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Cheniere Energy in 2016: What's Driving the Bullish Sentiment?

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Part 2
Cheniere Energy in 2016: What's Driving the Bullish Sentiment? PART 2 OF 9

Will Cheniere Energy Have Positive Operating Cash Flow Soon?

Cheniere Energy’s operating cash flow

Cheniere Energy (LNG) is yet to generate positive operating cash flow. Its consolidated operating cash flow was -$88.7 million at the end of the first quarter of 2016 compared to -$14.2 million during the same period last year.

The situation is expected to improve in the coming quarters with the commissioning of its export cargo from Train 1 of the Sabine Pass Liquefaction Project. Train 2 is expected to be commissioned in the second half of 2016.

Will Cheniere Energy Have Positive Operating Cash Flow Soon?

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The above increase might be slightly offset by a decline in LNG (liquefied natural gas) imports and higher interest expenses. Cheniere Energy’s subsidiary Cheniere Energy Partners (CQP) provides regasification services for LNG imports.

According to the EIA (U.S. Energy Information Administration), LNG imports are expected to decline to 0.2 Bcf/d (billion cubic feet per day) in 2016 compared to 0.25 Bcf/d in 2015.

Dominion Midstream Partners (DM), Kinder Morgan (KMI), and Energy Transfer Equity (ETE) are among the midstream companies that provide regasification services. They’re expected to be negatively impacted by a decline in LNG imports.

Cheniere Energy’s capital expenditures

In 2015, Cheniere Energy spent ~$6.9 billion mainly on capital projects. That was 58.7% higher than what the company spent in 2014. In 2016, Cheniere Energy is investing in Trains 3–5 at the Sabine Pass Terminal and Trains 1–2 at the Corpus Christi LNG Terminal.

Cheniere Energy Partners has plans to construct six liquefaction trains at the Sabine Pass Terminal facility. Each will have a production capacity of 4.5 mtpa (million tons per annum). Construction of the first two trains at Sabine Pass is almost complete. Trains 3 and 4 combined are 83.8% complete and are expected to come online in 2017. Train 5 is ~28.8% complete and is expected to come online in 2019. Train 6 has received approval from the United States Department of Energy, but the FID (Final Investment Decision) is still pending.

Apart from the Sabine Pass Terminal, Cheniere Energy is developing an LNG export terminal at Corpus Christi. In stage 1 of the project, Cheniere Energy started developing Trains 1 and 2, each with a production capacity of ~4.5 mtpa.

Next, let’s see what Cheniere Energy’s current leverage indicates.

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