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Icahn Trims Cheniere Energy Stake, Remains Major Investor

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Shares of Cheniere Energy, Inc. (LNG - Free Report) plunged on Thursday after Carl Icahn pared down his stake in the liquefied natural gas exporter.

Carl Icahn Cashes Out a Portion of His Holdings  

Days after raising ownership in Permian oil producer Energen Corporation , the activist hedge fund billionaire said in a filing yesterday that entities controlled by him sold nine million of his 32.7 million shares in Cheniere Energy. That marks a roughly 27.5% divestiture of the firm’s ownership.

Cheniere Energy’s stock tumbled on the news, falling 3.9% to $64.86. However, shares are up 20.5% for the year. Icahn, who still has two members on Cheniere Energy’s board, remains the company’s largest shareholder with a roughly 9.5% stake.



Icahn Remains Bullish on Cheniere Energy’s Long-Term Prospects

Despite trimming his position in Cheniere Energy, Icahn expressed his confidence in Cheniere Energy’s management and Chief Executive Officer Jack Fusco.

Since announcing his position in Cheniere Energy in 2015, Icahn has maintained his bullish stance on the company in the face of several headwinds. Cheniere Energy is in the business of setting up natural gas liquefication plants, which is a costly affair that requires high capital spending. This has translated into a huge debt burden for the company. As of Mar 31, 2018, Cheniere Energy had $25,656 million in net long-term debt. The debt-to-capitalization ratio of the company stands at more than 93%.

However, Icahn believes the fundamentals of liquefied natural gas to be favorable in the long run, considering the secular shift to the cleaner burning fuel for power generation worldwide and in the Asia-Pacific region in particular. With domestic prices remaining constrained on the back of abundant supplies, there exists a big opportunity in selling natural gas production in the United States at higher prices overseas.

Cheniere Energy: A Top Zacks Rank Holder with a Competitive Advantage

Being the first company to receive Federal Energy Regulatory Commission (FERC) approval to export liquefied natural gas from its 2.6 billion cubic feet per day Sabine Pass terminal in Cameron Parish, Louisiana, Cheniere Energy enjoys a distinct competitive advantage.

Last month, the company gave its final approval regarding the construction of its third liquefaction unit or Train 3 at its Corpus Christi export terminal in Texas. The facility is expected to come online in 2019.

Not surprisingly, the stock is a huge draw among investors and is currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While shares have run up considerably and recently reached its highest level in three years, there is still time to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Other Stocks to Consider

Other top-ranked stocks in the energy space worth considering include Whiting Petroleum Corporation and Northern Oil & Gas, Inc. (NOG - Free Report) , both carrying a Zacks Rank #1.

Whiting Petroleum is a top-tier upstream operator in North Dakota's Williston Basin. In the last 60 days, 15 earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 128% in the same period.

Northern Oil & Gas is a non-operator explorer and producer with primary focus on the Williston Basin in North Dakota and Montana. In the last 60 days, four earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 33.3% in the same period.

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