Cheniere Energy: an Opportunity That Makes It a Buy

Cheniere Energy (LNG) plans to export its LNG to higher costs producing countries that should further accelerate its profit. This is due to the fact that U.S has been the lowest cost natural gas providers in the world and Cheniere looks strong to maximize this costs benefit. It plans to export its natural gas to other countries that have higher costs and better price. For example, Cheniere has estimated liquefied natural gas price for its Gulf Coast of $7.5 to $8.5, whereas in Africa, Asia and Australia the liquefied natural gas prices are $11.9, $14.7 and $16.7 respectively.
The chart below shows liquefied natural gas price breakeven in overseas.

Volume remains strong in key LNG demand centers

Cheniere Energy has approximately 87% of its LNG volume contracted for the next 20 years on a contract basis with the fixed fees that provides stable annual cash flow of $4.3 billion. This is despite the fact that the commodity market remains pretty weak.  It expects up to 9 mtpa LNG volumes expected from SPL T1-6 and CCL T1-3. Moreover, Cheniere Marketing continues to commercialize the additional trains and obtaining sufficient long term SPAs to underpin financing required and obtaining financing with permits already obtained that should drive its growth and create value for its shareholders. The chart below shows SPL and CCL trains contracted volume.

LNG demand across the world remains pretty muscular in the future. As per IEA the natural gas shares are expected to grow 25% in 2035 from 10% in 2010. This growth in the natural gas shares should help Cheniere to improve its bottom line performance going forward. In fact, the report expects higher LNG demand through 2020.


Cheniere Energy looks pretty good for investment as its LNG export terminals have now become operational that will drive its growth going forward. Moreover, the company is developing additional projects with undue emphasis on accretive projects that should optimize value for its shareholders and investors.
Published on Feb 23, 2016
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

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