Recent

% | $
Quotes you view appear here for quick access.

Cheniere Energy Partners LP. Message Board

  • tucksox1 tucksox1 Apr 25, 2012 1:44 PM Flag

    Elephants in the Room

    Forgive me as I just started following this company/stock recently and am trying to figure out the best way to "play" NG over the coming years.
    Four concerns that I'm trying to get comfortable with before taking a position are the following:

    1) What if China, as previously suggested, decides to aggressively exploit its huge shale reserves?

    2) How much of CQP's export business will the facility in British Columbia eat into?

    3) Will the supposed differences in composition between U.S. and Europe/Asia NG pose an expensive problem?

    4) Given that exports won't begin until at least 2016, will someone like Australia take full advantage of their advanced infrastructure and become a formidable competitor?

    Conceptually, there is a lot to like about CQP and their long-term export prospects but a lot can happen in four years, not the least of which is our own government getting in the way so...

    Thanks in advance.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • These are important questions. Allow me to respond to each:

      1) What if China, as previously suggested, decides to aggressively exploit its huge shale reserves?

      We would expect China to do their best in this area -- but the question is how long it will take them to build infrastructure and what type of gas fields will they encounter. Not all shale fields are good. I wonder how many years will pass before we have an answer to this question? Probably many years.

      2) How much of CQP's export business will the facility in British Columbia eat into?

      I have read as much as I can about the British Columbia plan -- is this worth an investment? Some people think it is (but the profits will be shared). British Columbia is closer to Asia than CQP's system -- but the demand in Japan, etc. is so great -- it seems that everyone will make money -- but it also seems that that the British Columbia system has its own special problems. It does not seem possible to make precise predictions in this area -- but it seems that the demand for gas is so great they everyone can win.

      3) Will the supposed differences in composition between U.S. and Europe/Asia NG pose an expensive problem?
      read:

      http://www.pipelineandgasjournal.com/issues-facing-us-shale-gas-exports-japan (Pipeline & Gas Journal)

      also:

      http://www.investorvillage.com/smbd.asp?mb=4288&mn=87264&pt=msg&mid=11424703

      The numbers people provide are all over the place -- but it seems that most experts feel that there is real profit to be made. I suspect that the exporting of gas will affect prices -- but not have extreme impact -- at least in the beginning. The political and economic system in the USA seems such that USA use and activity will probably remain low over the short term.

      4) Given that exports won't begin until at least 2016, will someone like Australia take full advantage of their advanced infrastructure and become a formidable competitor?
      Yes, the Australians will build as fast as they can. But it takes time to build stuff. It also seems that CQP will be getting in line to collect the big money. So I predict that the time will come when CQP gets some big profits and the question is this: how long will that wonderful time last? Eventually, there may be a time to sell CQP -- but that time has not come yet.

      There have been shorts providing info for years now -- let's look back as one of them: Nov. 20, 2011 Seeking Alpha article
      http://seekingalpha.com/article/309189-cheniere-energy-currently-driven-by-hope-not-fundamentals

      The issues are complex and there is plenty to worry about. How will CQP get all the money it needs?
      These ideas are something that should be considered -- but the short ideas turned out to be wrong. CQP seems able to get the money. The demand for the gas is there. And it seems that the technology for doing the whole thing in a way that does not damage the environment exists (or perhaps the politics of the situation is such that it seems likely that CQP wins out). The whole idea of fracking may be affected by future technological advances using water.

      Response?

      • 3 Replies to beinghere1
      • Thanks very much for a very informative response. I've gotten pretty comfortable with the story and risk/reward scenario. While I shouldn't be too concerned with trying to pick the ever-elusive "perfect" entry point given my lengthy time horizon, I'm now biding my time with one eye on the market. It's been a good week and I'm concerned that it may be getting ahead of itself fundamentally.
        If I had a nickel for every time I wish that I'd been more patient, I'd be exporting LNG via my mega yacht.

      • "Real profit to be made":

        I do not know if this was discussed here - what role in the LNG business Cheniere plays and what the fees consist off and how much.

        1) Cheniere procures (buys/contracts for) the gas using the Henry Hub pricing
        2) uses own pipeline (part way) to bring the gas to their liquefaction trains to liquify ("make" LNG).
        3) loads the LNG on to customer's LNG vessels = free on board.

        Fees Cheniere charges (existing contracts):

        1) 15% mark-up to the Henry Hub prices (floating) = the more the NG costs, the more Cheniere makes.
        2) Cheniere charges fixed fee - $2.00 to %3.00 per each million BTUs

        Final capacity as planned right now - 19 million tons of LNG per year.
        1 million metric tons of LNG = 36 trillion BTUs

      • All of the issues (except #3) are Pacific Area questions. CQP's sales are for the European market.

        That said, Japan said they were disappointed they did not get in on the first round of sales, but CQP said when they start Corpus Christi Japan can certainly buy from there.

        With two facilities operating by 2020, CQP can be a $50 stock.

    • Note that the contracted agreements for LNG shipment require payment to CQP even if the end user decides they don't want/need the gas.

      This results in stable revenue/profit models. Also, think if a company decided to forgo a shipment. Not only do they pay the contract required fee, CQP can sell the gas as a one-time shipment to another customer. This would only be a problem if there was no demand for the LNG anywhere and CQP was forced to sell the excess LNG at lower than cost.

    • None of the four concerns you mention affect CQP at all.

      They have already contracted 89% of the first four trains for the next twenty years.

 
CQP
33.57+0.38(+1.14%)Jun 1 4:00 PMEDT