While most of Australia's energy stocks are on a tear today after oil prices rose for a fifth straight session overnight, Liquefied Natural Gas Ltd (ASX: LNG) has actually retreated 4.7% to be trading at $4.31.
Given that LNG prices are linked to the oil markets, investors might be wondering why the stock has fallen today while other energy stocks have soared higher. Senex Energy Ltd (ASX: SXY), for instance, has rallied 7% while AWE Limited (ASX: AWE) is up 12.3%.
So What: The most likely explanation for the stock's decline today is profit taking. During Wednesday's session, the stock leapt more than 15% to a fresh all-time high of $4.59, giving it a gain of nearly 90% since the beginning of the year.
Even at today's price, Liquefied Natural Gas Ltd could prove to be a profitable investment. With oil prices on the rise, it will become easier for the company to find financial support for its two new tolling facilities, Magnolia and Bear Head, located in the USA and Canada respectively, which could generate substantial earnings growth for the company once constructed and in production.
However, the company's success is by no means guaranteed, making it a risky bet at these prices. The projects are still years away from production while the company also faces regulatory and commodity risk, too.
Now What: Shares of Liquefied Natural Gas Ltd have rallied hard this year and could be set for a pullback. While investors would be wise to remain on the sidelines for now, there is one much safer way to profit from Australia's LNG boom.