Cheniere Energy, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 23, 2021. This is an annual filing, with fourth-quarter results also disclosed. Cheniere develops and operates U.S. LNG export and related infrastructure, principally Sabine Pass, Louisiana, and Corpus Christi, Texas.
Business and operating context
Sabine Pass operated five liquefaction trains and was building Train 6; Corpus Christi operated two trains, with Train 3 in commissioning. Approximately 85% of the combined projects’ production capacity was contracted on a term basis, with about 18 years of average remaining contract life. Long-term LNG sales generally include fixed fees payable even when customers elect not to take cargoes, plus variable fees generally linked to Henry Hub.
Financial and operating metrics
| Metric (USD millions, except per-share data) | 2020 | 2019 |
|---|---|---|
| Revenue | $9,358 | $9,730 |
| Income from operations | $2,631 | $2,361 |
| Operating margin | 28.1% | 24.3% |
| Net income | $501 | $1,232 |
| Net income (loss) attributable to common stockholders | $(85) | $648 |
| Basic and diluted EPS attributable to common stockholders | $(0.34) | $2.53 basic; $2.51 diluted |
| Net cash provided by operating activities | $1,265 | $1,833 |
| Cash capital expenditures for property, plant and equipment | $1,839 | $3,056 |
Operating cash flow less cash property and equipment spending was negative $574 million in 2020. The filing does not present this as a company-defined free-cash-flow measure. Total operating costs and expenses were $6,727 million, down from $7,369 million. Cost of sales fell, while operating and maintenance and depreciation expenses rose as more trains operated. Interest expense, net of capitalized interest, increased to $1,525 million from $1,432 million. The filing does not provide a clear gross-margin figure.
Fourth quarter: Revenue was $2,787 million, operating income $276 million, consolidated net income $2 million, and net loss attributable to common stockholders $194 million, or $0.77 per share.
Liquidity and debt at year-end: Cash and cash equivalents were $1,628 million and restricted cash was $449 million; available commitments included $1,126 million under Cheniere’s revolver, $372 million under its term loan, $767 million under the CCH working-capital facility, $787 million under the SPL working-capital facility, and $750 million under Cheniere Partners’ credit facilities. Some cash and commitments are restricted or subject to borrowing conditions. Consolidated debt was approximately $31.5 billion before unamortized premium, discount and issuance costs; balance-sheet debt, net, was $30,843 million, including $372 million current debt. The company reported compliance with debt covenants.
Changes versus 2019
- Revenue declined $372 million, mainly because of weaker integrated-marketing revenue and customers’ non-lifting of cargoes, partly offset by contracted fixed-fee revenue and greater available train capacity.
- Common-stockholder results fell by $733 million, from $648 million income to an $85 million loss. Management cited commodity-derivative losses, a higher tax provision, debt modification or extinguishment losses, higher operating and maintenance and depreciation costs, interest-rate derivative losses, and higher net interest expense.
- Operating cash flow decreased $568 million. Cash and cash equivalents fell by $846 million, and total cash, cash equivalents and restricted cash declined by $917 million.
- Cheniere recognized $969 million of LNG revenue for cargoes customers notified it they would not take; $38 million of that amount would otherwise have been recognized after year-end if the cargoes had been lifted. Variable fees associated with undelivered cargoes were not earned.
Outlook, risks and unusual items
- Management expected Train 3 at Corpus Christi to reach substantial completion in the first quarter of 2021 and Sabine Pass Train 6 in the second half of 2022. Corpus Christi Stage 3, planned for up to seven midscale trains and approximately 10 mtpa, remained subject to an EPC contract, additional commercial support and financing before FID.
- Management said long-term contracting limited exposure to oil and spot LNG price fluctuations and did not expect price changes or cargo cancellation notices to materially affect its forecast 2021 financial results. No detailed numerical earnings or cash-flow guidance is provided in the supplied filing text.
- COVID-19 measures and business-continuity actions added approximately $69 million of costs in 2020. Management expected some incremental costs to continue while pandemic risks persisted. COVID-19, customer credit and contract performance, construction execution and financing, extreme weather, LNG market prices and demand, regulation, environmental requirements, and facility concentration are highlighted risks.
- Debt transactions included $2.0 billion of Cheniere 2028 secured notes and $2.0 billion of SPL 2030 secured notes, alongside refinancing and repayment activity. Debt modification or extinguishment losses were $217 million. The company also recorded $129 million of impairment losses on its Midship Holdings investment and $233 million of net interest-rate derivative losses.
- Two Sabine Pass storage tanks remained out of service following reported leaks in 2018 while repair and remediation work continued with PHMSA and FERC. Cheniere did not expect the related order and work to materially affect financial results or operations. An LDEQ permit-deviation matter remained under discussion; the company did not expect a material financial impact. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether Train 3 and Train 6 meet the stated completion schedules, and how actual capacity and costs compare with plans.
- Whether customers and guarantors continue performing under long-term SPAs and terminal-use agreements, particularly during market stress.
- Cash available to the parent versus cash held in subsidiaries, restricted cash, borrowing conditions, debt maturities and refinancing needs.
- The effect of derivative fair-value changes and LNG marketing results on reported earnings and cash flow; 2020 included significant non-cash and mark-to-market effects.
- Whether Corpus Christi Stage 3 secures commercial support and financing and reaches FID, and the status of pending export and capacity authorizations.
- Whether facility, environmental and regulatory matters—including the Sabine Pass tank remediation—result in additional costs, restrictions or delays.