With LNG Demand Soaring, Cheniere Beats its Own Cargo Record
Cheniere Energy, the leading U.S. LNG terminal operator, set a new record for export volume in the first quarter of the year - and posted a surprising loss, despite soaring prices.
In an investors call, CEO Jack Fusco said that Cheniere shipped 160 cargoes of LNG in the first three months of 2022, more than it ever has before. About 75 percent of that cargo went to Europe, reflecting both higher prices in the EU and the national-security priority to ensure an alternative to Russian gas supplies for America's NATO partners.
Though it posted higher margins on its cargoes, a higher volume of shipments, and higher underlying earnings than expected by analysts, Cheniere still posted a large loss. In attempting to control commodity risk, the company made an ill-timed bet on LNG price derivatives, resulting in "approximately $3.1 billion of non-cash unfavorable changes in fair value attributed to positions indexed to such prices." This trading loss led to an overall quarterly loss of -$3.41 per share ($865 million), far below analyst expectations of positive earnings of about $3.50 per share.
Going forward, however, Cheniere expects an excellent year ahead. It predicts that the global LNG market will show "sustained strength" in 2022 and that its own production will rise to meet soaring demand. It has raised its earnings guidance for the full year by 17 percent.
“The current volatility in the global energy markets signals the need for additional investment in new LNG capacity, underscoring the power of the Cheniere platform," Fusco said.
In keeping with its expectations of continued growth, Cheniere announced Wednesday that it has signed a deal with Canadian producer ARC Resources to purchase 0.85 million tonnes per annum (mtpa) of gas for its Corpus Christi Stage III expansion project.
The 15-year deal will be sealed after Cheniere makes a final investment decision on Corpus Christi Stage III, which would add 10 mtpa of capacity to Cheniere's massive (and growing) production portfolio.