The Country Caller explains why investors should consider Cheniere Energy shares for the long term
Liquefied natural gas company Cheniere Energy, Inc. (NYSEMKT:LNG) reported a net loss of $298.4 million for its second quarter earnings, almost doubling the $118.5 million loss it reported for the same quarter last year. However, The Country Caller believes this would not drastically hamper investor confidence in the stock, as the company has finally yielded revenues from its commercial operations.
The company started burning cash at a fast pace, when it began developing export facilities at Louisiana, Sabina Pass and Corpus Christi, and had to report substantial losses. In addition, its debt also kept piling up as it had no commercial operations and was engaged in developing LNG trains.
However, earlier this year, the company began its LNG shipments from Sabine Pass, leading it to report its first commercial revenue of $110.7 million from LNG sales. Last year, the company had reported a net loss amounting to $706 million.
The revenue commencement marks a key milestone for the company, as it signals the hard times are finally over as the company has now entered into the earnings phase. In addition, revenues for the company are expected to grow over time.
Even in 3QFY16, investors can expect the revenues to be higher. This is because 2QFY16 reflected sales from only five weeks as the train began its operations on May 26. However, the company has plans to shut down Train-1 for maintenance later in September, which would ultimately improve revenues further.
Moreover, the company’s second LNG Train also commenced production in June. As per Cheniere’s expectations, revenue through shipments could be realized as early as next month. Hence, the 3QFY16 and 4QFY16 revenues have the chance to soar even higher.
In the long run, the company plans to build about five trains from the Sabine Pass which could produce around 4.5 million tons a year of LNG on a cumulative basis. Later in 2019, the company also expects two trains to be constructed at its Corpus Christi.
The demand for LNG is also secure, as the company stated that it has already made contracts for 87% of its overall capacity at two of its LNG terminals. Hence, The Country Caller continues to remain bullish on Cheniere Energy’s long-term growth prospects.