Cheniere Energy, Inc. (LNG - Free Report) , riding high on its first-mover advantage in exporting liquified natural gas from the United States, recently inked a major deal with Taiwan’s CPC Corporation. Per the deal, Cheniere Energy will supply two million tons of liquified natural gas (LNG - Free Report) annually to CPC for 25 years.
Cheniere Cashing in on Shifting Trends
Considering the secular shift to 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.
Reportedly, natural gas output in the United States has surged around 60% in the past 10 years and is set for another 60% growth in the next 20 years. LNG exports are likely to increase to around 10 billion cubic feet per day within five years.
Cheniere Energy is the only LNG exporter in the United States that currently exports 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 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. With 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.
Notably, Taiwan is the largest importer of LNG (after Japan, China, South Korea and India) as it has limited hydrocarbon resources of its own, and thus has to rely on oil and gas imports to meet increasing demand. The latest 25-year agreement with Taiwan will further boost Cheniere’s earnings and revenue prospects. The company is poised to enter into more LNG contracts as it boasts significant projects like Sabine Pass or Corpus Christi facilities.
As it is, the Zacks Consensus Estimate for 2018 revenues is pegged at more than $7 billion, representing around 25% revenue growth from 2017. The next year’s average forecast is $8 billion, pointing toward 13.4% growth.
Cheniere’s Power-Packed Projects
Being the first company to receive Federal Energy Regulatory Commission’s (FERC) approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal in Cameron Parish, Louisiana, Cheniere Energy enjoys a distinct competitive advantage. The company has been exporting LNG from the Sabina Pass since 2016. While four trains under the Sabina Pass project are already functional, train 5 is under construction and likely to begin exporting in the second half of 2019. Train 6 is being commercialized with necessary regulatory approvals.
Cheniere Energy is also gearing up to commence exports from its $15-billion Corpus Christi liquefaction (CCL) project, under which it wants to develop three trains, each having a nominal production capacity of 4.5 million metric tons per year of LNG. While the construction of the first train is likely to be completed by the first half of 2019, the second train is likely to become operational within the second half of 2020. In May 2018, the company gave the final investment decision (FID) on Train 3 at its Corpus Christi export terminal in Texas, marking the first FID on a new LNG project in the United States since 2015.
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. Total production capacity of these trains is expected to be approximately 9.5 Mtpa.
Zacks Rank & Other Promising Stocks
Cheniere Energy currently sports a Zacks Rank #1 (Strong Buy).
Other top-ranked stocks in the energy space include Bonanza Creek Energy, Inc. (BCEI - Free Report) , Eclipse Resources Corporation (ECR - Free Report) and Geopark Ltd. , each sporting a Zacks Rank #1. 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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