Cheniere Energy Is Irrationally Overvalued Compared To Its International Peers
- Cheniere is an overleveraged company with weak fundamentals in an industry with a muddy outlook.
- Lots of moving parts will challenge Cheniere over the next years.
- The company is definitely not on sale at $74 per share and a significant drop can occur sooner than later.
- Speculation about global LNG demand has boosted Cheniere's valuation that largely ignores the global LNG supply, among others.
- Cheniere's highly leveraged balance sheet will not get better anytime soon, if ever.
- The stock is way ahead of its fundamentals.
- If the choosy investors want energy exposure, there are better-positioned, cheaper and financially healthier midstream companies available, so I will definitely avoid Cheniere at $74.
5 Reasons Cheniere Is A Buy Amid Oil Price Drop Turmoil
- The market is unfairly including Cheniere Energy with other highly levered oil stocks.
- Manageable debt levels and ahuge backlog are only a few reasons Cheniere will survive energy downturn.
- Five reasons in favor of buying stock are presented.
Fears On Cheniere Energy's Exposure To Oil Prices Are Overblown
- The plunge in oil prices also impacting the LNG market.
- Lower oil prices could threaten the high-yield bond market.
- Here’s how Cheniere Energy stands up against these challenges that have raised concerns about its future growth prospects.
- Cheniere Energy Inc has 40% to 60% downside from current levels if oil prices stay below $60.
- Business model at risk, as export margins turn negative at current oil and gas prices. Break-even levels for export at $3 gas prices is $63-$66 Brent prices.
- Enterprise value of $51 Bn and EV/EBITDA of 10-11x for 2020 . Forecasted EBITDA of $4.5 Bn in 2020 is vulnerable to market, operational and financing risks.
- Phase 3 of Sabine pass limited which contributes 30% of value may not happen given only 48% contracted and increased hurdle rate for investment on account of IDR.
- The company is using convertible debt to finance its equity contributions in subsidiaries making it very vulnerable to refinancing risks.
- Cheniere Energy put all its eggs in one basket, and the basket is falling.
- The world's largest liquefied natural gas (LNG) import market, East Asia, indexes to Brent Crude, which has fallen precipitously.
- U.S. natural gas exports may be the next big thing, but Cheniere might not stay solvent long enough to see it happen.
Cheniere Energy: In This Bearish Oil Market, It Might Be Overvalued
- Cheniere is a company engaged in LNG-related business.
- Natural gas supply is increasing in the U.S., mainly due to the shale oil industry.
- The change in energy prices could impact natural gas supply and the margins related to its transportation.
- At current energy price levels, Cheniere might be overvalued.
Cheniere Energy: First To Profit From The Changing Energy Landscape
- The global LNG demand is set to grow by an average of around 5% per year through 2030.
- Currently, Qatar is the biggest exporter of LNG but the energy landscape could significantly change in the next couple of years.
- In the U.S., Cheniere Energy is leading the change.
- Cheniere Energy's CEO Charif Souki was the highest paid in 2013.
- Owning 6,210,445 shares of the company’s stock, valued at approximately $439,388,984, some investors are hate mongering.
- Investors should realize the impressive job Souki has done, and consider his performance as CEO and co-founder when considering his compensation.
Cheniere Energy's Sabine Is Primed With Contracts And Midstream Infrastructure
- Cheniere will have the first fully-operational LNG export facility in the US, with 88% of volumes contracted on 20-year deals. Facility is approved for 2.8 Bcf/d.
- Cheniere Energy's multiple export LNG facilities continue to secure long-term volume contracts.
- Sabine's Creole Trail Pipeline already connects to 6 major pipeline networks, and is a fantastic feed to the facility.
Short Cheniere Energy After This Meteoric 3000% 4-Year Run
- Cheniere Energy is trading at record highs following a multi-year run based on optimistic future expectations.
- Investment in the company is simply a highly leveraged and dangerous arbitrage bet on natural gas prices that can easily go the other way.
- Even if the bet works out and everything goes exactly as planned by the company, the valuation still isn't anywhere close to justified.
- American natural gas prices are low, which allows Cheniere Energy to generate huge margins from LNG exports.
- Demand for LNG is set to surge in Europe and Asia through 2030.
- Natural gas is clean compared to coal, which is why China is going to rely on it to clean up its air.
- China will see its consumption of natural gas double over the next five years as LNG imports more than triple.
- Cheniere Energy has several major projects underway to service the LNG boom.
Cheniere - A Bright Future For The Company, But What About The Stock?
- LNG demand will grow worldwide, and the U.S. is preparing for export.
- Cheniere signs a lot of contracts, most recently being with EDF.
- Fantastic stock performance since 2009, but with financial losses.
Liquefied Natural Gas Fuels Strong Growth For Cheniere Energy
- The increasing demand and price realization of liquefied natural gas overseas attracted the U.S. energy producers, including Cheniere, for achieving higher margins through export.
- With the lifting of the U.S.'s partial export ban, the company is in a better competitive position than its peers with its two LNG export projects.
- The company's location near unconventional shale gas plays and smooth access to increasing production are providing upside to future LNG export activity.
