Cheniere Energy Initiates Work Under KOGAS LNG Supply Deal

U.S.-based natural gas exporter Cheniere Energy, Inc (NYSE:LNG) recently commenced work under its long-term supply contract with South Korean natural gas utility Korea Gas Corporation , aka, KOGAS. The first shipment – loaded on Jun 3 – is in transit from Sabine Pass to South Korea’s Tongyeong and is likely to arrive on Jul 1.

The 20-year supply contract, inked in Jan 2012, aims to supply U.S.-sourced LNG from the Sabine Pass Liquefaction facility in Louisiana to KOGAS. Per the deal, Cheniere Energy is expected to deliver about 3.5 million tons of LNG per year which is 10% more than South Korea’s total annual demand.

South Korea depends heavily on Middle Eastern countries including Oman and Qatar for its import requirements through state-run KOGAS. The country is the second-largest LNG importer in the world due to the paucity of domestic resources to meet its energy demands. Further, post the election of Moon Jae as the President of the nation, the country is likely to make a shift to natural gas and other renewable sources of energy as opposed to coal and nuclear power. As such, the 20-year sales and purchase agreement will enable KOGAS to position itself better to capitalize on the transition policy. KOGAS intends to import 1.5 million tons of natural gas this year, increasing the South Korea’s imports to 36 million tons.

KOGAS, being the largest buyer of natural gas in South Korea, is also in talks with Cheniere Energy to acquire additional capacity for the commercialization of its two liquefaction trains.

With the energy production boom in U.S., the nation is likely to become the world’s largest LNG supplier by 2035, transcending Australia and Qatar. Cheniere Energy, which is the only LNG exporter of U.S., is expected to ship 200 LNG vessels this year. The company exports natural gas to around 20 countries. The gas contract with KOGAS is likely to generate over $548 million of revenues for Cheniere Energy per year.

Zacks Rank & Key Picks

Cheniere Energy is primarily engaged in liquefied natural gas-related businesses. The company owns and operates the Sabine Pass liquefied natural gas terminal in Louisiana through its 57.9% ownership interest in and management agreements with Cheniere Energy Partners, L.P. (NYSE:CQP) .

The company, under the Zacks categorized Oil and Gas - United States - Exploration and Production industry, carries a Zacks Rank #3 (Hold).

Cheniere Energy, Inc. Price

Cheniere Energy, Inc. Price | Cheniere Energy, Inc. Quote

Some better-ranked players in the same industry include Viper Energy Partners LP (NASDAQ:VNOM) and W&T Offshore, Inc. (NYSE:WTI) . While Viper Energy sports a Zacks Rank #1 (Strong Buy), W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Viper Energy Partners delivered a positive earnings surprise in each of the trailing four quarters, the average being 20.35%.

W&T Offshoredelivered a positive earnings surprise in each of the trailing four quarters, the average being 69.21%.

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