Cheniere (LNG) Inks LNG Supply Deal With China's ENN Natural Gas
Cheniere Energy, Inc. LNG, a prominent liquefied natural gas (“LNG”) company in the United States, entered into a long-term LNG supply agreement with ENN Natural Gas Co., Ltd., a China-based energy company. The 20-year agreement facilitates long-term collaboration between the two companies.
Below we will delve into the details of this contract and its implications for the LNG market.
Details of the Deal
Per the terms of the contract, Cheniere Marketing, a subsidiary of Cheniere, will provide ENN LNG (Singapore) Pte. Ltd. — a wholly-owned subsidiary of ENN Natural Gas — with 1.8 million tons of LNG annually on a free-on-board basis. The purchase price will be indexed to the Henry Hub price, a widely recognized benchmark for natural gas prices in the United States.
Cheniere Marketing is set to begin deliveries in mid-2026 and increase its supply to 0.9 million tons per annum (mtpa) in 2027. Delivery of the remaining 0.9 mtpa is subject to the completion of the first train of the Sabine Pass Liquefaction Expansion Project and will begin upon the commencement of commercial operations of Train Seven.
Implications of the Agreement
Strengthening LNG Trade: The aforementioned deal establishes a long-term trading partnership between the United States and China in the LNG sector. This was following a 13-year contract between Cheniere and ENN Natural Gas (signed in 2021), marking a significant step forward in LNG trade between the two nations.
Diversifying LNG Supply: With the United States emerging as the largest LNG exporter globally, this agreement provides China with an alternative LNG source, reducing its reliance on traditional suppliers and enhancing energy security.
Sabine Pass Expansion: The successful implementation of the deal depends upon the completion of Cheniere's Sabine Pass Liquefaction Expansion Project. The project aims to add three natural gas liquefaction trains, increasing the facility's total production capacity to approximately 20 mtpa.
Economic Benefits: The agreement is expected to have positive economic implications for both companies, fostering job creation and investment in the LNG industry. It will also help strengthen bilateral trade ties between the United States and China.
Conclusion
The 20-year LNG supply agreement between Cheniere and ENN Natural Gas signifies a milestone in the LNG market. With Cheniere serving as a reliable LNG supplier and ENN diversifying its resources, the deal is expected to enhance energy security and foster economic growth.
As the world continues its transition toward cleaner energy sources, such long-term agreements play a vital role in meeting the increasing global demand for LNG.
Zacks Rank and Key Picks
Currently, Chenierecarries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum EPM, sporting a Zacks Rank #1 (Strong Buy), and Archrock AROC and NGL Energy Partners NGL, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is worth approximately $280.79 million. EPM currently pays dividends of 48 cents per share, or 5.69% on an annual basis.
The company currently has a forward P/E ratio of 7.64. In comparison, its industry has an average forward P/E of 19.90, which means EPM is trading at a discount to the group.
Archrock is valued at around $1.58 billion. It delivered an average earnings surprise of 8.34% for the last four quarters and its current dividend yield is 5.96%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
NGL Energy Partners is valued at around $498.68 million. In the past year, its units have risen 133.3%.
The partnership currently has a forward P/E ratio of 4.34. In comparison, its industry has an average forward P/E of 13.80, which means NGL is trading at a discount to the group.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report
NGL Energy Partners LP (NGL) : Free Stock Analysis Report
Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
Archrock, Inc. (AROC) : Free Stock Analysis Report
