Cheniere Energy, Inc. (LNG) stock intrinsic value fair value estimate & owner earnings analysis

Cheniere Energy buys natural gas in the United States, liquefies it at its Sabine Pass (Louisiana) and Corpus Christi (Texas) plants, and ships it overseas. About 90% of expected output into the mid-2030s is sold under long-term contracts with roughly 15 years of average life remaining at the end of 2025. Most contracts pay a fixed fee whether or not the cargo is taken plus a variable charge that passes through the gas cost, so Cheniere earns a toll-like fee rather than a commodity spread. That contracted base is what we value; the uncontracted remainder and the eventual expiry of the contracts are where the risk sits. How earnings are measured: reported profit swings with non-cash derivative marks (first-half 2026 net income attributable to shareholders was a $434 million loss even though the second quarter alone earned $3.1 billion), so we use cash flow. From operating cash flow we remove working-capital swings, deduct stock compensation and deduct capital spending other than growth spending. On that basis owner earnings were $5.6 billion in 2023, $2.5 billion in 2024 and $3.9 billion in 2025 ($17.81 per share). Adding back cash interest paid to lenders ($1.08 billion in 2024, $0.84 billion in 2025), the business itself generated roughly $3.5 billion and $4.8 billion after all capital spending in those two years, and about $6.6 billion a year before capital spending that was mostly for new trains. First-half 2026 operating cash flow was $2.66 billion against $2.06 billion a year earlier, with $1.92 billion of capital spending, consistent with that level; we have not raised it on one half-year. Normal level: we use 2024-2025 and leave out 2022-2023, which carried the post-invasion European gas-price spike that has since reversed. Because Cheniere expenses major plant maintenance and its capitalized spending has been mostly construction, we charge about $0.6 billion a year of upkeep once current projects finish; that figure is our judgement, as the company does not disclose an upkeep number. Business cash flow before upkeep and normal taxes is about $6.6 billion a year in the base case. Growth check: business cash flow rose about 34% in 2025; the growth we credit for 2027 adds well under that. Growth we credit, because it is paid for and under way: the remaining Corpus Christi Stage 3 trains (more than 98% complete by mid-2026; Train 6 reached substantial completion in June 2026 and Train 7 was in commissioning), and Midscale Trains 8 and 9 (about 5 million tonnes a year, more than 48% complete, expected second half of 2028). The Department of Energy granted the non-FTA export approval for Trains 8 and 9 on 26 February 2026, which removes the main uncertainty in our previous bear case. We credit about $85 million a year of cash flow per million tonnes of new capacity, set below what the existing plants earn per tonne. Left out: the Sabine Pass expansion (a $4.7 billion construction contract was signed in 2026 but no final investment decision has been taken and approvals are pending), the Corpus Christi expansion, any rise in LNG prices, market share gains and future buybacks. Taxes: Cheniere paid almost no net cash tax in 2025 ($32 million) and $30 million in the first half of 2026, sheltered by accelerated depreciation and modest remaining loss carryforwards. We charge normal cash tax of $0.6 billion a year from 2029 in the base and bull cases and $1.05 billion in the bear case. Debt and outside owners: at 30 June 2026 long-term debt was $22.6 billion plus $1.4 billion due within a year, finance leases were $1.4 billion and cash was $1.1 billion. In the second quarter Cheniere Partners issued $1.75 billion of notes due 2036 and 2056 and used the proceeds to retire $1.5 billion of Sabine Pass notes due 2027, pushing maturities out. The debt carries an average cost of roughly 5% on mostly fixed rates, which lowers its burden by about $1.4 billion, giving net debt of about $23.2 billion. Outside unitholders of Cheniere Energy Partners, which owns Sabine Pass, received about $0.8 billion in 2025; we value their claim at about $8.6 to $11.1 billion depending on the case. The Corpus Christi financing restricts distributions unless a 1.25 times coverage test is met; in every case cash flow stays several times the roughly $1.1 billion annual interest bill. Base case ($188 per share): business cash flow of about $5.6 billion in 2027 rising to about $6.3 billion a year from 2028 as the new trains come online, after upkeep and normal taxes. Contracts run off evenly from 2035 to 2050 (the export authorizations run to 2050) and expiring volume earns half of today's margin, because new capacity is still being sold on long-term terms. Nothing is credited after 2050. The business is worth about $71.9 billion, it owes about $23.2 billion, the outside owners' claim is about $9.4 billion, leaving about $39.3 billion, or $188 per share on 209.5 million diluted shares. Bear case ($72 per share): starts from the weaker 2024 level (about $5.8 billion before upkeep), credits only $75 million per million tonnes of new capacity, and takes $1 billion a year off cash flow from 2027 to 2030 for a downturn of the kind the LNG trade saw in 2015-2016 and 2020, when buyers cancelled cargoes and Cheniere earned only its fixed fees with no marketing margin. Cash tax is $1.05 billion from 2029, contracts start rolling off in 2033 and expiring volume earns a quarter of today's margin. The business is worth about $46.9 billion, it owes about $23.2 billion and the outside owners' claim is about $8.6 billion, leaving about $15.1 billion, or $72 per share. Bull case ($282 per share): starts from about $7.3 billion, the stronger 2025 level, credits $100 million per million tonnes of new capacity, and replaces expiring contracts at today's margin through 2050. The business is worth about $93.4 billion, it owes about $23.2 billion and the outside owners' claim is about $11.1 billion, leaving about $59.1 billion. Margin of safety price ($80): we are fairly sure of the earnings level for the next decade because most of it is fixed fees from investment-grade buyers under contracts with about 15 years left, though not of the uncontracted margin, which swung from $5.6 billion of owner earnings in 2023 to $2.5 billion in 2024. The worst plausible outcome is a long glut of global LNG supply in the 2030s that leaves renewing customers paying far lower fees, compounded by roughly $24 billion of debt; the debt is long-dated, mostly fixed-rate and well covered, so the structure survives a downturn, but most of the value beyond 2035 could disappear, which is what the bear case shows. If we are wrong on the post-2035 contract renewals and the size of normal cash taxes, the shares are worth roughly the bear figure. At the margin-of-safety price of $80 the shares are roughly covered by the bear case, on a business that pays a dividend and spends heavily on buybacks during the holding period, and if value moves only partway to the base case over about five years the base case implies more than 20% a year; above that price, a few years at the bear outcome would not support that return. Change since our previous estimate (29 September 2026: $69 bear, $163 base, $248 bull): the Department of Energy approval for Midscale Trains 8 and 9, which the previous bear case treated as pending, was in fact granted in February 2026, so the bear case now credits those trains; we also lifted the starting level slightly toward 2025's cash flow, which the first half of 2026 supports, and added an explicit LNG downturn to the bear case. Debt refinancing in 2026 pushed the 2027 Sabine Pass maturities out. Reported earnings will remain very volatile, and the split between upkeep and growth capital spending could not be confirmed from the filings.