Cheniere Partners Earnings: The Distribution Looks Secure for 2023
Cheniere Partners’ CQP second-quarter results were solid, in our view. With parent Cheniere Energy expecting greater marketing contributions leading to higher-than-expected EBITDA for 2023, we expect a similar level of outperformance to accrue to Cheniere Partners. Our revised 2023 EBITDA forecast for Cheniere Partners stands at $4.2 billion. After updating our model, we will maintain our $52 per unit fair value estimate and wide moat rating. The base/variable distribution was also reaffirmed by management at a midpoint of $4.12 for 2023.
The 20-million-ton Sabine Pass expansion continues to be the biggest near-term upside for Cheniere Partners. Cheniere continues to be active on the contracting front. It has signed contracts for about 4 million tons of offtake supply per annum, or mtpa. While it may not top 2022′s 11 mtpa of contracts, we expect it to exceed 2021′s 5 mtpa. These contracts are, for now, tied to Train 7 of the Sabine Pass expansion project. The Sabine Pass expansion project consists of three trains (about 6.7 mtpa each) totaling 20 mtpa of annual capacity. While we think the full 20 mpta remains somewhat aspirational, 4 mtpa represents about 60% of the capacity for the first train. We would anticipate that perhaps another 1.5 million tons are needed to sanction a final investment decision. Cheniere has already entered the pre-review process for permitting and signed a contract with Bechtel for the initial engineering work.
LNG market fundamentals continue to be reasonably healthy, in our view. European LNG demand remains slightly ahead of 2022 levels so far this year, contributing to very healthy EU storage levels amid declining gas consumption. Asian, particularly Chinese LNG demand, is recovering strongly, as attractive LNG prices are prompting higher LNG imports.
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