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Cheniere (LNG) & Chevron Pen LNG Sale and Purchase Contract

Zacks Equity Research
·3-min read

Cheniere Energy, Inc. LNG recently announced that it has entered into a long-term liquefied natural gas (“LNG”) sale and purchase agreement with Chevron Corporation CVX via two of its subsidiaries – Sabine Pass Liquefaction, LLC and Cheniere Marketing, LLC.

Per the contract, CVX will purchase approximately 2.0 million tons per annum (mtpa) of LNG from Houston, TX-based Cheniere, subject to certain conditions.

Under the first agreement, Chevron will buy about 1.0 mtpa of LNG from Sabine Pass Liquefaction on a free-on-board basis. Further, the supply will commence in 2026 and reach the complete 1.0 mtpa target in 2027 and carry on until mid-2042.

Under the second sale and purchase agreement, the oil major agreed to purchase roughly 1.0 mtpa of LNG from Cheniere Marketing on a free-on-hold basis, with deliveries starting in 2027 and continuing for another 15 years.

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The Cheniere Marketing agreement was subject to LNG making a positive final investment decision concerning the construction of additional liquefaction capacity at the Corpus Christi LNG Terminal beyond the seven-train Corpus Christi Stage III Project. However, the same was approved by the company, with Bechtel Energy to proceed with the construction of the project.

The purchase price of LNG under this agreement is indexed to the Henry Hub price, with an add-on fixed liquefaction fee.

Moreover, Sabine Pass LNG, L.P, another subsidiary of Cheniere, and Chevron have agreed to terms for the premature termination of their LNG terminal use agreement in return for a lump-sum payment to be made by CVX to Sabine Pass LNG in 2022. The termination, which is anticipated in the third quarter of 2022, is subject to the consent of certain lenders to Cheniere Energy Partners, L.P

“We are pleased to welcome Chevron, one of the world’s premier integrated energy companies, as a valued long-term LNG off-taker,” stated Anatol Feygin, LNG’s Executive Vice President and Chief Commercial Officer.

Chevron is one of the largest publicly traded oil and gas companies in the world with operations spanning worldwide. The only energy component of the Dow Jones Industrial Average, Chevron is fully integrated as it participates in every aspect related to energy, from oil production to refining and marketing. The company generates around $95 billion in annual revenues and produces more than three million barrels per day of oil equivalent.

Cheniere Energy Inc. is primarily engaged in businesses related to LNG through its two business segments: LNG terminal and LNG and natural gas marketing. The company, through its controlling interest in Cheniere Energy Partners L.P., owns and operates the Sabine Pass LNG terminal in Louisiana – North America’s first large-scale liquefied gas export facility.

Cheniere currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space that warrant a look include Earthstone Energy ESTE and SilverBow Resources SBOW, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Earthstone’s 2022 earnings is pegged at $4.44 per share, up 255.2% from the projected year-ago earnings of $1.25.

ESTE beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being 35%.

The Zacks Consensus Estimate for Silverbow’s 2022 earnings is pegged at $12.69 per share, up 97.6% from the projected year-ago earnings of $6.42.

SBOW beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being 20.3%.


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Chevron Corporation (CVX) : Free Stock Analysis Report
 
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
 
Earthstone Energy, Inc. (ESTE) : Free Stock Analysis Report
 
SilverBow Resources (SBOW) : Free Stock Analysis Report
 
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