Despite Attractive Projects, Cheniere Shares Not A Bargain
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Fri, Jan. 2, 12:42 PM
- FERC regulators earlier this week approved Cheniere Energy (LNG +1.2%) for construction of its proposed liquefied natural gas plant in Corpus Christi, Tex., the second such facility the company has been approved to build.
- LNG is now poised to become the biggest beneficiary of last year's Energy Department decision to change the way the government reviews proposed gas exports, jumping ahead of dozens of other applicants for export licenses.
- LNG already has secured financing commitments for the project, and FERC clearance "is the major regulatory approval from a difficulty standpoint... It's going to be relatively easy for the DoE to approve," according to Westlake Securities' Chris McDougall.
- The Corpus Christi terminal would have the capability to liquefy and ship as much as 15M metric tons/year of gas.
Dec. 24, 2014, 12:55 PM
- Cheniere Energy (NYSEMKT:LNG) CEO Charif Souki - the highest-paid CEO in the U.S., with a $142M pay package last year - has seen his base salary cut to $1 following a shareholder revolt earlier this year.
- Cash bonuses and employee benefits for Souki will be calculated using a notational $1M salary, so he will still enjoy a $2.4M cash award at the end of the year, based on this year’s performance.
- The announcement did not mention any changes to Souki's stock awards, which totaled $132M last year.
Dec. 23, 2014, 6:55 PM
- Goldman Sachs' David Kostin thinks it’s time for patient investors with at least a 12-month time horizon to begin loading up on energy companies.
- The Goldman team recommends refiners such as Marathon Petroleum (NYSE:MPC) and Phillips 66 (NYSE:PSX), as well as midstream companies that are less sensitive to oil prices and offer the potential for dividend growth, including EQT Midstream Partners (NYSE:EQM), Kinder Morgan (NYSE:KMI) and Cheniere Energy (NYSEMKT:LNG).
- With capital spending sure to take a hit and oil prices likely to remain volatile, oil service companies probably aren’t the way to go, but Goldman considers the more defensive names such as Atwood Oceanics (NYSE:ATW), Schlumberger (NYSE:SLB) and Oceaneering (NYSE:OII) as the best of a bad lot.
Dec. 18, 2014, 11:29 AM
- Cheniere Energy (LNG, CQP) announces a new 20-year contract to supply natural gas to Portuguese utility EDP Energias (OTCPK:EDPFY) with 770K tons/year of liquefied natural gas once operations begin at the third train of the export facility being developed near Corpus Christi, Tex.; deliveries from the third train are expected to occur by 2019.
- The agreement with EDP increases Cheniere's commitments for LNG to ~8.42M tons/year, or nearly two-thirds of the facility's planned production capacity of ~13.5M tons/year.
Dec. 12, 2014, 12:05 PM
- Cheniere Energy (LNG +0.3%) says it has engaged 18 financial institutions to act as joint lead arrangers to assist in structuring and arranging of up to $11.5B of debt facilities.
- LNG says the proceeds will be used to pay for the costs of development and construction of the Corpus Christi liquefied natural gas export facility and related pipeline and for general business purposes.
- Shares have resumed trading after a brief halt.
Dec. 11, 2014, 10:45 AM
- Investors in giant gas export terminals from Australia to Canada are facing the prospect of losing nearly $250B plowed into the projects during the past seven years, as weaker oil prices threaten to wipe out returns.
- Oil-linked pricing means LNG producers stand to get much less revenue than expected on delivery of their first shipments, and oil prices have fallen so low that U.S. shale gas producers with plans to export the usually cheaper fuel to Asia suddenly find themselves facing a much tougher competitive environment.
- LNG prices in Asia have sunk below $10/MMBtu, while most Australian LNG projects would need to sell the commodity for at least $12-$14 to break even; for example, the breakeven point for the $54B Gorgon project under construction by Chevron (NYSE:CVX), Exxon (NYSE:XOM) and Shell (RDS.A, RDS.B), is ~$17.7/MMBtu.
- Other relevant tickers: LNG, TOT, COP, CEO, FCG, GASL, OTCPK:BRGXF, OTCQX:BRGYY, OTCPK:STOSF
Dec. 10, 2014, 6:56 PM
- Cheniere Energy (NYSEMKT:LNG) signs 15-year pipeline capacity agreements with Kinder Morgan (NYSE:KMI) and a multi-year gas storage agreement for the proposed Corpus Christi liquefied natural gas export project in south Texas.
- KMI will provide 550K dekatherms/day of firm natural gas transportation service and 3B cf of natural gas storage capacity to serve the LNG export facility.
- KMI will expand its existing Texas intrastate pipeline system in south Texas to provide 250K dekatherms/day of firm transportation and 100% of storage services, and expand its TGP Pipeline to provide 300K dekatherms/day of firm transportation; KMI expects to invest ~$187M on the project.
Dec. 9, 2014, 11:38 AM
- Even as energy markets are buffeted by unusual volatility, some of Wall Street's biggest banks are ready to write billion-dollar checks to finance Cheniere Energy's (LNG +0.4%) $15.5B Corpus Christi natural gas project on the Gulf coast, CNBC reports.
