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Cheniere Partners (CQP) Down 4.6% After Q3 Earnings Miss

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Cheniere Energy Partners, L.P. (CQP - Free Report) stock dipped 4.6% since the announcement of weak quarterly results on Nov 6. The partnership’s net long-term debt increased through the third quarter.

It reported third-quarter 2020 loss per unit of 8 cents against the Zacks Consensus Estimate of earnings of 27 cents. Moreover, the partnership reported earnings of 19 cents per unit in the year-ago period.

Revenues of $982 million were lower than the year-ago level of $1,476 million and missed the Zacks Consensus Estimate of $1,305 million.

The weak quarterly results were due to lower margins, thanks to accelerated revenue recognition in prior periods. Moreover, reduced LNG cargoes sold in the quarter affected the results.

Distribution Hike

The partnership increased quarterly cash distribution from 64.5 cents per unit to 65 cents. The distribution hike amid the current market uncertainty is expected to send a strong signal to investors about its operational strength.

Operations

The partnership sent 36 cargoes in the third quarter, down from 79 in the year-ago period. Total LNG volumes loaded in the quarter was recorded at 122 trillion British thermal units (TBtu), much lower than the year-ago level of 277 TBtu.

Adjusted EBITDA for the third quarter was recorded at $352 million, down from the year-ago level of $543 million. Profits declined in the third quarter on the back of lower total margins, thanks to accelerated revenue recognition in prior periods. Notably, Cheniere Partners recognized $109 million in revenues from cancelled cargoes.

Costs and Expenses

Cost of sales for the quarter was $454 million, down from the year-ago period’s $742 million. Operating and maintenance expenses declined to $146 million from $172 million in third-quarter 2019. Total costs and expenses for the quarter were recorded at $830 million, significantly down from $1,130 million in the September quarter of 2019. 

Cash Flow

Notably, the partnership generated operating cash flow of $459 million for third-quarter 2020, higher than the year-ago level of $337 million.

Balance Sheet

As of Sep 30, 2020, the partnership had only $1,254 million in cash and cash equivalents, down from $1,341 million at second quarter-end. Cheniere Partners had a net long-term debt of $17,573 million, higher than $17,566 million in the second quarter. It had a debt to capitalization ratio of 0.97.

Guidance

The partnership reiterated its full-year 2020 guidance for distribution per unit in the range of $2.55-$2.65. For the next year, distribution per unit is expected in the range of $2.60-$2.70. The partnership expects current distributable cash flow per unit in the range of $3.75-$3.95, indicating an increase from the previous expectation of $3.70-$3.90.

The SPL Project Train 6 was 70.9% complete at third quarter-end. Full work on the train is expected to be completed by second-half 2022.

Zacks Rank & Stocks to Consider

The partnership currently has a Zacks Rank #4 (Sell). Some better-ranked players in the energy space include Matador Resources Company (MTDR - Free Report) , Antero Resources Corporation (AR - Free Report) and NuStar Energy L.P. (NS - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Matador Resources’ bottom line for 2021 is expected to surge 187% year over year.

Antero Resources’ bottom line for 2021 is expected to rise 30.5% year over year.

NuStar Energy’s bottom line for 2021 is expected to rise 147% year over year.

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