Cheniere Energy Inc. unveiled its new capital allocation plan after achieving the prior plan ahead of schedule. The company’s new “20/20 vision” forecasts over $20 billion of available cash through 2026, over $20 per share of run-rate distributable cash flow and a $4 billion share repurchase authorization.
With the new plan Cheniere aims to maintain its “investment-grade credit metrics through cycles, further return capital to shareholders over time, and continue to invest in accretive organic growth,” the company said Sept. 12 in a press release.
Revelation of the plan comes after the company reached a “new cash flow inflection point,” it said. The new plan supports its efforts to “ensure the long-term success and sustainability… while creating and delivering substantial long-term value” to its stakeholders.
“Our new ‘20/20 vision’ is designed to return significant capital to shareholders, while solidifying investment-grade credit metrics and pursuing accretive growth of our platform within our disciplined capital investment parameters,” Zach Davis, Cheniere’s executive vice president and CFO, said in the release.
As a result of strong financial performance, Cheniere is boosting its consolidated adjusted EBITDA and distributable cash flow guidance to $11 billion-$11.5 billion for 2022 compared to $9.8 billion-$10.3 billion earlier and $8.1 billion-$8.6 billion compared to $6.9 billion-$7.4 billion respectively. The changes are primarily due to “a change in the expected timing of several cargoes accelerating into 2022 which were previously forecast for 2023 as well as sustained higher margins on LNG throughout 2022,” the company said.
The company is also eyeing further debt reduction, after achieving its initial $4 billion debt reduction target. Under the new plan Cheniere aims to achieve long-term leverage of approximately 4 times while maintaining investment-grade credit metrics through the construction cycle of Corpus Christi Stage 3 Liquefaction Project (CCL Stage 3).
The company’s share program is for an additional three years with potential to repurchase approximately 10% or more of the company’s market cap with excess capital. The company also looks to reduce its cumulative debt paydown to share repurchase allocation ratio to 1:1 compared to 4:1.
Houston-based Cheniere also plans to boost its dividend by approximately 20% this quarter to $1.58 per common share on an annualized basis compared to an inaugural $1.32 per common share dividend initiated last year. Through the construction phase of CCL Stage 3, the company aims to boost the future growth rate of its dividend to approximately 10%.
“We view protection of the balance sheet positively and anticipate an investment-grade credit rating will be obtained across the complex in the coming months,” Tudor, Pickering, Holt & Co. (TPH) said Sept. 13 in a research note to clients. “We see the company missing an opportunity here to use excess free cash flow to attract more new shareholders to the story by making the dividend story more compelling versus the S&P and midstream peers,” TPH added.
Cheniere currently boasts total LNG production capacity of approximately 45 mtpa in operation. A dramatic rise in capacity is forecast over the near and long term through development of additional brownfield expansion and debottlenecking opportunities.
Near-term liquefaction growth will be driven by CCL Stage 3 Trains 1-7 with first LNG expected in late 2025 and CCL Midscale Trains 8-9. Collectively the project will add around 15 mtpa and take Cheniere’s capacity to about 60 mtpa. Thereafter, longer-term growth will be driven by the SPL expansion and CCL Stage 4 which will push capacity up another notch to around 90 mtpa, the company revealed in a separate investor presentation on its website.
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