Cheniere Energy Partners, L.P. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. CQP owns and operates the Sabine Pass LNG export terminal in Louisiana, with six operating trains and approximately 30 mtpa of capacity, plus the Creole Trail Pipeline.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $9.664 billion | $17.206 billion |
| Income from operations | $5.036 billion | $3.380 billion |
| Net income | $4.254 billion | $2.498 billion |
| Net income per common unit | $6.95 | $3.27 |
| Cash from operating activities | $3.109 billion | $4.149 billion |
| Cash used in investing activities | $227 million | $451 million |
| Cash used in financing activities | $3.247 billion | $3.676 billion |
- Operating margin was approximately 52% in 2023 versus 20% in 2022; net margin was approximately 44% versus 15%. These comparisons are affected by substantial derivative fair-value movements.
- LNG volumes loaded and recognized as revenue were 1,536 TBtu, up from 1,520 TBtu.
- At year-end, cash and cash equivalents were $575 million, restricted cash was $56 million, and available credit commitments were $1.720 billion, for total available liquidity of $2.351 billion.
- Total debt principal was $16.032 billion, with no borrowings under the revolving facilities; $300 million of SPL notes was current. Weighted-average contractual interest rate on senior notes was 4.83%.
- Net derivative liabilities were $1.657 billion, including $1.676 billion of Level 3 liabilities. The filing reports $1.8 billion of favorable non-cash fair-value changes on the Tourmaline IPM agreement in 2023.
Material changes versus 2022
- Revenue fell $7.542 billion, principally because lower Henry Hub prices reduced LNG revenue; regasification revenue also declined $933 million after the Chevron terminal-use agreement was terminated and its termination consideration was recognized in 2022.
- Net income increased $1.756 billion, primarily reflecting a $3.2 billion favorable year-over-year change in derivative fair value and settlements. Excluding derivative effects, LNG revenue net of cost of sales was lower by $492 million, and regasification revenue also decreased.
- Operating cash flow declined $1.040 billion, as lower LNG sale receipts and regasification fees more than offset lower feed-gas cash costs.
- In June 2023, CQP issued $1.4 billion of 5.950% notes due 2033; proceeds and cash on hand were used to redeem $1.4 billion of SPL notes due 2024. SPL also repurchased or redeemed additional 2024 notes, leaving $300 million outstanding at year-end. New $1 billion CQP and $1 billion SPL revolving facilities mature in 2028.
Outlook, risks and unusual items
- Approximately 85% of anticipated production capacity was contracted, with about 14 years of weighted-average remaining contract life. Third-party SPAs provide approximately $3.4 billion in annual fixed fees; fixed fees are generally payable even if customers cancel or suspend cargoes, subject to contract terms.
- The proposed SPL Expansion Project could add up to approximately 20 mtpa, including estimated debottlenecking. FERC pre-filing review began in May 2023, and Bechtel was engaged for front-end engineering and design. No positive final investment decision had been made; development depends on commercial, regulatory and financing arrangements. A new 15-year ARC Resources IPM agreement is conditional on FID or waiver.
- Management cited lower 2023 international LNG prices and normalized market conditions, while noting continuing global demand and contracting opportunities. Actual results remain exposed to LNG and gas market changes, customer performance, feed-gas and pipeline availability, severe weather, operational hazards, cyber events, regulation, and access to capital.
- The January 2024 U.S. pause on pending non-FTA LNG export authorization decisions was not expected by the Partnership to materially affect its business; it reported no existing project pending such authorization, though it anticipates seeking approval for the expansion.
- A Louisiana environmental compliance matter concerns formaldehyde standards for terminal turbines. The company reported test results indicating all 44 turbines met the standard and did not expect a material penalty; its petition regarding operating parameters remained pending.
- Derivative fair values use significant unobservable assumptions and can materially affect GAAP earnings. The 2023 improvement in reported earnings therefore should not be read as equivalent to recurring cash earnings.
- The Partnership declared $4.12 per common unit in distributions for 2023. The fourth-quarter distribution was $1.035 per unit, paid February 14, 2024, comprising $0.775 base and $0.260 variable.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also assessed controls as effective.
Key facts for investors to verify
- How much of 2023 net income reflects non-cash derivative remeasurement rather than realized operating cash generation, and how sensitive are Level 3 valuations to market assumptions?
- Whether contracted fixed-fee cash flows, customer credit quality and debt covenants support future distributions, given the Partnership’s debt burden and subsidiary restrictions on distributions.
- Progress, cost estimates, customer commitments, permits and financing for the SPL Expansion Project, including the conditions attached to the ARC Resources agreement.
- Upcoming debt maturities and refinancing plans, particularly the $300 million due in 2024 and $2.052 billion scheduled for 2025.
- Resolution of the LDEQ matter and the potential cost and operational implications of methane, emissions and other regulatory requirements.
- Customer concentration: five customers each represented 11%–23% of 2023 external revenue; also review affiliate sales and related-party service arrangements.