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Could Cheniere Energy Outperform AMLP in 2018?

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Cheniere Energy’s market performance

Cheniere Energy (LNG) had a weak start to the month. However, it has bounced back since then. Overall, the LNG (liquefied natural gas) exporter has gained 2.8% in December 2017.

The recent gain in Cheniere Energy’s stock price could be mostly attributed to strong gains in Asian LNG price. These gains were driven by supply disruptions in Europe and strong demand from the Asian markets, particularly China.

At the same time, Cheniere Energy’s MLP subsidiary, Cheniere Energy Partners (CQP), has risen 5.0% while Cheniere Energy Partners LP Holdings (CQH) has lost 2.6%. CQH owns the GP (general partner) of CQP.

Cheniere Energy’s YTD performance

Cheniere Energy is up ~20% since the beginning of 2017. The company has remained in positive territory for most of 2017. Cheniere Energy’s huge YTD (year-to-date) gains in 2017 could be attributed to several factors:

  • timely completion of its projects
  • boost to LNG exports under the Trump administration
  • a rise in spot LNG demand from Asian and emerging markets
  • US tax reforms

Cheniere Energy is expected to benefit from the US tax cuts.

Cheniere Energy is outperforming both the Alerian MLP ETF (AMLP) and the Energy Select Sector SPDR ETF (XLE), which serves as a benchmark for US energy sector. AMLP and XLE have lost 13.9% and 8.1%, respectively, in 2017 year-to-date.

Cheniere Energy is outperforming AMLP and XLE by 3,400 basis points and 2,800 basis points, respectively. The trend is expected to continue in 2018 considering Cheniere Energy’s stable cash flow stream from LNG shipments while uncertainty prevails in US drilling activity amid volatility in commodity prices.

Series overview

In the series, we’ll look into the US LNG exports, Cheniere Energy’s recent operating performance, 2018 guidance, and financial position. We’ll also look into its valuations, technical indicators, and analyst ratings.

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