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Cheniere (LNG) Gains More Than 2% Following Q2 Earnings Beat

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Zacks Equity Research
·4 min read
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Cheniere Energy Inc.’s LNG stock has risen more than 2% since its second-quarter 2020 earnings announcement on Aug 6. The industry player not only reported strong bottom line numbers but also reiterated its EBITDA and DCF guidance for 2020.

Behind the Earnings Headlines

This largest U.S. liquefied natural gas exporter delivered June-quarter earnings per share of 78 cents, surpassing the Zacks Consensus Estimate of 39 cents. Further, the outperformance reversed the year-ago loss of 44 cents per share. Revenue recognition of around $458 million related to cargo cancellations aided the bottom line.  

Moreover, revenues from LNG came in at $2,295 million, increasing 5.6% from the year-ago number of $2,173 million but below the Zacks Consensus Estimate of $2,706 million.

Owing to higher LNG volumes, quarterly revenues rose 4.8% to $2,402 million from $2,292 million a year ago. However, the top line missed the Zacks Consensus Estimate of $2,520 million in the quarter under review.

The company posted adjusted EBITDA of $1,393 million with DCF of around $580 million. During the quarter, Cheniere shipped 78 cargoes, jumping 25% from the year-earlier figure. Total volumes of LNG exported were 278 trillion British thermal units (TBtu) compared with 360 TBtu in the prior year.

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

Costs & Balance Sheet

Overall costs and expenses fell 21.2% from the corresponding quarter of last year to $1,465 million. This drop is mainly attributed to lower cost of sales expenses that plummeted 37.1% from the year-ago quarter to $803 million. 

As of Jun 30, Cheniere had approximately $2,039 million in cash and cash equivalents. Its net long-term debt was $30,807 million (with a debt-to-capitalization of 92.3%).

During the six months ended Jun 30, the company repurchased an aggregate of 2.9 million shares of its common stock for $155 million under its share buyback program.

2020 Guidance

On its latest earnings call, management stated that the worldwide LNG consumption was up by roughly 6% year over year in the first half of 2020. However, the company added that demand for the fuel took a hit from the coronavirus impact on gas demand as opposed to previous years’ significant growth.

Cheniere reiterated its guidance for the full year. It anticipates adjusted EBITDA within $3.8-$4.1 billion with distributable cash flow between $1 billion and $1.3 billion.

Project Updates

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’s expected capacity to be 4.5 million tons per annum (Mtpa). Notably, the run-rate of LNG production is projected within 4.7-5 Mtpa. While Trains 1 to 5 are functional, Train 6 is currently under construction with completion estimated within the second half of 2022. 

Corpus Christi Liquefaction Project (CCL): Under this project, the company aims to build three trains, each with a nominal production capacity predicted to be 4.5 Mtpa of LNG. Notably, Train 1 and 2 are functional while Train 3 is under construction. In June 2019, the first commissioned cargo from Train 2 was dispatched. Train 3 is expected to come online in the first half of 2021.

Corpus Christi Expansion Project: Cheniere looks to develop seven midscale liquefaction trains adjacent to the CCL Project. Total production capacity of these trains is assumed to be 10 Mtpa.

Zacks Rank & Key Picks

Cheniere currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Murphy USA Inc. MUSA, CNOOC Limited CEO and SilverBow Resources Inc. SBOW, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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