (002648.SZ): Unlike traditional petrochemical companies, Satellite Chemical's raw materials are linked to ethane (tied to the HH price). As of the end of 2024, the annual average profits for naphtha route, ethane cracking, and coal-to-ethylene were -210 yuan/ton, 2749 yuan/ton, and 1024 yuan/ton respectively. ENN Natural Gas (600803.SH): The company's natural gas business includes direct sales, retail, and wholesale. The direct sales business primarily sources international natural gas resources. According to the company's Q1 2024 performance presentation, the company has signed long-term contracts for 10.16 million tons with companies like Total, Chevron, and Cheniere, securing relatively cheap natural gas resources. Risk warning 1) Risk of reduced associated gas production due to a drop in crude oil prices; 2) Risk of LNG terminal construction progressing faster than expected; 3) Risk of continued reduction in shale gas production, leading to supply falling below expectations.