Cheniere Energy Partners Earnings: Marketing Profit Boost Lifts Our Fair Value to $54 From $52

Cheniere Energy Partners' second-quarter earnings were better than we expected. We are now reasonably confident that the company's results have bottomed out for the earnings cycle after the huge profit boosts from the Russian-Ukraine war in 2022 and 2023. We have observed an improvement in marketing spreads from the past few quarters, bringing them close to normalized levels and placing Cheniere Energy Partners in a reasonably well-positioned state for the remainder of 2024 and 2025.After refreshing our marketing forecast, we've boosted our fair value estimate for Cheniere Energy Partners to $54 from $52. We've boosted our 2024 EBITDA forecast to $3.7 billion from $3.3 billion and our 2025 forecast to $3.7 billion from $3.4 billion.The global LNG market continues to shift as we expected. The EU’s gas demand has declined following its shift away from Russian gas and ongoing power demand declines. Consequently, its need for US LNG as a stopgap to meet the differences between EU gas production and overall demand has declined. With lower demand and now lower gas prices, more price sensitive consumers of LNG like India and China have once again resumed their usual role in the market as ongoing demand drivers. LNG imports to both regions are well above 2023 levels, a trend that we expect to continue, driven by at least China’s need to reduce its reliance on coal over time.Cheniere Energy Partners' distribution is likely to remain flat at $3.25 annually for some time to free up cash for larger train capital investments. We think this is an appropriate decision given the higher returns available.