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Morningstar | Cheniere's 1Q Meets Expectations; Reaffirms 2019 Guidance

Cheniere reported first-quarter results that met our expectations and reaffirmed 2019 EBITDA guidance of $2.9 billion-$3.2 billion in EBITDA, in line with our $3.2 billion forecast. We plan to maintain our fair value estimates and wide moat ratings for the Cheniere entities. The more interesting insights may come in a few weeks, when Cheniere provides an update on its capital-allocation policy with expected leverage, growth, and capital return targets. For now, Cheniere's trains under construction are on track and budget, and Cheniere also obtained a positive environmental assessment from the Federal Energy Regulatory Commission for the Corpus Christi 3 as well as issued a notice to proceed for its Midship pipeline. Incremental liquefied natural gas demand this quarter was driven by Europe instead of Asia, which has historically been the main driver. The flip in demand was driven by mild weather and high LNG storage inventories in Asia, though we don't expect Asia demand to be curtailed for long. Long-run LNG demand from Asia, particularly China, will be driven, in our view, by the shift toward gas for reasons related to environmental policy. The inability of China to procure enough gas from other areas (import pipelines, domestic production) to meet domestic demand means the gap must be filled with LNG, primarily U.S. LNG.

For more on our LNG forecast for China, please see our Energy Observer published in November 2018, "China Oil & Gas Demand: Above-Consensus Forecasts for Medium-Term Growth, but Electric Vehicles Loom Large for Oil."