Cheniere Energy Partners, L.P. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; comparative period is Q1 2018. The partnership owns and operates the Sabine Pass LNG export and regasification facilities and its interconnecting pipeline. Trains 1–5 were operational by quarter-end; Train 5 achieved substantial completion and began operating in March.
Financial performance
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Total revenue | $1.749 billion | $1.593 billion | +9.8% |
| Income from operations | $563 million | $508 million | +10.8% |
| Net income | $385 million | $335 million | +14.9% |
| Basic and diluted net income per common unit | $0.75 | $0.67 | +$0.08 |
| Operating cash flow | $344 million | $331 million | +$13 million |
| Cash capital spending | $284 million | $194 million | +$90 million |
- Operating margin was approximately 32.2%, compared with 31.9%; net margin was approximately 22.0%, compared with 21.0%.
- Revenue growth reflected higher LNG sales volumes, including Train 5’s partial-quarter contribution. LNG volumes recognized as revenue were 263 TBtu, up from 241 TBtu.
- Third-party LNG revenue rose to $1.367 billion from $1.015 billion, while affiliate LNG revenue fell to $305 million from $503 million. Total operating costs increased to $1.186 billion from $1.085 billion, principally due to the additional operating Train, higher maintenance and transportation costs, and higher feedstock volumes and prices.
- Operating cash flow less cash investing outflows was $60 million. Distributions to owners were $304 million, contributing to a $244 million decrease in cash and restricted cash during the quarter.
Balance sheet, debt and liquidity
- At March 31, total assets were $18.005 billion, long-term debt net was $16.073 billion, and partners’ equity was $881 million. Debt was nearly unchanged from year-end 2018.
- Cash and cash equivalents were zero; the $1.297 billion reported as cash was all restricted. Restricted cash is subject to contractual limits on use and withdrawal.
- Available commitments were $779 million under the SPL Working Capital Facility and $115 million under the CQP Credit Facilities. The SPL facility had $421 million of letters of credit issued and no borrowings; the CQP facility was undrawn. The CQP facility matures in February 2020.
- The partnership reported compliance with debt covenants. It also reported no off-balance-sheet arrangements with a material current or future effect on financial position or results.
Outlook, material developments and risks
- Management said it expected capital needs for Trains 1–5 to be met through project debt, facility commitments and operating cash flows. No specific earnings or distribution guidance was provided.
- Train 6 remained subject to a positive final investment decision and full notice to proceed, contingent in part on acceptable commercial arrangements and adequate financing. Its EPC contract price was approximately $2.5 billion, including estimated costs for an optional third marine berth.
- On April 26, the partnership declared a $0.60 per-unit distribution for Q1, payable May 15, 2019. This compares with $0.59 per unit paid for Q4 2018 and $0.50 paid for Q4 2017.
- Train 5 commissioning cargo proceeds of $48 million were recorded as an offset to construction costs rather than revenue; this was a notable accounting item absent in Q1 2018. The partnership adopted lease accounting on January 1, recognizing approximately $100 million of operating-lease assets and liabilities, with no material income-statement or cash-flow impact.
- Revenue and cash flows are exposed to operating and construction execution, LNG and natural-gas markets, derivative valuations, financing needs and contractual conditions. Four customers each represented at least 10% of external revenue in Q1 2019; the largest accounted for 31%. Level 3 natural-gas derivative valuations rely partly on unobservable inputs. Management reported no material changes to previously disclosed risk factors or legal proceedings.
- Management cautioned that quarterly results are not necessarily indicative of full-year results. Forward-looking statements are subject to risks and uncertainties.
Important facts for investors to verify
- Train 5’s operating performance and contribution to volumes, costs and cash generation in subsequent quarters.
- Train 6’s commercial arrangements, financing, final investment decision and expected capital requirements.
- Availability and permitted use of restricted cash and credit commitments, including the approaching February 2020 CQP facility maturity.
- Distribution coverage against operating cash flow, capital spending, debt service and contractual reserves.
- Customer concentration, affiliate transaction terms and sensitivity of derivative values and LNG margins to market changes.