Cheniere Energy: A Huge Growth Story is Now Beginning
Cheniere Energy, Inc. (LNG) announced second quarter revenues of $176.8 million, up 160% year-over-year from just $68.0 million during the same period last year.
The global LNG supplier reported continued year-over-year top line expansion primarily driven by significant revenue contribution from the strategic beginning of the Sabine Pass Liquefaction facility after the extensive progress achieved in the first liquefaction train or "Train 1".Still, it also declared a second quarter net loss of $334.9 million or $1.31 of loss per diluted share.
This story is about to gain major tractionCheniere successfully exported 11 cargoes from the strategic Sabine Pass Train 1 in second quarter of 2016 that includes 5 functional cargoes and 6 appointing cargoes.
So far this year it has exported a net of approximately 53 million MMBtu that includes the well-planned export of nearly 39 million MMBtu in second quarter of 2016.
Image by / c2.staticflickr.com
The company should be ramping its operations nearly every quarter through 2019.
Going forward, the company targets on continuing to fortify its balance sheet by issuing $2.75 billion worth of senior secured notes for prepayment of some parts of the company’s attractive credit facilities at Corpus Christi and Sabine Pass.
Importantly, Cheniere is expected to have an industry-leading consolidated debt management profile with no debt maturing as of 2020 post the strategic repayment of approximately $1.7 billion of significant SPLNG debt that is maturing during November 2016. In addition, Cheniere plans to take benefit of runway for continuing to minimize debt maturities during 2020 and 2022 while expecting to expand SPL and CCH maturity profile.
Long-term tailwinds should buoy growthGoing forward, the investment thesis of Cheniere includes planned shift towards the usage of cleaner natural gas fuel for global power generation, cost-effective LNG supplier in the industry, currently active 7 train policy allows for superior and enduring cash flows and impressive growth opportunities for prospective cash flow expansion at minimal risks.
The phase-I of strategic Chilean project running at El Campesino is estimated to pick up development after receiving final supervisory approvals during the second half of 2016. The strategic project comprises of about two development phases, each having a well-planned 600 MW of unique gas-powered consolidated cycle plant.
The consistently rising demand for cleaner fuels to drive automobiles and several industrial machinery as a precautionary measure to preserve the global environment while minimizing the harmful emissions is believed to drive sustainable expanding demand for LNG fuel and thus, benefiting Cheniere over the longer term to illustrate solid long-term company growth while delivering attractive shareholder returns.
The growth comes with risk
I would reccomend that investors wait off on adding to their position in Cheniere Energy. The company’s significant long-term growth prospects driven by a solid global demand for cleaner fuels are offset by a weaker financial position (total debt of $19.8 billion against total cash of $1.1 billion). This may restrict the company's growth initiatives.
The long-term story is there, but financial and operational issues remain.
Published on Oct 5, 2016By Subhen Mittra