Cheniere Energy $LNG


Cheniere Energy 3Q20 results analysis here

What is Cheniere?

Cheniere Energy is an energy infrastructure company engaged in LNG-related businesses. It is the main LNG exporter in the US thanks to its 2 liquefaction plants, Sabine Pass (29Mtpa) and Corpus Christi (9Mtpa) both located in the Gulf of Mexico.

Before starting the construction of the liquefaction plants, Cheniere has to reach long-term agreements with buyers of LNG. The usual structure of the contracts is 20 years + contracts with a fixed part of $2.5/MMBtu + 115% natural gas price at Henry Hub.

Sabine pass has 86% of its capacity under long-term contracts and Corpus Christi has 84%.

Additionally, Cheniere launched last year its Marketing division. It rents vessels to deliver LNG directly to the customer terminals. In 2019, there were 3 vessels. That number is going to increase considerably in 2021 thanks to the three new vessels from Gaslog


Chart, line chart

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Cheniere’s organisation / structure

There are two listed companies, Cheniere Energy (LNG) and Cheniere Energy Partners (CQP). LNG has 100% of the Corpus Christi terminal and 50.6% interest of $CQP. Moreover, it also has the Marketing division (opportunistic sales of LNG at a short time).

$CQP has 100% of the Sabine Pass terminal.

What is the current situation of Cheniere?

Because of Covid-19, an important number of cargos has been cancelled for the 2020’ summer. It means that Cheniere received the fixed amount, but it does not receive the variable part of the contract. However, the good news is that the fixed amount does not imply any COGS, so it is 100% net revenue.

On the expansion part, Corpus Christi new train will be online in the 1H21 (forecast). Meanwhile, the last one for Sabine Pass will be in the 2H22. Both trains are 4.85Mtpa.

Since Oct-20, we have already reached pre-Covid levels. Bloomberg forecast says that Cheniere’s revenue will be +$3Bn in the 4Q20.

How much debt has Cheniere Energy?

Cheniere business requires a huge amount of CAPEX. Currently, it has $30Bn debt, an average interest of 5.46%. Fortunately, once that the operations begin, Cheniere obtains predictable cash flows for the next 20 years.

Cheniere’s expansion Plan

There is a phase 3 of the Corpus Christi terminal, the plan is to finish the construction before the end of 2024. It will have 10 Mtpa capacity if Cheniere decides to build it (95% prob –  Stifel). Consequently, it will have a huge impact on the development of Cheniere Energy ($LNG) but it will not have any impact for Cheniere Energy Partners ($CQP)

Cheniere - Sabine pass trains capacity
Cheniere - Corpus Christi trains capacity

Annex – Cheniere Energy

The two graphs show the main statistics of both liquefaction facilities (Sabine Pass and Corpus Christi) for the month of September.

Cheniere – Valuation model

Cheniere - Valuation model DCF

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