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Cheniere Partners (CQP) Up 5% in Past Month: More Room to Run?

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Cheniere Energy Partners, L.P. (CQP - Free Report) units have gained 5% in the past month compared with the industry’s 2.3% rise. As the energy sector recovers rapidly from coronavirus woes, Cheniere Partners has managed to move ahead of its peers. The Houston, TX-based firm — with a market c­­­­­­ap of $20.7 billion — is one of the most efficient liquified natural gas (LNG - Free Report) providers in the world.

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Can It Retain Momentum?

The answer is yes and here’s why we think so.

As most of the industries around the globe are looking for ways to decrease greenhouse gas emissions, the demand for LNG is expected to grow gradually, which in turn will enable the partnership to make massive profits from its export facility. LNG demand from major Asian economies is likely to rise in the coming days, which will, in turn, boost demand for Cheniere Partners’ assets.

Long-term and fixed-fee contracts with clients provide the partnership with a steady revenue source. As such, Cheniere Partners, which was formed by Cheniere Energy, Inc. (LNG - Free Report) , is least exposed to short-term commodity price fluctuations and generates stable fee-based revenues from the large-scale liquefied gas export facility via the contracts. Importantly, the SPL Project Train 6 was 83% complete at the first quarter-end. Full work on the train is now expected to be completed by first-half 2022, ahead of the previous schedule of completion in the second half.

The partnership reiterated its full-year 2021 guidance for distribution per unit in the range of $2.60-$2.70, indicating an increase from the 2020 figure of $2.59. Notably, it generated free cash flow before distributions of $1,003 million in the trailing 12-month period, reflecting a 28.8% year-over-year rise. The cash flow situation is expected to further strengthen in the coming days, as the SPL Project Train 6 completes.

Moreover, it has economic hedges to secure natural gas feedstock for liquefaction projects, which will provide a cushion to its bottom line from volatile commodity prices. The Zacks Rank #3 (Hold) firm is also working toward reducing costs in order to boost the bottom line. Through the last year, the partnership’s total operating costs and expenses decreased 15.8%. Even though the metric witnessed a boost in the first quarter, it is likely to decrease in the coming quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What’s Holding Back the Stock?

As of Mar 31, 2021, the partnership had only $1,219 million in cash and cash equivalents and net long-term debt of $16,732 million. Also, its current debt stands at $850 million. It had a massive long-term debt to capitalization of 96.9%, which is concerning. This can affect the partnership’s financial flexibility. With a high debt profile and depreciating assets, declining contract tenors can affect its future cashflow, further making debt reduction difficult.


The Zacks Consensus Estimate for Cheniere Partners’ bottom line for 2021 is pegged at $2.41 per unit, suggesting around a 4% year-over-year rise. It has witnessed one upward revision and no downward movement in the past 30 days. Moreover, the consensus mark for 2021 revenues indicates an improvement of 28% year over year. Notably, Cheniere Partners beat estimates thrice in the trailing four quarters.

Key Picks

Some better-ranked players in the energy space include PHX Minerals Inc. (PHX - Free Report) and Pembina Pipeline Corporation (PBA - Free Report) , each having a Zacks Rank #2 (Buy).

PHX Minerals’ bottom line for 2021 is expected to jump 180% year over year.

Pembina Pipeline’s bottom line for 2021 is expected to rise 42.2% year over year.

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