LNG 1Q2017 Earnings Note

1Q17 show cases power of M&T; LNG cash flow power taking shape ||
In our opinion, Cheniere needs to buy back all CCH HoldCo II Convertible Senior Notes (CCH Holdco 2 Convertibles). We don’t like 10% automatic discount on conversion price. We believe Quarter showed power of marketing and trading (M&T) accounting for more than half of revenue. We like it. We like that Cheniere is looking at ways to deploy future FCF, but not thrilled about foreign investments and liquids-based ventures; we believe there are many US involving E&P, pipelines or marketing and trading (M&T) or all 3. We’re surprised and disappointed Cheniere could not roll-up CQH but we believe roll-up of CQH and CQP will happen in due time. We believe new Midship pipeline feels right but mid-scale LNG plant feels wrong. We believe that there are better ways to finance expansion program, but, long-term, company 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 third act. Though loose now, we expect global LNG markets to tighten quicker than current expectations and believe Europe would continue to migrate towards hub pricing/trading, and Asia is likely to start hub pricing/trading.

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