Whenever a company or an individual acts on a vision of the future, there are usually pessimists who say that because something is what it is now, it will always be that way. They are the ones who said the internet was a fad, that mobile connectivity wasn’t practical, then that bitcoin at $250 was laughable and unsustainable. These unimaginative people create an environment where it is difficult for companies to make bold decisions, even when they clearly see a trend in their own industry.
We should celebrate those who do make those tough calls, put their money where their mouth is, and commit to a massive investment in the future. And we should especially celebrate those who get it right.
Take Cheniere Energy (LNG), for example. When it was founded in 1996, Cheniere was set up to import liquefied natural gas to the U.S., warm it to return it to its gaseous state, then distribute it via pipeline around the country. Around ten years ago, they began to see that as fracking technology opened up previously inaccessible reserves of gas here in the U.S., that flow would reverse.
America had never really been an exporter of natural gas, certainly not in liquefied form, so in 2010, when Cheniere announced plans to add a liquefaction plant and export terminal to their facility at Sabine Pass, Louisiana, the naysayers came out in force.
The stock was under pressure at that time, spending most of the year below $3; conventional wisdom said that Cheniere was crazy. They had an import and regassification facility that had been operational for only a couple of years, and now, here they were, talking about moving gas in the opposite direction. To understand how that story ended, you have only to look at the chart for LNG since 2010:
You might look at that chart and conclude that any value that was in LNG has long since been accounted for, but that isn’t the case. Their bravery a decade ago continues to pay dividends, and a story that broke this morning that may have escaped your attention suggests that they are in for another surge in business next year.
President Biden and the UK Prime Minister announced a deal last night that will increase the amount of natural gas that the U.S. sells to the U.K. substantially over the coming months. That makes sense given that the U.K. is, like the E.U., moving as quickly as they can away from dependence on Russian exports of gas, and it fits with the idea that energy resources are a tool in geopolitics as much as they are practical commodities.
Whatever the motivation for the deal, the end result is more exports of U.S. natural gas, and Cheniere, which added another liquefaction plant and terminal in Corpus Christi, Texas, will inevitably be the beneficiary.
This year, the U.S. officially became the world’s largest exporter of natural gas, according to this EIA report, but those exports currently run through only seven export terminals, with Cheniere owning and operating two the top four of those. They will be expanding their capacity soon at their Corpus Christi facility and will be an important factor in satisfying the increased demand for American LNG that the new deal will cause.
There are a lot of plans for other facilities, as you might expect given the profitability of those currently in operation, and at some point, the pendulum will swing to where the supply of liquefaction and export plants outstrips the demand for their services. These things take many years to build, though, so for now, Cheniere can continue to reap the benefits of their “craziness” back in 2010 and their stock can continue to climb as a result.
* In addition to contributing here, Martin Tillier works as Head of Research at the crypto platform SmartFI.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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