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Cheniere Energy (LNG) Incurs Wider-Than-Expected Loss in Q2

Zacks

U.S. gas exporter Cheniere Energy, Inc. LNG reported mixed second-quarter results on Aug 8, wherein the company incurred wider-than-expected loss, while revenues topped the Zacks Consensus Estimate. Shares of the company declined 1.3% to eventually close at $42.60 on Aug 8. The shares further lost ground, closing at $41.23 on Aug 10.

Cheniere Energy posted second-quarter 2017 net loss of $1.23 per share which was much wider than the Zacks Consensus Estimate of a loss of 28 cents. The weaker-than-expected results were attributed to increased costs in the reported quarter. However, the loss per share narrowed from the prior-year quarter level of $1.31 due to improved year-over-year revenues.

The company’s quarterly revenues jumped to $1,241 million from $177 million recorded in the year-ago quarter, reflecting massive growth of 601.1%. Further, the top line also surpassed the Zacks Consensus Estimate of $969 million. The top line surge led the company’s adjusted EBITDA to jump to $371 million against a loss of $4 million in second-quarter 2016.

Cheniere Energy, Inc. Price, Consensus and EPS Surprise


During the quarter, the company shipped 48 cargoes from Sabine Pass liquefied natural gas terminal in Louisiana. Total volumes lifted in the reported quarter were 170 trillion British thermal units.

Costs & Expenses

Overall costs and expenses soared 282% to $967 million from the same quarter last year. The increase is mainly attributed to the higher cost of sales which jumped to $692 million compared with $85 million in the prior-year quarter. Depreciation and amortization expenses also increased from $33 million a year ago to $90 million in the reported quarter. Increase in these costs were partly offset by the absence of restructuring expenses incurred in the year-ago quarter and also by the lower selling /administrative expenses in the reported quarter.

Balance Sheet

As of Jun 30, 2017, Cheniere Energy had approximately $796 million in cash and cash equivalents and $24,654 million in net long-term debt. The company’s debt to capital ratio is 96.1%.

Guidance

Cheniere Energy updated its guidance for full-year 2017 despite the wider-than-expected loss this quarter. The raised guidance reflects the management’s confidence in its construction projects which are much ahead of the schedule. The adjusted EBITDA is expected to be between $1.6 and $1.8 billion, 5.8% higher than the prior guidance. Distributable cash flow is likely to be between $500 and $700 million ($2.10 to $2.80 per share), unchanged from the prior guidance.

Project updates

During the quarter, Cheniere Energy attained major regulatory and financial milestones with respect to the development of its interstate natural gas pipeline operation – Midship Project. Midship expects to receive FERC authorization by early 2018 and the project is scheduled to come online in late 2018 or early 2019.

The company is nearing the completion of its fourth liquefaction unit at its Sabine Pass export terminal in Louisiana.Train 4 initiated LNG production in late July and is expected to produce its first commissioning cargo later this week. Altogether, Cheniere Energy intends to construct up to six trains at Sabine Pass with each train expected to have a capacity of about 4.5 million tons per annum. Train 3 came online in the first quarter. Train 5 is under construction and expected to get completed by 2019 while Train 6 is being commercialized and has the necessary approvals in place.

Cheniere Energy’s Corpus Christi LNG project, under which the company intends to develop three trains, is also expected to come online in 2019. Trains 1 and 2 are partially complete, while Train 3 is being commercialized and has the necessary approvals in place.

Zacks Rank & Key Picks

Cheniere Energy currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space include TransCanada Corporation TRP, Braskem S.A. BAK and Range Resources Corporation RRC. All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada reported positive earnings surprise of 4.06% in the trailing four quarters.

Braskem reported positive earnings surprise of 107.79% in the trailing four quarters.

Range Resources reported positive earnings surprise of 250.00% in the previous quarter.

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