Cheniere Energy Inc. (LNG) Update - Oct 20

[dan_s]

Notes below are from BofA Equity Research
LNG is currently trading at $106 this morning

Valuation of Cheniere Energy Inc. (NYSE: LNG): Raise Price Target to $123, reiterate Buy
We raise our PO to $123 from $105. We forecast an improving commodity environment helps to materially de-risk shares, and we reduce the DCF discount rate to 5.0% from 6.0%, after applying a 1% company-specific discount to CAPM given Cheniere’s lower risk contracted profile and established position as an LNG developer. We maintain our $2.75/mmbtu ’23 marketing margin assumption but MtM our midstream multiple and raise our LT run-rate margin to $3.00/mmbtu on potential for a sustained global natural gas price rally. We reiterate our Buy rating based on a strong mgmt track record and execution.

2022 EBITDA: Est. $5.5-$5.8bn, +$200mn vs. run-rate
For 2022 we forecast an Adj. EBITDA guidance range of $5.5-$5.8bn (our estimate
raised to $5.61bn). While this is above our ’21 estimate of $4.85bn, recall that Cheniere
had provided run-rate 9-train guidance of $5.3-$5.7bn based on 4.9-5.1 mtpa per train
and $2.00-$2.50/mmbtu avg marketing margin. With Sabine Pass Train 6 (SP6) expected
to come online in 1Q22, we forecast significant upside with exposure to high winter gas
prices, and well above historical levels. We estimate Cheniere could have ~200 Tbtu of
volume exposure for 2022, prior to the year’s start. We conservatively estimate
~$200mn upside to the $5.5bn run-rate midpoint, after materially cutting the current
forward LNG prices on a weighted basis (see below for calcs) based on a run-rate
$2.25/mmbtu margin as a starting point. Given our conservatism, we believe we could
see upward revisions to initial guidance (in line with the mgmt’s historical tendencies in
strong/rising commodity env’ts). For 3Q21, we forecast $1.208bn Adj. EBITDA. Our
$4.85bn ’21 Adj. EBITDA estimate is at the high end of $4.6-$4.9bn guidance. While we
revised our ’21 est higher, we do not expect meaningful impact for 3Q with most of the
pricing gains seemingly in 4Q21. Below, we also provide our LNG spot margin estimates
for both 2021 and 2022. With the recent near-term pricing improvement, we see a
beneficial contracting backdrop for Corpus Christi Stage 3 (CCS3); ~4 mtpa is needed to
reach FID (Final Investment Decision), which mgmt has guided for 2H22.
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This caught my eye because their Sabine Pass Train 6 is one of two new LNG export facilities that is coming online in Q1, hopefully in January. The U.S. LNG export capacity will be over 12.5 Bcf per day by mid-Q1 and with Europe and Asia in a Bidding War for cargos it is a good bet that exports will remain high thru the winter.

[Fraser921]

What's it worth if Biden shuts down exports?

[dan_s]

Biden won't shut down LNG exports. He would loose all of his friends in Europe.