Cheniere Energy, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Cheniere operates LNG export facilities at Sabine Pass and Corpus Christi, with approximately 45 mtpa of operating capacity. Sabine Pass Train 6 reached substantial completion in February 2022.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $8.007 billion | $3.017 billion | $15.491 billion | $6.107 billion |
| Income from operations | $1.477 billion | $146 million | $864 million | $1.210 billion |
| Net income (loss) attributable to common stockholders | $741 million | $(329) million | $(124) million | $64 million |
| Diluted earnings (loss) per share | $2.90 | $(1.30) | $(0.49) | $0.25 |
| Operating cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $5.172 billion | $1.373 billion |
Q2 revenue rose 165% year over year, primarily because higher commodity indices increased revenue per MMBtu, with additional contribution from higher LNG volumes. Q2 common-stockholder profit improved by $1.070 billion year over year. For the first half, however, common-stockholder results turned to a loss, largely because derivative losses increased by $3.8 billion pretax, excluding non-controlling interest. Management said much of the derivative impact reflected non-cash fair-value losses as forward international LNG prices rose; underlying LNG sales are generally recognized when delivered.
Cost of sales increased to $5.752 billion in Q2 and $13.088 billion for the first half, mainly reflecting higher natural-gas feedstock prices and unfavorable commodity derivative changes. The filing does not provide a single headline operating-margin measure. Q2 operating income was $1.477 billion on $8.007 billion of revenue; first-half operating income was $864 million on $15.491 billion.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $2.631 billion, restricted cash was $335 million, and total current assets were $6.186 billion versus current liabilities of $7.556 billion.
- Total debt was $28.582 billion, including $2.270 billion current debt and $26.055 billion long-term debt, net of discounts and issuance costs. The company reported a consolidated stockholders’ deficit of $1.195 billion.
- Management reported total available liquidity of $10.287 billion, including $2.631 billion cash, restricted cash, and $7.321 billion of available credit commitments. Some subsidiary cash and facilities are restricted and not freely available to the parent.
- First-half investing cash outflow was $1.033 billion; financing cash outflow was $2.990 billion. Financing uses included $2.715 billion of debt repayments, $565 million of share repurchases and $170 million of dividends.
Operating cash flow increased by $3.799 billion year over year, mainly due to higher cash receipts from LNG sales, partly offset by higher feedstock costs and lower contributions from some portfolio optimization activities.
Material changes, outlook and notable items
- Corpus Christi Stage 3: The board made a positive final investment decision in June and issued full notice to proceed to Bechtel, effective June 16. The project is planned for up to seven midscale trains and over 10 mtpa of capacity. Its EPC contract price was approximately $5.5 billion, subject to change orders. Management expects capital expenditures to increase following construction authorization.
- Contracting: Cheniere reported new and amended SPAs totaling approximately 140 million tonnes for delivery from 2026 to 2050. Approximately 50 million tonnes depend on a further FID for capacity beyond Corpus Christi Stage 3 or Cheniere waiving that condition. Approximately 95% of anticipated production from the existing liquefaction projects was contracted through the mid-2030s; weighted-average remaining contract life was approximately 17 years, excluding agreements under 10 years.
- Chevron agreement: In June, Chevron agreed to pay SPLNG a $765 million fee to terminate its terminal use agreement early. The agreement became effective July 6, after quarter-end. Cheniere said it would recognize revenue, including the fee, over the remaining 2022 period; termination also ends Chevron’s approximately $125 million annual capacity payments, adjusted for inflation, through 2029.
- Capital allocation: Cheniere repurchased 4.37 million shares for $565 million in the first half, including approximately 2.68 million shares bought from the Icahn Group for about $350 million. $433 million remained under the repurchase authorization at quarter-end. First-half dividends were $0.66 per share; a further $0.33 quarterly dividend was declared in July.
- Derivatives and market risk: Net derivative liabilities were $8.509 billion at June 30, compared with $4.466 billion at year-end 2021, driven mainly by liquefaction supply derivatives. Management cautioned that fair-value movements can make reported results volatile and may reflect future-period exposures. A 10% commodity-price change was estimated to change the fair value of liquefaction supply derivatives by $2.155 billion.
- Debt and execution: CCH amended and expanded its credit facilities in June to support Stage 3, extending maturities and moving facility rates to SOFR-based terms. Cheniere reported compliance with debt covenants at quarter-end. The filing does not provide a quantified full-year earnings or cash-flow forecast.
- Contingencies: The LDEQ matter concerns historical self-reported permit deviations; management does not expect a material adverse financial impact. One Sabine Pass LNG tank received conditional approval to return to service in March 2022; work and coordination concerning the tank incident continued. The filing reports no material change to previously disclosed risk factors.
Investor verification priorities
- Track Stage 3 construction costs, change orders, schedule, financing and the conditions attached to future LNG sales.
- Assess cash available at the parent versus restricted or subsidiary-level liquidity, upcoming debt maturities and covenant or distribution limitations.
- Monitor derivative fair values, settlements, commodity assumptions and the timing gap between derivative accounting and recognition of related LNG sales.
- Verify the timing and amount of Chevron termination-fee revenue and weigh it against the capacity payments relinquished through 2029.
- Reconcile first-half reported losses with operating cash generation, including the effects of commodity prices, taxes and non-controlling interests.