Cheniere Energy, Inc. (NYSEMKT:LNG) announced disappointing quarterly results on July 31, with a loss of $201.9 million, or $0.9 per share, a miss of $0.57 per share; the consensus was a loss of $0.33 per share. This loss is added to the $97.8 million in Q1, or $0.44 per share, representing a cumulative loss for 2014 of $271.9 million, or $1.26 per share. The market has not really punished the company after these results, with a decrease of -3.6% of the share on the day of publication of the results.
This will not help extinguish the controversy over the salary of the CEO. Earlier this year, investors had indeed learned with astonishment that the CEO, Charif Souki, was the highest paid of all the U.S. listed companies.
We can add at the end of the 2nd quarter, the company had $889.9 million in cash or equivalents, against $960.8M on January 1. In addition, as on June 30, the net long-term debt amounted to $8.9 billion.
The two main projects, Cheniere Sabine Pass and Corpus Christi, are vital for the future of the company. The progress of these projects is reassuring, and is the main good news in this quarter.
The construction of the first two trains is now completed at 69%, which is ahead of schedule. At the end of the first quarter, the construction was completed at only 63%.
Trains 3 and 4 have an advancement of 36% against 27% at the end of the first quarter, which is also ahead of the initial schedule.
The last two trains (5 and 6) need authorization from the FERC to start being built.
Note that all trains have received the permission to export LNG in FTA countries, and today, trains 5 and 6 are waiting the authorization to export in non-FTA countries.
Many contracts have been signed. DOE has given permission to export LNG to allowed countries, but the certificate to commence construction from FERC is still pending. In its quarterly report, Cheniere states that other trade agreements and authorizations are necessary to make a final investment.
Although the financial health is not optimal, including the lowering cash and significant losses for years, Cheniere continues to go forward, and infrastructure construction is progressing clearly, being even ahead of schedule since this quarter.
While the third-quarter results will probably not be the best, the point to focus on will be the smooth construction of Sabine Pass and obtaining FERC approvals and additional commercial contracts for Corpus Christi.
The future is promising, partners from many countries have already signed contracts to import LNG, and I'm still optimistic. The global demand for LNG is the main argument used to be enthusiastic about this company.
But investing at these valuation levels (about $70) has no margin of safety, in my opinion. The stock has lost about 5% percent these last days; if the recent market downturn continues, an entry point may appear, which could be a good opportunity to invest in this business.
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