Cheniere Energy, Inc. (LNG - Free Report) recently achieved a major milestone with the dispatch of the first cargo from its Corpus Christi liquefaction (CCL) project. Notably, the company did not disclose the destination yet. Nonetheless, the cargo surely marks the first ever shipment of liquified natural gas (LNG - Free Report) from Texas.
Cheniere’s First Mover Advantage in LNG Market
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, LA, Cheniere definitely enjoys a distinct competitive advantage. As it is, 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 undergoing commissioning and set to become fully operational early next year. Train 6 is being commercialized with the necessary regulatory approvals.
Under the CCL project, Cheniere intends to develop three trains, each having a nominal production capacity of 4.5 million metric tons of LNG per year. While the first train is likely to come online this year or early next year, the second and third trains are expected to be operational within the second half of 2019 and in 2021, respectively. Notably, the CCL project is the third export facility in the United States that produces LNG, after Cheniere’s Sabina Pass and Dominion Energy, Inc.’s (D - Free Report) Cove Point terminal.
Cheniere has already entered into long-term contracts with the Indonesian state-owned oil and gas company, Pertamina Corporation, and Spain-based Endesa S.A. to supply liquified natural gas from Train 1 of the CCL project to these firms for 20 years.
Notably, the company intends to export five to seven test cargoes each from Train 1 and Train 5 of its CCL project and Sabine Pass project, respectively, before placing both the units into long-term service during the first quarter of 2019.
Importantly, Cheniere currently exports to around 30 countries worldwide, as the firm aims at turning the natural gas glut in the United States into export revolution. The company, being one of the few LNG exporters of the United States, shipped more than 190 LNG vessels on a year-to-date basis, marking a solid y/y increase of 43%. It posted robust year-over-year results in the last reported quarter.
Cheniere looks well positioned to maintain its revenue growth trajectory over the coming years, on the back of solid operations and long-term contracts. Of late, the company has entered into long-term sale and purchase agreements with CPC and Vitol, which bode well for revenue and growth prospects of the firm, thereby helping LNG generate excellent cash flow visibility for investors. As it is, Cheniere has been witnessing a consistent improvement in revenues over the past few years. Over the last 3 years (2015-2017), the Zacks Rank #3 (Hold) company’s revenues recorded a CAGR of 354.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
U.S. LNG Exports to Witness a Boom
Per EIA reports, LNG exports from the United States will more than double by 2019 end. While the current export capacity is 3.6 billion cubic feet (BCF) of natural gas per day, the number is going to move up to 8.9 BCF/d by the end of 2019, with nearly 18 LNG production units expected to come online over the next year. Notably, the United States is likely to become the third-largest exporter of LNG, given these enhancements, after Australia and Qatar.
Out of the 18 new LNG production units, three will be from Cheniere itself. While Cheniere has already dispatched the first cargo from Train 1 of the CCL project, the company is expected to make its first shipment from Train 5 of Sabina Pass by the month end. Further, the second train at its CCL plant will come online by the second half of 2019. Meanwhile, Sempra Energy (SRE - Free Report) is likely to bring online all the three trains from its Cameron LNG project by the end of 2019. Importantly, Kinder Morgan, Inc. (KMI - Free Report) is also likely to bring into service 10 of its production units at Elba Island LNG facility by the end of 2019. Moreover, first two trains at the Freeport LNG facility will also become functional by 2019-end. These developments will surely boost United States’ efforts to become a global gas power.
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