Cheniere Energy, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unaudited consolidated results include Cheniere’s subsidiaries, including CQP. Cheniere operates LNG export facilities at Sabine Pass and Corpus Christi, with approximately 45 mtpa of operating capacity; Corpus Christi Stage 3 is under construction.
Financial performance
Amounts in billions of dollars except per-share data. Cash flow figures are for the nine months ended September 30.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $8.852 | $3.200 | $24.343 | $9.307 |
| Operating loss | $(3.016) | $(2.350) | $(2.152) | $(1.140) |
| Net loss attributable to common stockholders | $(2.385) | $(1.084) | $(2.509) | $(1.020) |
| Basic and diluted loss per share | $(9.54) | $(4.27) | $(9.94) | $(4.03) |
| Net cash provided by operating activities | Not presented separately | Not presented separately | $7.571 | $2.057 |
| Net cash used in investing activities | Not presented separately | Not presented separately | $(1.348) | $(0.707) |
| Net cash used in financing activities | Not presented separately | Not presented separately | $(4.707) | $(0.805) |
- At September 30, cash and cash equivalents were $2.504 billion and restricted cash was $834 million. Reported available liquidity was $10.717 billion, including $7.379 billion of undrawn credit commitments; some cash and subsidiary facilities are restricted or not freely available to Cheniere.
- Debt was $27.273 billion in the debt note, before $231 million of net unamortized premium, discount and issuance costs. Balance-sheet current and long-term debt, net of those items, totaled $27.042 billion. The corresponding debt-note total at December 31, 2021 was $30.406 billion.
- Stockholders’ deficit was $4.330 billion. Derivative liabilities were $14.169 billion, compared with $4.590 billion at year-end 2021; the net derivative liability was $13.992 billion.
Changes, drivers and unusual items
- Revenue rose sharply year over year, primarily from higher LNG pricing and, to a lesser extent, higher delivered volumes, including capacity additions from Corpus Christi Train 3 and Sabine Pass Train 6. Q3 LNG revenue was $8.236 billion; regasification revenue was $455 million.
- Despite higher revenue, Q3 cost of sales was $11.073 billion, contributing to the operating loss. Management attributed the increase in costs principally to higher natural-gas feedstock prices and unfavorable commodity derivative changes. The filing reports a $5.0 billion non-cash unfavorable fair-value change during Q3 on positions indexed to international LNG prices, before tax and non-controlling interest. Derivative accounting can make reported results highly volatile because derivative changes may be recognized before the related LNG sales.
- Nine-month operating cash flow increased by $5.514 billion year over year, mainly due to higher cash receipts from LNG sales, partly offset by higher feedstock costs and lower contribution from some portfolio optimization activities. The cash flow statement also adds back $10.228 billion of derivative losses and reports $702 million of cash settlements of derivatives, illustrating the difference between accounting losses and cash flows.
- Cheniere used $4.005 billion for debt redemptions, repayments and repurchases during the first nine months, while issuing $1.015 billion of debt. It repurchased $640 million of common stock and paid $251 million of shareholder dividends.
- The September 2022 capital-allocation plan increased the repurchase authorization by $4.0 billion, lowered the long-term consolidated leverage target to approximately 4x, raised the quarterly dividend 20% to $0.395 per share, and targeted approximately 10% annual dividend growth through Corpus Christi Stage 3 construction.
Outlook, projects and risks
- Corpus Christi Stage 3 had reached 12.2% overall completion at September 30. Expected substantial completion is staged from the second half of 2025 through the first half of 2027. Its Bechtel EPC contract was approximately $5.5 billion, subject to adjustment by change order; management expects capital expenditures to rise as construction progresses.
- Cheniere reported approximately 95% of anticipated production from its existing liquefaction projects contracted through the mid-2030s, including qualifying contracts supporting additional capacity. It also disclosed approximately $115.1 billion of transaction price allocated to unsatisfied performance obligations, with an estimated weighted-average recognition timing of nine years for LNG revenue. These disclosures exclude substantially all variable consideration and are not equivalent to a revenue or cash-flow forecast.
- In June 2022, SPLNG agreed to terminate Chevron’s terminal-use and related marine-services agreements for a $765 million fee. Cheniere allocated the fee between commitments and other obligations and was recognizing the TUA-related amount ratably through December 31, 2022. The filing reports $387 million of related contract assets at September 30.
- Key exposures include commodity-price and derivative fair-value volatility, counterparty credit risk, project construction and financing requirements, and restrictions on moving cash among subsidiaries. The Inflation Reduction Act’s 15% corporate alternative minimum tax, effective in 2023, may make cash tax payments more volatile, according to management.
- Cheniere reported compliance with debt covenants. It said the disclosed Louisiana environmental matter and Sabine Pass tank incident were not expected to have a material adverse financial impact. One tank remained subject to repair, remediation and regulatory coordination; a proposed PHMSA penalty had been paid and the matter was described as closed.
- No specific earnings guidance was provided in the supplied filing text. Management’s statements about future project timing, capital allocation and cash requirements are forward-looking and subject to risks.
Most important facts for investors to verify
- How much of the derivative liability and reported loss reflects non-cash fair-value movements, and how those positions may settle against future LNG sales and feedstock costs.
- Whether LNG pricing, feedstock costs, realized margins and operating cash flow remain favorable as market prices and delivered volumes change.
- Corpus Christi Stage 3 construction progress, total cost including change orders, financing, and the expected timing of train completions.
- How much of the stated liquidity is available to the parent, given restricted cash, subsidiary capital structures and debt covenants.
- Execution of debt reduction, the enlarged share-repurchase authorization and dividend-growth targets while funding Stage 3.
- The effect of the Chevron termination on reported regasification revenue and the loss of future annual capacity payments, as well as the timing of the termination fee.