Record production, ample inventories in storage and relatively mild weather conditions led to a nearly 40% fall in average Henry Hub prices for U.S. natural gas in 2023, pressuring margins for LNG firms such as Cheniere.
The price weakness also prompted Chesapeake Energy (CHK.O), opens new tab - soon to be the biggest U.S. gas producer after its merger with Southwestern Energy (SWN.N), opens new tab - to cut its 2024 production plan by roughly 30% on Tuesday.
Cheniere expects adjusted core profit between $5.5 billion and $6 billion for 2024, about 35% lower from the previous year at mid-point and below analysts' expectations of $6.2 billion, according to LSEG data.
Cheniere shares were down 3.7% at $158.51 on Thursday afternoon.
Cheniere is the biggest U.S. buyer of gas and the biggest U.S. exporter of LNG, with the capacity to produce about 45 million tons per annum (MTPA) of LNG at Corpus Christi and Sabine Pass in Texas.
Its quarterly profit fell 65% to $1.38 billion after LNG revenue nearly halved to $4.58 billion, primarily hurt by a decrease in Henry Hub pricing, on which the majority of its long-term LNG sales contracts is signed.
Cheniere signed several long-term LNG sales agreements with companies in 2023, including Foran Energy (002911.SZ), opens new tab and BASF (BASFn.DE), opens new tab.
The company's LNG volumes loaded for the quarter marginally rose to 615 trillion British thermal units (TBtu), compared with 600 TBtu last year.
The pause by the Biden administration on new LNG export permits to countries that do not have free trade agreements, so-called non-FTA countries, will not prevent Cheniere's plant expansion projects from progressing on time, its CEO, Jack Fusco, told analysts on a conference call.
He said Cheniere has been through studies similar to the Department of Energy reviews and he expects them to reach the same conclusion that use of LNG is in the best interest of the U.S. and the world.
The Biden administration's decision to pause was "appalling and shocking," Fusco said. He said LNG's benefits have been proven and that he looks forward to the comment period.
"I think this is politically motivated. Let the market determine which projects survive and which do not," Fusco said.
Cheniere expects continued growth in LNG demand from South Asia and Southeast Asia, according to Executive Vice President Anatol Feygin.
The company is also building new liquefaction trains at Corpus Christi that will add more than 10 MTPA of capacity between 2025-2027.
