Cheniere Energy Partners Earnings: Excess Marketing Profits Mean Secure Distribution for Now

Cheniere Energy Partners’ CQP third-quarter results met our expectations. After updating our model, our $52 fair value estimate and wide moat rating are unchanged. Our near-term EBITDA estimate fell slightly to $3.9 billion in 2023 EBITDA compared with the past quarter as we refreshed it for current market spreads. Cheniere Energy Partners also maintained its midpoint of about $4.12 in 2023 distribution payouts. This distribution is made up of a base distribution of $0.775 and a variable distribution of $0.255 per unit per quarter. The 2024 distribution will be reevaluated in February 2024 after discussions with Brookfield, Blackstone, and the board of directors. However, management suggested that the distribution could be increased to closer to $5 per unit over time as new Sabine Pass expansions obtain final investment decisions.

The LNG market continues to be very volatile, with gas prices reacting significantly to any perceived supply disruptions. Areas of concern include unexpected nearly 50% declines in piped Norwegian gas to Europe following unplanned maintenance, concerns regarding Australian LNG strikes, and recent leaks at the Baltic Connector pipeline connecting Finland and Estonia. While EU gas consumption is down, LNG imports to EU are also down about 7% year over year, offset by higher Asian demand, which was up 4% over the same time frame. This demand is primarily China-driven, where demand was up 21% due to a recovery in gas-fired power generation.