Auvila Flash on LNG (05/17/2018): LNG offers to buy remaining 7.8% of CQH that it doesn’t own for $28.24/share

As expected, Cheniere Energy Inc. (LNG) announced today that it is offering to buy the remaining 7.8% of the remaining public float in Cheniere Energy Partners L.P. Holdings LLC (CQH)
LNG is offering 0.45 of LNG for each share of CQH, which translates into an exchange price of some $28.2375/share based on LNG’s closing price on May 16, 2018 of $62.75/share
The transaction is expected to be a tax-free transaction for CQH and LNG shareholders

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LNG Earnings Note (05/04/2018): LNG looks to be at inflection point; makes for tempting target

Cheniere reported stellar 1Q2018 results, but much of upside performance due to excess cargos from its LNG plants prior to servicing LT SPAs
Cheniere expects positive investment decision (FID) on CCL3 in next several weeks
We like that Cheniere’s looking at ways to deploy future FCF, but not thrilled about foreign and liquids-based ventures
Midship pipeline feels right but mid-scale LNG still feels wrong
LT, Cheniere faces under-leverage problem. We’d like Cheniere to take excess cash flow to pay dividend after rolling up CQH and CQP and after its 3rd-act.
As expect global LNG markets are tightening quicker than past market expectations, but in-line with our expectations
We believe CNPC contract will lead to more Chinese contracts and positive FID for SPL 6
Cheniere’s performance and LNG market fundamentals make Cheniere tempting target for large E&P players & integrated oil companies

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LNG (02/21/2018): 2018 looks to be strong transition year; upside potential strong

Cheniere all but confirms positive investment decision of CCL3 in 2018
We like that Cheniere’s looking at ways to deploy future FCF, but not thrilled about foreign and liquids-based ventures
We believe CQH and CQP roll-up will happen in due time
Midship pipeline feels right but mid-scale LNG still feels wrong even though Cheniere says there’s no cost disadvantage and FID’s only a matter of customer preference for smaller contracts
LT, Cheniere faces under-leverage problem. We’d like Cheniere to take excess cash flow to pay dividend after rolling up CQH and CQP and after its 3rd-act
As expect global LNG markets are tightening quicker than past expectations, but we wonder how much of it’s due to sanctions on Qatar by neighbors
We believe CNPC contract will lead to more Chinese contracts and positive FID for SPL 6. We also look for additional LT-contracts to boost value.

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LNG (02/09/2018): We believe Cheniere is on cusp of announcing positive FID on CC3

· Following the Trafigura Pte Ltd (Trafigura) contract for 1MM tonnes per annum (MMTPA) of LNG, which was announced on January 16, 2018, LNG signed two contract with China National Petroleum Corporation (CNPC) for 1.2 MMTPA

· Corpus Christi Liquefaction #3 (CCL3) already has a contract with EdP of Portugal for about 0.8MMTPA or about 40MM MMBTU per year

· Combined with the PetroChina contract and the Trafugura contract CCL3 would have close to 70% of its output under contract, which should be enough for LNG to move forward with starting construction on CCL3

· Therefore, we expect a positive FID to be announced sooner than we expected, quite possibly before the end of 1Q2018
Conclusion: We believe that the announcement for the positive FID on CCL3 will serve as an impetus to propel LNG further to the upside

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2018 Industry Update: Economic growth should favor commodities-driven businesses in 2018

Warmer than normal winter:
Weak gas prices:
However, 4Q2017 and 1Q2018 power gross profit could be better than expectations:
Similarly, we’d expect natural gas infrastructure businesses to perform well for 4Q2017 and 1Q2018:
We expect economic growth to surpass 4% for 2018:
Strong economic performance should lead to strong power sector performance:
Commensurately, we expect natural gas infrastructure businesses to perform well:
Adjusted for seasonality, we expect natural gas prices to creep up throughout 2018 and, given normal weather, we’d expect natural gas prices to average at or just below $3.50 for 2018 with an exit price of some $3.65-$3.75:
Conclusion: Going into 2018, we believe that natural gas prices will stage a moderate recovery, but power margins should do better benefiting from accelerating economic activity. Individually, we continue to like… . However, the real star may be … . Among the utility names, we like … due to their growth prospects. We also look for … to outperform as … .

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Flash: LNG Signals positive FID for CCL3 in 1H2018 with Bechtel EPC contract

On Monday, December 18, 2017, Cheniere announced that it signed an approximately $2.36B fixed-price turnkey Engineering, Procurement and Construction (EPC) contract with Bechtel Oil, Gas and Chemical, Inc. (Bechtel) to proceed with the construction of Corpus Christi Train 3 (CCL3), a 4.5MM Metric Ton per Annum (MM MTPA) or about 576MMCF/Day LNG liquefaction facility, by July 5, 2018

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LNG 3Q2017: 2018 looks to be breakout year, but depends on commercialization

In our opinion, Cheniere needs to buy back all CCH HoldCo II Convertible Senior Notes (CCH Holdco 2 Convertibles), but conversion unlikely before March 1, 2020. So, we feel investors won’t be concerned until 2H2019.
We like that Cheniere’s looking at ways to deploy future FCF, but not thrilled about foreign and liquids-based ventures. We believe there are many US opportunities involving E&P, pipelines or M&T
We believe CQH and CQP roll-up will happen in due time
LT, Chenier faces under-leverage problem. We’d like Cheniere to take excess cash flow to pay dividend after rolling up CQH and CQP and after its 3rd-act, but no share buybacks.
As expect global LNG markets are tightening quicker than past expectations, but we wonder how much of it is due to Qatar sanctions imposed by neighbors
2018 likely to be driven by SPL 6 and CCL 3 FID and associated LT-contracts
We believe CNPC MOU will lead to LT-contract and both SPL 6 and CCL 3 will FID in 2018. We also look for additional LT-contracts to boost value.

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Natural gas: Tailwind; Interest rate: Mild headwind; Election: Tornado

• As expected, natural gas prices started to rally, but about a month ahead of expectations in June
• We expect natural gas prices to generally move upward through 2H2016 and for 2017
• The impact of 1-3 rate increases should not be significant for valuations, but the portend for further rate increases is what would drive valuations down, in our opinion
• We expect that the global migration towards using more natural gas will continue and favor US energy companies, including energy infrastructure companies
• Power industry move towards renewables and natural gas is unlikely to abate, but there are a plethora of issues that would determine whether this is good or bad for investors depending on the industry, pricing mechanism, use of storage and back-up power, and development of new or refurbishment/replacement of old infrastructures
• Regardless, we look for heat rates to become more central in determining power economics moving forward, and likely grows in importance with higher percentage of generation delivered from intermittent renewable power sources

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