Cheniere Energy - $LNG.US

What’s Cheniere Energy Business Model?

Cheniere Energy, Inc. is an energy company focused on LNG-related businesses. The Company owns and operates liquefied natural gas (LNG) receiving terminals and liquefied natural gas (LNG) pipelines. Cheniere Energy manages and operates projects in Louisiana and Texas.

What Cheniere Energy is doing in more details?

Cheniere Energy is a producer of liquefied natural gas (LNG) in the US, exporting LNG to customers in over 30 nations around the world.

The company purchases natural gas and processes it into LNG, and offers customers the option to load the LNG onto their vessels at its terminals, or it delivers the LNG to regasification facilities around the world.

The company has two terminals on the US Gulf Coast in various stages of development: its Sabine Pass liquefaction project in southwest Louisiana and its Corpus Christi liquefaction facility in South Texas.

Over 70% of revenue comes from outside the US. Cheniere also has pipeline assets and operates an LNG and natural gas marketing business.

Where Cheniere Energy is Operating?

Cheniere’s Sabine Pass project in southwest Louisiana has five liquefaction units, or “Trains” as they are known in the LNG industry.

When all Trains are completed (after its sixth Train is operational) its production capacity is expected to be approximately 30 million tonnes per annum (mtpa) of LNG.

When its Corpus Christi liquefaction facility in South Texas is complete, its aggregate production capacity is expected to be approximately 15 mtpa of LNG. The company has a contract with major engineering firm Bechtel for construction work.

Natural gas is transported to Cheniere’s LNG facilities on third party pipelines, as well as on pipelines Cheniere has constructed and owns and operates.

Its pipelines include the Creole Trail, nearly 95-mile pipeline interconnecting the Sabine Pass terminal with a number of large interstate pipelines; the Corpus Christi Pipeline, about 25-mile pipeline that interconnect its Corpus Christi project with several inter- and intrastate natural gas pipelines; and the Midship Pipeline, a new-build project that will connect new gas production from the Anadarko Basin in Oklahoma to Gulf Coast and Southeast markets once it is complete.

Nearly all the company’s revenue (some 95%) comes from LNG sold at its terminals and three percent of the revenue is from regasification.

Where is the geographical reach of Cheniere Energy?

The Houston, Texas-based Cheniere Energy derives substantially all of its revenue from facilities in Louisiana and Texas.

Sales to customers in the US account for about 30% of revenue; South Korea and India, over 10% each; Ireland, approximately 10%; Spain and the UK, more than 5%; Singapore, some 5%; and Japan, two percent.

The company has offices in Houston, Beijing, London, Singapore, and Tokyo.

What is Cheniere Energy’s Sales and Marketing Strategy?

Approximately 85% of Cheniere’s expected LNG production capacity, either completed or under construction, is contracted through long-term agreements with customers. The remaining volumes of LNG are available to sell on the open market.

The company market and sell LNG produced by the Liquefaction Projects that is not required for other customers through their integrated marketing function.

Cheniere is highly dependent on revenue from four major customers: BG and its affiliates account for over 15% of revenue, while Korea Gas Corporation (KOGAS), GAIL (India), and Naturgy generates some 10% of revenue each.

What is Cheniere Energy Financial Performance?

Throughout the five-year period ending in 2019, Cheniere Energy reported year-over-year revenue growth as the company built more “Trains” (liquefaction units) and increased the volume of LNG it sold during the year.

The company reported losses between 2015 and 2016 as it invested big in build-out. Net income eventually swung to a profit in 2018. The company reported $9.7 billion in revenue in 2019, up from $8 billion in 2018.

The increase was primarily attributable to the increased volume of LNG sold following the achievement of substantial completion of these Trains.Net income was $648 million for the year, an increase of $177 million from 2018.

The increase was mostly attributable to increased gross margins, increased tax benefit, and increased LNG revenues. Cash at the end of 2019 was $3 billion.

Cash from operations was $1.8 billion, while investing activities used $3.2 billion, primarily to purchase property, plant, and equipment. Financing activities contributed another $1.2 billion.

What is Cheniere Energy Future Strategy?

The company’s primary business strategy is to be a full-service LNG provider to worldwide end-use customers.

It will accomplish this objective by owning, constructing and operating LNG and natural gas infrastructure facilities to meet its long-term customers’ energy demands and safely, efficiently and reliably operating and maintaining its assets; procuring natural gas and pipeline transport capacity to its facilities; commencing commercial delivery for its long-term SPA customers; safely, on-time and on-budget completing its expansion construction projects, including the development of Corpus Christi Stage 3; maximizing the production of LNG to serve its long-term customers and generating steady and stable revenues and operating cash flows; and maintaining a flexible capital structure to finance the acquisition, development, construction and operation of the energy assets needed to supply its customers.

What is Cheniere Energy’s Background?

Cheniere Energy was founded in 1996. The company began developing its first LNG terminal in 1999 and was among the first companies to secure sites and commence development of new LNG terminals in North America.

The company is particularly vulnerable to weather-related interruptions. While Hurricane Katrina in 2005 didn’t directly hit its operations, it significantly impacted workforce availability. Hurricanes Rita in 2005, Ike in 2008, and Harvey in 2017 all had a serious impact.

In February 206, the Sabine Pass facility became the first to ship LNG from a commercial facility in the contiguous US. The company’s Corpus Christi liquefaction facility in South Texas began operations in 2018.

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