At the moment everything is running Cheniere Energy’s (LNG) way. And while natural gas remains a cyclical sector and subject to the ebbs and flows of global growth, catalysts are very strong for this member of 50 Stocks Portfolio.
Catalysts? Let me count them down.
First, liquified natural gas looks to be a winner from any U.S.-China trade agreement with China promising to up its purchases of U.S. LNG as part of the deal. Cheniere is in talks with China’s Sinopec (SNP) for a new long-term liquefied natural gas supply agreement and the parties are awaiting further instructions from government authorities. The Way Street Journal has reported that Cheniere is expected to sign an $18 billion supply deal that could be announced as part of a broader U.S.-China trade deal at a summit at the end of March.
Second, Chinese demand for U.S. liquified natural gas is on the upswing anyway. Before the start of the U.S.-China tariff war, Cheniere announced two LNG sale and purchase agreements with Petrochina. PetroChina would buy 1.2 million metric tons per year of LNG with a portion of the supply beginning in 2018 and the balance starting in 2023. Globally Cheniere signed contracts for 7.5 million metric tons per year in 2018.
Third, Cheniere has new capacity coming on line that will enable the company to supply more liquified natural gas and give it more flexibility in juggling shifts in demand. Three new production trains are scheduled to go into service in 2019 and the company is making good progress on permits for its #3 Train at the Corpus Christi site. This would be a midscale train–with capacity of 1.4 million tons a year versus trains in current operation with capacity of 4.9 million tons each a year.Fourth, Cheniere is on the verge of seeing substantial positive cash flow beginning in, I’d estimate 2020. By 2020 Cheniere should have 31 to 34 million metric tons a year in capacity online and 40 to 44 million tons by 2022. About 88% of capacity on the Sabine Pass terminals and 93% at the Corpus Christi terminals is under contract. The company has guided to $4.4 billion to $4.9 billion in EBITDA (earnings before interest, taxes and depreciation) in 2020 and Morningstar projects $5.2 billion in EBITDA by 2022. That should provide ample cash for paying down some of the company’s debt and/or paying dividends. In any case, those earnings will go a long way to alleviating worries about Cheniere’s debt load.
And, I might note, that Cheniere’s revenues are more stable than most since they are the result of long-term contracts with provisions that make it relatively difficult for customers to refuse to honor their purchase commitments. Shares of Cheniere Energy are u 13.03%, as of the close on March 5, since I added them to my long-term 50 Stocks Portfolio on May 3, 2013.
On March 4, charts show a very positive cross as the 50-day moving average, finally, moved above the 200-day moving average. That usually a good sign for continued upward movement in a stock’s price