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Surging Asian winter LNG demand spurs Cheniere to boost 2018 guidance

Surging Asian LNG demand over the winter boosted Cheniere Energy Inc.'s 2017 results and prompted the company to raise financial expectations for 2018, executives said on a fourth-quarter 2017 earnings call.

The company said its marketing arm, Cheniere Marketing Ltd., has produced better-than-expected profit margins as booming Asian LNG demand drives spot prices higher.

"We've seen higher LNG spot market prices and prices remaining higher for longer during the winter season," Cheniere CFO Michael Wortley said on the company's Feb. 21 earnings call. "Given that approximately 40% of the volumes expected to be available to our marketing function from Sabine Pass for 2018 are forecast in the first quarter, we have improved visibility into what marketing can deliver for the full year."

Cheniere Marketing has had access to an increased volumes of LNG produced at the Sabine Pass export terminal ahead of the start of a contract with GAIL (India) Ltd. for volumes from train 4, which reached substantial completion in October 2017. In the fourth quarter, 60% of volumes produced at Sabine Pass went to long-term customers, while the rest fell to Cheniere Marketing for sale on the spot market.

Cheniere raised its consolidated adjusted EBITDA guidance for 2018 to a range of $2.0 billion to $2.2 billion, from $1.9 billion to $2.1 billion.

Executives attributed much of the strong Asian demand to China, which CEO Jack Fusco is showing signs of longer-term appetite for natural gas as the country seeks to clean up its air. "We saw that it was a structural change in China that wasn't dependent on weather," Fusco said. "So, yes, it was cold in China and in Asia overall, but that's not what was driving the higher LNG prices and China's demand for LNG."

Earlier in February, Cheniere announced that affiliates Cheniere Marketing International LLP and Corpus Christi Liquefaction LLC, the division developing the company's second LNG export terminal, had signed two contracts with PetroChina International Co. Ltd., a subsidiary of the state-run China National Petroleum Corp., or CNPC. Fusco on the earnings call said the company recently signed a third contract with CNPC but declined to give details on the terms of the agreement.

Those contracts, along with another signed in January with trading company Trafigura Pte. Ltd., bring Cheniere closer to reaching a final investment decision on a third liquefaction train at its Corpus Christi terminal. Fusco said the company believes it has "enough contracts to commercialize train 3" and expects a decision "in the next few months."

Fusco stood by Cheniere's previous statements that an LNG leak from one of its storage tanks at Sabine Pass and a vapor release from a second tank at the facility have not affected production after federal regulators ordered the tanks to be removed from service. Fog along the U.S. Gulf Coast, however, has caused ports to shut down, Fusco said, which has limited customers' ability to load tankers at the terminal. He said the company "opportunistically" planned maintenance to take place during the closures.