LNG giant navigates rough seas with calm
The liquefied natural gas industry is facing its biggest challenge in years, but the Houston LNG exporter Cheniere Energy is forging ahead after a strong 2019 for the pioneering company.
Shutdown orders related to the coronavirus pandemic have cut global demand for energy and forced the cancellation of 130 LNG cargoes at the six export terminals in the United States since April, according to the research firm S&P Global Platts.
With Cheniere handling 80 percent of U.S. LNG exports, analysts suspect the company absorbed most of the cancellations.
Cheniere does not comment on individual cargoes. But CEO Jack Fusco reminded investors during a conference call in April that the company has long-term contracts with buyers. Those contracts, he said, allow the company to still make money on canceled cargoes.
“One of the primary flexibilities granted to our long-term customers within their contracts is their right to cancel or suspend cargoes with appropriate notice,” Fusco said. “In instances where that occurs, the fixed liquefaction fee is still paid to us.”
Cheniere, which shipped the first LNG cargo from the lower 48 states in 2016, is the leader in the burgeoning U.S. industry. Cheniere ranked No. 6 on the Houston Chronicle’s list of the region’s top performing 100 public companies.
Cheniere’s profits last year rose nearly 40 percent to $648 million from $471 in 2018. Revenues climbed more than 20 percent to $9.7 billion from $8 billion the previous years. The company returned earnings per share of $2.51 to investors in 2019, roughly 32 percent higher than the $1.90 the previous year.
Cheniere shipped its 1,000th cargo in February, only weeks before the coronavirus pandemic took hold in the United States and sent energy demand and prices tumbling. Cheniere, however, views the drop in LNG demand for as temporary and expects a return to previous growth projections, particularly in Asia and Europe, after the pandemic ends.
In the meantime, Cheniere is taking precautions to protect its workers. It ordered most office employees to work from home while adopting stricter safety protocols for master control operators and crews at LNG plants.