Cheniere Energy Is a Good Long-Term Buy

Cheniere Energy (LNG) looks set to profit from the beginning of LNG exports from the U.S. market. Though the company is facing losses due to expenses related to the development of natural gas liquefaction and export facility near Corpus Christi, Texas, its long-term potential looks strong.

The long-term prospects are strong

Going forward, Cheniere Energy forecasts to deliver approximately 60 mtpa of LNG by 2025. It captures nearly 14% of the total LNG market and is believed to be a major global exporter of LNG.
Through a highly flexible, scalable and industry-leading platform Cheniere has also become a key natural gas buyer in the U.S. By 2025, Cheniere is estimated to have significantly grown its infrastructure investments in the U.S. to over $50 billion and thus creating notable job opportunities.

In May 2015, Cheniere implemented a strategic final investment decision ("FID") and agreed to continue ("NTP") with the development in coordination with Bechtel Oil, Gas and Chemicals, Inc. ("Bechtel") for the initial two natural gas liquefaction trains ("Trains") and the linked innovative facilities ("Stage 1") of the CCL Project.

The significant growth platform of Cheniere Energy encourages it to successfully plan for prospective expansion investments till 2025. The oil major has also signed a strategic deal for the development of two key natural gas liquefaction trains for the CCL Project which is estimated to deliver notable long-term returns once completed.

Diversification is an advantage

Cheniere has four major businesses including, LNG platform, and gas procurement, Cheniere marketing and future developments. The company has planned development of four LNG terminals to be situated along Gulf of Mexico. The terminals are believed to have approximately 60 mtpa of production capacity.

Moreover, LNG is a scalable platform and identified by competitive costs and long-term contracts. The gas procurement business of Cheniere provides feedstock for LNG production. The business has a repetitive pipeline capacity that allows for reliable gas deliverability. Also, upstream pipeline capacity allows access to different supply sources.

Cheniere is also successfully continuing with its marketing business segment and provides FOB or DES and LNG sales to key customers on short, mid and long-term basis. Cheniere estimates to deliver nearly 9 mtpa of LNG volumes from CCL T1-3 and SPL T1-6. The company has successfully marketed 3 key chartered LNG vessels till date. Moving ahead, Cheniere is developing/ investing in infrastructure to support hydrocarbon revolution in Texas and beyond. It is keen on optimizing the value of LNG platform and exploring growth opportunities in related markets.

More favorable points

U.S. liquefaction project expenditures are notably lesser owing to minimal project development needs. In addition, the breakeven LNG cost for Cheniere LNG export units is one of the least as against other planned LNG projects. Importantly, the company has an established growth track record that offers objective flexibility, provides upstream gas procurement services and does not need any lifting.

The continuously growing LNG price range and forecasted CQP distributable cash flows is believed to notably support the company’s top line growth, allowing it to accelerate future growth investments while deliver superior shareholder’s value.

The forecasted demand for LNG is expected to reach 438 mtpa by 2025, with demand projected to grow by 200 mtpa at an average CAGR of 21 mtpa of fresh liquefaction capacity required every year. This is a tailwind for Cheniere Energy.


Hence, Cheniere Energy looks well-placed for the long run on account of expected growth in the end market. The company is preparing itself for this expected growth by improving infrastructure, which will allow it to do well in the long run. Hence, from a long-term point of view, Cheniere Energy looks like a good investment.
Published on Oct 19, 2015
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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