- The commitments could put banks including JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) on the hook if the market for liquefied natural gas goes south, according to the report.
- The gas terminal, now under development and expected to produce as much as 13.5M tons of liquefied natural gas starting in 2018, is now seeking $11.5B in a seven-year bank credit facility that would depend in part on the issuance of new bonds next year and the year after to repay its debt; private lenders reportedly have provided LNG with an initial $2.5B in funding to construct the terminal.
Nov. 13, 2014, 4:38 PM
- Cheniere Energy Partners (NYSEMKT:CQH) -3.8% AH after announcing a public offering of 10.1M common shares.
- CQH says it plans to use the proceeds to redeem from Cheniere Energy (NYSEMKT:LNG) a number of its shares held by LNG equal to the number of shares offered and sold in the offering; after the offering, LNG would hold 80.1% of CQH outstanding shares.
Nov. 11, 2014, 9:41 AM
- Cheniere Energy (LNG +0.7%) will sell $2.5B in convertible notes to help fund construction of the Corpus Christi liquefaction project in Texas to export natural gas.
- EIG Management and RRJ Capital will buy the notes, which can be converted into LNG common stock; RRJ will have the right to transfer a portion of the notes to Temasek Holdings, Singapore’s state-owned investment company.
- The Corpus Christi facility would be LNG’s second project to export natural gas from U.S. shale production; the company's Sabine Pass terminal in Louisiana is under construction.
Oct. 31, 2014, 12:58 PM
- Cheniere Energy (LNG +1.2%) reaches a tentative settlement with investors that would restrain executive compensation following shareholder litigation over pay practices that included CEO Charif Souki’s $142M compensation last year.
- If approved, the accord would prohibit LNG from paying out any remaining shares it had authorized in a Feb. 2013 vote but hadn’t yet distributed to executives or employees; it would not require Souki or any employees to give up awards already received.
- The agreement also would bar the company from seeking shareholder approval for any stock-based compensation before Jan. 1, 2017.
Oct. 30, 2014, 5:25 PM
Oct. 14, 2014, 2:50 PM
- Cheniere Energy (LNG +0.3%), set to be the first natural gas exporter from the U.S. shale boom, has seen its share price slump 21% in the past month as falling crude oil prices will shrink the cost advantage of gas over oil, CEO Charif Souki says.
- “In the U.S., 80% of the rigs today are looking for oil and find gas as a byproduct... We really are more sensitive to oil prices than gas prices on the production side today," Souki tells Bloomberg.
- Even after the recent slump, LNG shares are up nearly 50% YTD.
Oct. 10, 2014, 7:48 AM
- FERC's in-concept approval of Cheniere Energy's (NYSEMKT:LNG) Corpus Christi LNG export project “confirms a less risky regulatory outlook for U.S. LNG and will support upside to U.S. export volumes,” Eurasia Group says.
- Move seems to indicate DOE "will continue to approve U.S. LNG projects in a timely fashion as they come up for review after FERC approvals,” firm says.
- U.S. LNG will be the “dominant source” of new supply by the end of this decade, Eurasia says, challenging the outlook for projects in Canada, East Africa, Russia targeting post-2020.
- Financing "could be the most challenging hurdle for the estimated $11B Corpus Christi, especially as a greenfield project that is betting on a larger share of uncommitted volumes.”
- Cheniere's project is the first greenfield LNG export project to receive environmental approval.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, KOLD, UNL, NAGS, DCNG
Oct. 8, 2014, 3:58 PM
- Cheniere Energy's (LNG -1.7%) Corpus Christi liquefied natural gas export project will not significantly affect the environment, the FERC says in a report that indicates the project is likely to receive a construction license from FERC near the end of the year.
- The project would enable Cheniere to export 2.1B cf/day of LNG and import sufficient LNG volumes to send out 400M cf/day of gas.
- FERC members will consider the staff’s recommendations and comments received in reaching a final decision regarding the proposed project.
Sep. 19, 2014, 10:50 AM
- The worldwide gas glut is prompting Japanese and Indian firms to resell some of the U.S. liquefied natural gas they had committed to buy several years ago, signaling tempered enthusiasm for U.S. energy, Reuters reports.
- Japanese utilities Tokyo Gas and Osaka Gas as well as India's Gail are dialing back on their U.S. LNG commitments via stake sales to European traders and utilities after realizing they can't handle the initial surge of volume due to low demand at home.
- Tokyo Gas, which bought 1.4M metric tons/year of LNG over 20 years from Dominion's (NYSE:D) Cove Point, reportedly has offered to sell 0.75M tons/year to at least one European energy firm; Gail is offering 1M metric tons/year for its first five years of supply from Cheniere Energy's (NYSEMKT:LNG) Sabine Pass project.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, KOLD, UNL, NAGS, DCNG
LNG vs. ETF Alternatives
Cheniere Energy Inc is engaged in LNG-related businesses. It owns and operates the Sabine Pass LNG terminal in Louisiana through its ownership interest in and management agreements with Cheniere Energy Partners, L.P.
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