LNG 2017 Analyst Day Note

Analyst Day reinforces strong value proposition and incremental info ||

We are puzzled by Cheniere’s suggestion that both its convertibles will convert at $94/share
We understand why 4.875% convertible unsecured notes due 11/2021 may convert at $94/share
However, the 11% CCH Holdco 2 convertible senior notes should convert 10% below or at about $84.60/share given the 10% discount to the then trading price of LNG
We’ve long held that Cheniere – and US in general – would be low cost LNG producer and would hold competitive advantage
US has close to 1 TCF of natural gas at full production cost of about $3/MMBTU at HHUB or some $18/BOE, even including Cheniere’s 15% markup on gas supply and $3/MMBTU fixed fee, plus $2.50/MMBTU in transport cost to Asia, US LNG supply would be priced at some $9/MMBTU or about $54/BOE vs. expected global price of oil north of $60/BBL, which doesn’t include transport or processing costs for LNG
Cheniere estimates full delivery cost to be closer to about $8/MMBTU to Asia
Cheniere has potential to double its LNG production capacity to 22 trains from full capacity of 11 (6 at Sabine Pass (SPL) & 5 at Corpus Christi (CCL)) of which SPL 6 and CCL 4&5 are fully permitted, given its leased land capacity that’s adjacent to both facilities
Tightening LNG markets by 2020 would necessitate new supplies; however, new construction takes 4-6 years or more to complete and very few, if any new FIDs have been reached over the past three years, which gives LNG and one other in the US an advantage in bringing new capacity to market given fully permitted sites ready for construction

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