Cheniere Energy, Inc. (LNG - Free Report) recently gave its final approval regarding the construction of its third liquefaction unit or Train 3 at its Corpus Christi export terminal in Texas. The approval of the project marks the first final investment decision on the new LNG project in the United States since 2015. Building of the third train will be handed over to contractor Bechtel Oil, Gas and Chemicals, Inc., which had started with its initial construction in late 2017.
Notably, under the Corpus Christi LNG project, the company intends to develop three trains each having a nominal production capacity of 4.5 million metric tons per year of LNG. The first two trains are expected to come online next year. However, the cost and timeline of the third train has not yet been disclosed and its construction is likely to take around four years. Cheniere’s wholly-owned subsidiary, Cheniere Corpus Christi Holdings has credit facilities worth $6.1 billion, which are likely to be utilized to finance a portion of the construction and operation of the trains.
Cheniere Energy is the only LNG exporter in the United States, currently exporting to more than 20 countries and plans to turn the natural gas glut into export revolution. The company's gas supply deals with Poland, Lithuania, South Korea, China and India are likely to boost its revenue growth trajectory in the coming years. Early this year, Cheniere Energy clinched a deal with China National Petroleum Corporation to sell around 1.2 million tons of LNG per year.
Considering the secular shift to the cleaner burning fuel for power generation worldwide and in the Asia-Pacific region in particular, Cheniere Energy is likely to cash in on the development. Per China's pollution-control measures, the use of coal for heating purposes is expected to go down, thereby giving a boost to the country’s LNG demand in the coming years. By 2030, China is believed to become the largest LNG importer. Cheniere Energy is likely to meet the rising demand for LNG in China and strengthen its hold in Asia.
Moreover, with U.S.-China trade war tensions abating, China intends to reduce its trade surplus with the United States through increased energy imports. Thus, with the trade war being on hold, the Chinese companies are likely to be induced to enter into more LNG contracts with companies like Cheniere Energy, which boasts significant projects like Sabine Pass or Corpus Christi facilities. The new train will help to increase the growth and revenue prospects of the United States, as China has agreed to boost its imports from the United States.
Apart from the Corpus Christi Project, Cheniere Energy’s Sabine Pass is North America’s first large-scale liquefied gas export facility. Altogether, Cheniere Energy intends to construct up to six trains at Sabine Pass, with each train expected to have a capacity of about 4.5 million tons per annum (Mtpa). While Trains 1, 2, 3 and 4 are functional; Train 5 is under construction and expected to begin exporting in the second half of 2019. Train 6 is being commercialized and has secured the necessary regulatory approvals.
Further, Cheniere Energy intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The company has also initiated the regulatory approval process regarding the same. The total production capacities of these trains are expected to be approximately 9.5 Mtpa.
Zacks Rank and Other Key Picks
Cheniere Energy currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the energy space include Bonanza Creek Energy, Inc. (BCEI - Free Report) , Eclipse Resources Corporation and Geopark Ltd. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bonanza Creek delivered an average positive earnings surprise of 215.36% in the last four quarters.
Eclipse Resources delivered an average positive earnings surprise of 133.33% in the trailing four quarters.
Geopark’s 2018 earnings are expected to grow 745.516% year over year.
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