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America’s LNG Giant Cheniere Reports Unexpected Loss

Houston-based Cheniere Energy Inc reported an unexpected Q1 loss, but bumped its full-year profit forecast by 17% in its earnings release Wednesday, on the back of soaring LNG demand and natural gas prices.

The largest LNG exporter in the United States, Cheniere reported earnings up to $8.7 billion before interest, taxes, depreciation and amortization. That represents a $1.2-billion increase over analyst estimates from Bloomberg.

“Today we are raising our 2022 financial guidance due to the sustained strength in the global LNG market and an increase in expected LNG production,” CEO Jack Fusco said. “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.”

Despite the stellar guidance, Cheniere’s reported a net loss of $865 million ($3.41 per share) for the quarter, compared with a profit of $393 million ($1.54 per share) in the same period a year ago.

Analysts had been expecting the reverse–earnings of $3.51/share.

According to Cheniere, the company lost significantly on commodity derivative instruments indexed to international LNG prices and LNG margins were not enough to offset the loss.

“While operationally we seek to eliminate commodity risk by utilising derivatives to mitigate price volatility for commodities procured or sold over a period of time, as a result of the significant appreciation in forward international LNG commodity curves during the quarter, we incurred approximately $3.1bn of non-cash unfavorable changes in fair value attributed to positions indexed to such prices,” Cheniere said.

Earlier on Wednesday, investors responded to the unexpected results by focusing on the full-year guidance, sending shares soaring over 6%, then retracing those gains by later in the afternoon. At the time of writing, Cheniere shares were trading up nearly 3% at $144.58 as investors digested the earnings detail against the full upwardly revised guidance.

Investors are more likely to respond to guidance for the company that also has the second-largest LNG facility in the world, after QatarEnergy given the push now to export large volumes to Europe to help the European Union reduce dependence on Russia.

Cheniere produced approximately 75% of LNG delivered to Europe in Q1 this year, up from 38% it delivered in the same quarter last year. 

By Charles Kennedy for Oilprice.com

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