UPDATE 1-Cheniere closer to expanding Texas LNG site after China deal

(Changes throughout, adds analyst’s comment, company comments and background)

Feb 9 (Reuters) – Cheniere Energy Inc has signed a deal to sell liquefied natural gas to China National Petroleum Corp (CNPC) from its Corpus Christi export terminal under construction in Texas, it said on Friday, moving Cheniere closer to a decision on whether to expand the site.

CNPC’s PetroChina International Co Ltd subsidiary will purchase about 1.2 million tonnes per annum (mtpa) of LNG under two agreements with a portion of the supply beginning in 2018 and the balance in 2023, Cheniere said in a statement.

“We expect these agreements to support the development of Corpus Christi Train 3, and we are now focused on completing the remaining necessary steps to reach a final investment decision later this year,” Jack Fusco, Cheniere’s president and CEO, said in a statement.

The agreements continue through 2043 for the purchase of LNG indexed to the U.S. natural gas Henry Hub benchmark price plus a fixed component.

Cheniere operates the only big LNG export facility currently operating in the United States at Sabine Pass in Louisiana.

In addition to the four 0.7-billion cubic feet per day (bcfd), or 4.5-mtpa, liquefaction trains at Sabine Pass, Cheniere has two 0.7-bcfd units under construction at Corpus Christi and one at Sabine Pass.

One bcfd can fuel about 5 million U.S. homes.

In addition, the company has other units that are fully permitted at both Corpus Christi and Sabine Pass that it plans to build once it obtains enough financial commitments.

The combination of the CNPC agreement and a 15-year deal announced in January to sell one mtpa to Swiss commodity trader Trafigura moves Cheniere closer to making a final decision on whether to build a third liquefaction train at Corpus Christi, analysts at U.S. financial services firm Cowen & Co said in a report.

“This could be enough visibility to final investment decision Corpus Train 3, as Cheniere will generate enough discretionary cash flow (about $4 billion) through 2021 to finance construction without project financing,” Cowen said, noting the third train would cost about $2.5 billion to build.

“The (China) contract announcement today is positive for the stock, as it brings growth into materially higher probability,” Cowen said.

Cheniere shares were up 3.7 percent at $55.09 near midday on Friday. The stock rose as high as $60.20 in January, its highest level since September 2015.

Reporting by Scott DiSavino in New York
Editing by Matthew Lewis



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