Analyst Note| Stephen Ellis |
Cheniere's first-quarter results were strong, as the firm benefited from Asian LNG pricing at record levels. The company boosted its 2021 EBITDA guidance for the second time this year to a midpoint of $4.45 billion from $4.25 billion, as it was able to lock in higher margins on marketing volumes for its uncontracted short-term capacity. We note with marketing margins well above $3 per mmBTU well above our long-term assumptions, we do not expect these margins to persist over the long run. With the stronger-than-expected cash flow, Cheniere expects to exceed its debt reduction target of $500 million this year. Cheniere has also locked in some of its short-term marketing capacity for 2022, and we'd expect to see more contracting take place as long as prices remain very high. Cheniere's and our assumptions around a midpoint of $5.5 billion in EBITDA when all nine trains are fully active are unchanged, which assumes lower long-run marketing margins. We will maintain our fair value estimates and wide moat ratings for the Cheniere entities while we incorporate these results into our models.
There were a number of other positive updates for the quarter. Cheniere moved up the time frame for Train 6 to be in service to the first half of 2022 from the second half of the year, continuing its track record of bringing complex projects in ahead of schedule. There were also no cargo cancelations from customers for the second quarter, a plus during the summer slowdown in demand, especially given the substantial number of cancelations that occurred last summer. Cheniere continues to make progress on a potential final investment decision for the modular 10 to 11 million tons per year (mtpa) Corpus Christi Stage 3 project. However, the delays here are now due more so to the fact that Cheniere has to contract an incremental 7 mtpa on its original trains due to its success in debottlenecking and optimizing per train production versus difficulty securing contracts due to market weakness.