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Cheniere (LNG) Q4 Earnings Lag Amid High Costs, Sales Up Y/Y

Zacks Equity Research
Personal Income and Consumer Spending figures for March were mixed this Monday, with income cooler than expected but spending slightly higher than estimates.

Cheniere Energy, Inc. LNG reported fourth-quarter 2018 net earnings per share of 26 cents, missing the Zacks Consensus Estimate of 36 cents. The weaker-than-expected results can be attributed to high costs incurred during the quarter. The bottom line also deteriorated from the year-ago income of $0.54 per share.

On an encouraging note, the U.S. gas exporter’s quarterly revenues increased 36.5% to $2,383 million from $1,746 million recorded in the year-ago quarter. Further, the top line surpassed the Zacks Consensus Estimate of $1,780 million in the quarter under review. Its adjusted EBITDA rose to $634 million from $523 million in fourth-quarter 2017.

During the quarter, the company shipped 80 cargoes from the Sabine Pass liquefied natural gas terminal in Louisiana, reflecting an increase of 14% from a year ago. Total volumes of LNG exported in the reported quarter were 285 trillion British thermal units (TBtu) compared with 252 TBtu in the year-ago period.

Costs & Expenses

Overall costs and expenses rose 43% to $1,867 million from the corresponding quarter last year. The increase is mainly attributed to higher cost of sales that jumped to $1,519 million from $980 million in the prior-year quarter, along with a 13.9% year-over-year increase in operating and maintenance expenses to $156 million. Depreciation and amortization expenses decreased from $116 million a year ago to $104 million in the reported quarter.

Balance Sheet

As of Dec 31, 2018, Cheniere had approximately $981 million in cash and cash equivalents. It recorded $28,179 million in net long-term debt compared with the prior-year level of $25,336. The debt-to-capitalization ratio of the company stands at 93.6%.

2019 Guidance Reiterated

Cheniere has reiterated its guidance for 2019. It anticipates adjusted EBITDA within $2,900-$3,200 million, with distributable cash flow expected between $600 million and $800 million.

Progress Report

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 expected to have a capacity of about 4.5 million tons per annum (Mtpa). Notably, expected run-rate LNG production is up from 4.3-4.6 Mtpa per train to 4.4-4.9 Mtpa. While Trains 1, 2, 3 and 4 are functional; Train 5 is currently undergoing commissioning. Train 6 is being commercialized and has secured the necessary regulatory approvals. The company expects the fifth train to come online in the first quarter of 2019.

Corpus Christi Liquefaction Project (CCL): Cheniere’s Corpus Christi LNG project, under which the company intends to develop three trains, is expected to come online in 2019. Each train is expected to have a nominal production capacity of 4.5 Mtpa of LNG. Notably, Train 1 and 2 are undergoing commissioning, whereas Train 3 is under construction.

Corpus Christi Expansion Project: Cheniere intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The total production capacity of these trains is expected to be approximately 9.5 Mtpa.

Zacks Rank & Key Picks

Cheniere currently carries a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the energy space may opt for some better-ranked players that include Repsol SA REPYY, Jones Energy, Inc. JONE and YPF Sociedad Anonima YPF, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Repsol’s 2019 earnings are expected to increase 13.69% on a year-over-year basis.

Jones’ 2019 earnings are expected to grow 18.95% on a year-over-year basis.

YPF Sociedad delivered average positive earnings surprise of 210.38% in the trailing four quarters.

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