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Cheniere Energy Rallies on US-China LNG Trade Deal

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Cheniere Energy’s market performance

Cheniere Energy (LNG), the first company to start LNG (liquefied natural gas) exports from the lower 48 US states, rallied ~3.3% on Friday, May 12, 2017. It followed the US (SPY) (SPX-INDEX) trade deal with China to open Chinese markets for more LNG exports from the United States.

That same day, the Alerian MLP ETF (AMLP), which is comprised of 25 energy MLPs, fell ~0.20%. Cheniere Energy is expected to benefit from higher LNG exports to China. According to the company, it had “extensive negotiations with the Chinese over the last month.”

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Who benefits from the deal?

The deal is also expected to benefit other players pursuing LNG projects, including Kinder Morgan (KMI) and Dominion Energy (D). US liquefaction capacity is expected to rise significantly in the coming years with six LNG facilities under construction.

Cheniere Energy has risen 17.6% since the beginning of 2017. Cheniere Energy Partners (CQP), Cheniere Energy’s MLP subsidiary that owns the Sabine Pass assets, has risen 10.4%. However, Cheniere Energy and its two subsidiaries are still trading below the levels before the rout in energy prices.

AMLP has fallen 3.0% YTD (year-to-date). Cheniere Energy has outperformed AMLP by 20.6%, which could be attributed to its stable cash flow stream from contracted liquefaction trains. Uncertainty prevails in the midstream sector considering the current volatility in crude oil prices.

The company might also benefit from an expected boost in LNG exports under the Trump administration. The current government is bullish on LNG exports since that’s expected to create many US jobs.

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