Cheniere Energy, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the provided filing text does not give a clear standalone fourth-quarter income statement or cash-flow summary. Figures are U.S. dollars unless noted.
Business context
Cheniere owns and operates U.S. LNG export and related pipeline infrastructure at Sabine Pass, Louisiana, and Corpus Christi, Texas. It reported approximately 40 mtpa of capacity at year-end, with Train 6 at Sabine Pass reaching substantial completion on February 4, 2022, bringing capacity to approximately 45 mtpa. About 95% of production capacity was contracted, with approximately 17 years of weighted-average remaining contract life for agreements with terms exceeding 10 years.
Key financial and operating metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $15.864 billion | $9.358 billion |
| Operating income (loss) | $(701) million | $2.631 billion |
| Net income (loss) attributable to common stockholders | $(2.343) billion | $(85) million |
| Diluted loss per share | $(9.25) | $(0.34) |
| Net cash provided by operating activities | $2.469 billion | $1.265 billion |
| Net cash used in investing activities | $(912) million | $(1.947) billion |
| Net cash used in financing activities | $(1.817) billion | $(235) million |
- Revenue rose about 70%, reflecting higher LNG volumes delivered and higher realized revenue per MMBtu. LNG volumes recognized as revenue were 1,997 TBtu, versus 1,488 TBtu in 2020.
- Operating margin, calculated as operating income divided by revenue, was approximately negative 4.4%, versus positive 28.1% in 2020. The comparison was heavily affected by commodity derivative accounting and higher feed-gas costs.
- Derivative losses increased by $5.8 billion year over year, before tax and non-controlling interests. The company recorded $4.5 billion of non-cash unfavorable fair-value changes on positions primarily related to IPM agreements, as international LNG forward prices rose sharply.
- At December 31, 2021, consolidated cash and cash equivalents were $1.404 billion, restricted cash was $413 million, and available credit-facility commitments were $3.394 billion, for reported available liquidity of $5.211 billion. Some cash and subsidiary resources are restricted or not freely distributable to the parent.
- Consolidated debt was $30.406 billion before unamortized discounts, premiums and issuance costs, down from $31.487 billion. Total equity was a deficit of $33 million, compared with positive equity of $2.218 billion in 2020.
- Margin deposits rose to $765 million from $25 million, principally reflecting collateral posted in connection with derivatives.
Material changes versus 2020
- Revenue increased, while operating results turned to a loss and the net loss attributable to common stockholders widened substantially, principally due to derivative losses and higher cost of sales. In 2020, Cheniere had also recognized $969 million of revenue for cargoes customers elected not to lift; there was no corresponding revenue in 2021.
- Operating cash flow nearly doubled, supported by higher LNG receipts and portfolio optimization activity, partly offset by higher natural-gas costs and derivative settlement cash outflows.
- Train 3 at Corpus Christi achieved substantial completion in March 2021 and began contributing to production. Train 6 at Sabine Pass was completed shortly after year-end.
- Cheniere reduced consolidated long-term indebtedness by $1.2 billion during 2021, refinanced certain obligations at lower rates, and extended the maturity of its $1.25 billion revolving facility to October 2026.
Outlook, risks and unusual items
- Management expected to reach a final investment decision on Corpus Christi Stage 3 in 2022. The proposed expansion comprises up to seven midscale trains and approximately 10 mtpa of capacity; FID remained subject to commercial arrangements, an EPC contract and financing.
- The board’s capital-allocation plan targeted approximately $1 billion per year of debt repurchases, repayments or retirements through 2024, quarterly dividends, and a reset $1 billion share-repurchase authorization. The company paid an inaugural $0.33-per-share quarterly dividend in 2021.
- Management reported that 2021 global LNG demand and benchmark prices rose sharply. It expects higher production following Train 6’s completion and generally higher operating costs as capacity expands.
- Key risks include substantial debt and interest obligations, customer or counterparty non-performance, derivative valuation volatility and margin requirements, construction cost or schedule changes, natural-gas supply and transport disruptions, severe weather, cyberattacks, and evolving environmental and regulatory requirements.
- The Level 3 physical liquefaction-supply derivatives had a reported net fair-value liability of approximately $4.036 billion at year-end. Their valuation relies partly on significant unobservable assumptions; KPMG identified this as a critical audit matter. The filing cautions that derivative values may change materially.
- The PHMSA matter concerning the 2018 Sabine Pass tank incident was closed after SPL elected to pay a reduced proposed penalty of $1.458 million; work with regulators on tank repair and return-to-service conditions continued. The LDEQ matter concerning self-reported permit deviations remained under discussion; management did not expect a material financial impact.
- KPMG issued an unqualified opinion on the financial statements and internal controls; management also concluded internal control over financial reporting was effective.
Important facts for investors to verify
- How much of the 2021 GAAP loss reflects non-cash mark-to-market movements versus realized derivative settlements and underlying operating economics.
- Derivative exposure, valuation assumptions, collateral and potential liquidity needs if commodity prices or spreads move materially.
- Progress on Corpus Christi Stage 3: binding customer commitments, EPC terms, financing, FID timing and expected project cost.
- Debt repayment capacity and the extent to which cash and credit commitments at subsidiaries are available to the parent, considering restrictions and reserve requirements.
- Train 6 ramp-up, continuing availability of the Sabine Pass tanks affected by the 2018 incident, and fulfillment of LNG supply and delivery commitments.
- Customer concentration, including the fact that four customers each accounted for at least 10% of 2021 external-customer revenue, and the credit protection supporting those contracts.