Cheniere Energy Partners, L.P. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparison is with Q1 2023. CQP owns and operates the Sabine Pass LNG export facility in Louisiana, with six operating trains and approximately 30 mtpa of capacity. The interim financial statements are unaudited.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $2.295 billion | $2.917 billion |
| Operating income | $875 million | $2.129 billion |
| Net income | $682 million | $1.935 billion |
| Net income per common unit | $1.18 | $3.50 |
| Operating cash flow | $669 million | $847 million |
| Capital expenditures, cash basis | $36 million | $89 million |
| Cash distributions paid | $720 million | $754 million |
Operating margin was approximately 38% versus 73%; net margin was approximately 30% versus 66%. These margins are substantially affected by commodity derivative fair-value changes. LNG volumes loaded and recognized as revenue increased to 417 TBtu from 403 TBtu.
Balance sheet and liquidity
- At March 31, cash and cash equivalents were $333 million and restricted cash was $59 million. Total available liquidity, including $1.728 billion of undrawn credit commitments, was $2.120 billion.
- Total debt was $15.882 billion, compared with $16.032 billion at year-end 2023. Long-term debt, net, was $13.616 billion; current debt, net, was $2.145 billion. SPL repaid $150 million of its 5.750% notes due 2024 in March; $150 million of those notes remained outstanding at quarter-end.
- Current assets were $1.103 billion and current liabilities were $2.948 billion. CQP and SPL reported compliance with debt covenants. Credit facilities had no borrowings outstanding; $728 million was available under SPL’s facility and $1.000 billion under CQP’s facility.
Material changes and unusual items
- Revenue fell $622 million, mainly because lower Henry Hub prices reduced revenue per MMBtu; higher production volume partly offset the decline. Excluding derivative effects, LNG revenue net of cost of sales was described as relatively consistent.
- Net income declined $1.253 billion. Management attributed substantially all of the decrease to a roughly $1.2 billion unfavorable year-over-year change in derivative fair-value gains and settlements. Derivative gains recorded in cost of sales were $55 million, versus $1.260 billion in Q1 2023; Tourmaline IPM-related gains were approximately $6 million versus $1.0 billion.
- Lower U.S. natural gas prices reduced feedstock costs by approximately $515 million, while lower LNG prices reduced cash receipts. Operating cash flow decreased $178 million year over year.
- Cash distributions paid in February were $1.035 per common unit for the prior quarter. On April 29, CQP declared a Q1 distribution of $0.810 per unit, comprising a $0.775 base and $0.035 variable component, payable May 15.
Outlook, risks and contingencies
- CQP is pursuing the SPL Expansion Project, with potential capacity of up to approximately 20 mtpa including estimated debottlenecking. In February 2024, subsidiaries applied to FERC for construction and operating authorization and to DOE for LNG export authorization. The filing says acceptable commercial and financing arrangements are needed before a positive FID; it provides no project FID or completion date.
- Approximately 85% of anticipated production was contracted under SPAs and IPM agreements, with about 14 years of weighted-average remaining contract life, excluding volumes tied to additional capacity beyond operating or in-construction facilities. Disclosed unsatisfied transaction price was $48.4 billion, with estimated weighted-average recognition timing varying by revenue category.
- Commodity derivatives had a net fair-value liability of $1.614 billion, largely Level 3 and valued using significant unobservable inputs. Management’s 10% natural-gas price sensitivity indicated a $351 million change in fair value. Derivative valuation and contractual/infrastructure uncertainties may cause substantial earnings volatility.
- Liquidity at SPL is subject to debt restrictions, including distribution conditions and a required debt-service coverage ratio. Other stated risks include commodity-market and counterparty exposure, project approvals and financing, and forward-looking estimates. The filing reports no material changes to previously disclosed risk factors or legal proceedings.
Most important facts for investors to verify
- Whether lower commodity prices and reduced derivative volatility persist, and how they affect realized LNG economics, cash flow and reported earnings.
- Remaining 2024 SPL note maturity funding or repayment plans, and the availability of cash across CQP and SPL’s separate capital structures.
- Progress on FERC and DOE approvals, commercial commitments, financing and FID for the proposed expansion.
- Derivative valuation assumptions, potential fair-value swings, and the actual cash and distribution capacity available under debt covenants.
- Customer concentration: five external customers each accounted for at least 12% of Q1 revenue; confirm ongoing receivable exposure and contract performance.