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What Could Drive Cheniere Energy’s Performance in 2019?

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Dec. 20 2018, Published 1:26 p.m. ET

Cheniere gets another long-term contract

Cheniere Energy (LNG) stock has fallen more than 15% since October. The stock has mirrored the weakness in broader markets. On December 18, Cheniere Energy announced its agreement to sell liquified natural gas to Malaysia-based Petronas for 20 years. State-owned Petronas is expected to buy 1.1 million tonnes of liquefied natural gas per year with a purchase price indexed to the monthly Henry Hub price plus a fee.

After delivering a strong performance in the third quarter, Cheniere Energy’s management raised its adjusted EBITDA guidance to $2.45 billion–$2.55 billion for 2018, which implies an increase of 44% YoY (year-over-year).

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Revenue growth

Cheniere Energy has signed several long-term contracts in 2018, which will likely facilitate earnings predictability and stability over a longer period.

In September, Cheniere Energy signed a 15-year agreement to supply 0.7 million tonnes of liquified natural gas per year to Vitol Group. In August, Cheniere Energy announced its deal with CPC to sell ~two million tonnes of liquefied natural gas per year for 25 years. Earlier in 2018, the company signed a 15-year agreement to sell liquified natural gas to Trafigura—a European commodities trader.

Cheniere’s top line showed notable growth YoY despite ongoing trade disputes between the US and China. For the nine months ending on September 30, Cheniere Energy’s revenue growth was 45%, while its consolidated adjusted EBITDA increased 55% compared to the same period last year.

According to analysts’ estimates, Cheniere Energy’s revenue growth is expected to slow down in 2019—compared to 2018. Increasing interest rates in the United States, diminishing effects of the tax rates, and slowing global economic growth could hamper Cheniere Energy’s growth in 2019.

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