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Cheniere (LNG) Slips to Q2 Loss Amid High Cost, Beats on Sales

Zacks Equity Research

After reporting earnings in the trailing three quarters, Cheniere Energy, Inc. LNG slipped to loss when it unveiled second-quarter 2019 results on Aug 8. The largest U.S. liquefied natural gas exporter posted loss per share of 44 cents, in stark contrast with the Zacks Consensus Estimate of earnings of 15 cents. High costs and derivates loss led to the underperformance. The loss also widened from the year-ago loss of 7 cents.

 

Owing to higher LNG volumes, quarterly revenues increased 48.5% to $2,292 million from $1,543 million recorded in the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $2,158 million in the quarter under review.

Cheniere Energy, Inc. Price, Consensus and EPS Surprise

Cheniere Energy, Inc. Price, Consensus and EPS Surprise
Cheniere Energy, Inc. Price, Consensus and EPS Surprise

Cheniere Energy, Inc. price-consensus-eps-surprise-chart | Cheniere Energy, Inc. Quote

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The company posted adjusted EBITDA of $615 million, with DCF of around $120 million. During the quarter, Cheniere shipped 104 cargoes, reflecting an increase of 70% from a year ago. Total volumes of LNG exported in the reported quarter were 360 trillion British thermal units (TBtu) compared with 222 TBtu in the year-ago period.

 

Costs & Balance Sheet

 

Overall costs and expenses rose 54% from the corresponding quarter last year to $1,860 million. The increase is mainly attributed to higher cost of sales that scaled up to $1,277 million from $873 million in the prior-year quarter. Operating and maintenance expenses doubled to $295 million in the quarter under review. Depreciation/amortization and SG&A expenses increased 84% and 5.4% from the prior-year quarter to $204 million and $77 million, respectively.

 

As of Jun 30, Cheniere had approximately $2,279 million in cash and cash equivalents. It recorded $29,944 million in net long-term debt (with a debt-to-capitalization ratio of 93.7%).

 

2019 Guidance Reiterated

 

Cheniere reiterated its guidance for 2019. It anticipates adjusted EBITDA within $2,900-$3,200 million, with distributable cash flow between $600 million and $800 million.

 

Progress Report

 

Sabine Pass Liquefaction Project (SPL): Sabine Pass is North America’s first large-scale liquefied gas export facility. Cheniere intends to construct up to six trains at the Sabine Pass, with each train expected to have a capacity of about 4.5 million tons per annum (Mtpa). Notably, run-rate LNG production is expected within 4.7-5 Mtpa. While Trains 1 through 5 are functional, Train 6 is currently under construction, with completion expected within the first half of 2023.

 

Corpus Christi Liquefaction Project (CCL): Cheniere Energy’s Corpus Christi LNG project, under which the company intends to develop three trains, is expected to come online in 2019. Each train is expected to have a nominal production capacity of 4.5 Mtpa of LNG. Notably, Train 1 is functional and Train 2 is undergoing commissioning. In June 2019, the first commissioning cargo from Train 2 was exported and the firm is geared up for the first shipment from the CCL Train 2 plant later this year. Train 3 is currently under construction and the facility is expected to come online in the second half of 2021.

 

Corpus Christi Expansion Project: Cheniere intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The total production capacity of these trains is expected to be approximately 9.5 Mtpa.

 

Zacks Rank & Stocks to Consider

 

Cheniere currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space include Delek Logistics Partners, L.P. DKL, BP Midstream Partners LP BPMP and TC PipeLines, LP TCP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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