Cheniere Energy missed earnings estimates, reporting a loss in the third quarter when analysts had projected booming profits for the U.S. liquefied natural gas giant. LNG shares edged lower Thursday.
Cheniere Energy Stock: Earnings
Estimates: Analysts predicted Cheniere Energy earnings would balloon to $5.58 per share, up from a loss of $4.27 a year ago. Revenue was expected to surge 141% to $7.7 billion, according to FactSet.
Results: Cheniere Energy reported a net loss of $9.54 per share while sales soared 175% to $8.8 billion in the third quarter.
The company reported that its loss was the result of an increase in derivative losses of more than $2 billion and settlements worth $6 billion. Cheniere said its increased volumes of LNG delivered and an uptick in margins per million British thermal unit of LNG offset some of these headwinds.
Cheniere also received a portion of a $765 million payment Chevron owes the company for the early termination of a Terminal Use Agreement (TUA) between a Cheniere subsidy and the energy giant.
The number of LNG cargoes increased 11% to 156 in Q3. As of Sept. 30, Cheniere had $652 million of LNG in transit
Outlook: Cheniere reconfirmed its full-year guidance and expected Adjusted EBITDA of $11 billion-$11.5 billion. The company is also projecting distributable cash flow of $8.1 billion-$8.6 billion in 2022.
"Our confidence in a strong finish to 2022 and optimism looking ahead to 2023 is underpinned by our achievements across the Cheniere organization," CEO Jack Fusco said in a statement.
Cheniere Energy Stock
Cheniere Energy fell 1.4% to 176.04 Thursday of market trading. On Wednesday, the stock dropped 0.7% to 178.62. LNG shares have formed a cup-with-handle pattern with a 178.69 buy point, according to MarketSmith analysis. The buy range for Cheniere Energy stock extends to 187.66. LNG stock is listed on IBD Leaderboard.
In Q2, sales increased 165% to $8 billion and LNG earned $2.90 per share, up from a net loss of $1.30 per share in Q2 2021.
Cheniere Energy stock has a 0.9% dividend yield and announced last week it would pay out a quarterly dividend of $0.395 per share on Nov. 16.
LNG shares have a Composite Rating of 83. It has a 97 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock's performance over the last 52 weeks holds up against all the other stocks in IBD's database. The EPS rating is 41.
Europe And LNG
Cheniere Energy is well positioned as a leading supplier to Europe and other regions. However, natural gas prices have turned volatile amid mild temperatures heading toward winter and as gas storage levels near capacity in the European Union. Cheniere Energy stock edged lower Wednesday.
Global energy prices have gyrated in recent weeks amid fears of recession and forecasts for possible oil and gas demand destruction. Since Russia's invasion of Ukraine earlier this year sent both global crude oil and natural gas futures to highs during the summer.
In 2021, Russia provided nearly half the European Union's gas imports. The loss of that supply has made LNG imports a crucial component of the EU's emergency energy plans.
So far in 2022, more than 70% of rising U.S. LNG cargoes have gone to Europe, compared with 34% in 2021, according to federal data. The U.S. is also the world's largest natural gas producer.
The European Union has now filled 95% of its natural gas storage facilities, Reuters reports. That leaves LNG import facilities few places to send incoming fuel, and has LNG tankers waiting outside ports. As a result, Amsterdam spot natural gas prices went negative last week.
The region is also set to have mild temperatures in November, which should limit natural gas use in the region. However, uncertainty remains around the winter and whether there is sufficient fuel if weather turns frigid.
In the first half of 2021, less than 40% of Cheniere Energy's LNG cargoes landed in Europe. That jumped to more than 70% through Q2 2022. The U.K. government has also recently confirmed it is in talks for an LNG purchase agreement with a number of companies, including Cheniere Energy.
The Houston-based company is the largest producer of liquefied natural gas in the U.S. and one of the largest LNG operators in the world. Its services range from gas procurement and transport to vessel chartering and delivery. Cheniere owns and operates liquefied natural gas terminals near Corpus Christi, Texas.
Uncertainty Around Key Export Terminal
A major U.S. Gulf Coast export terminal is also expected to come back online soon. Freeport LNG's Quintana, Texas, export plant has been offline since a June 8 fire. That reduced U.S. LNG exports, leaving more gas for U.S. utilities to inject into stockpiles for the winter.
Freeport said in August it anticipates partial operations to resume at the export terminal in early November, vs. earlier estimates for October. The facility aims to ramp up to a sustained level of at least 2 billion cubic feet per day — about 15% of total U.S. LNG export capacity — by the end of November.
The company does not expect the facility to reach full capacity until March 2023, it reported in August.
However, the privately held company has not yet submitted a restart plan to federal regulators, Bloomberg confirmed Tuesday. This casts some doubt that Freeport LNG is prepared to restart operations in November. U.S. natural gas futures dropped Tuesday on the news.
Prices sank 5% Thursday to $6.26 per million British thermal units after spiking 6.9% on Wednesday. U.S. natural gas prices are up about 53% since the start of the year. However, they are more than 40% off the 14-year high hit in August.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
