Cheniere Energy, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Comparisons are with Q1 2020 unless otherwise noted. Cheniere operates LNG export facilities at Sabine Pass and Corpus Christi; it consolidates Cheniere Partners, in which it held a 48.6% limited partner interest.
Key financial results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $3.090 billion | $2.709 billion | +$381 million |
| Income from operations | $1.064 billion | $1.346 billion | −$282 million |
| Consolidated net income | $571 million | $603 million | −$32 million |
| Net income attributable to common stockholders | $393 million | $375 million | +$18 million |
| Diluted earnings per share | $1.54 | $1.43 | +$0.11 |
| Cash from operating activities | $1.066 billion | $574 million | +$492 million |
LNG revenue was $2.999 billion, up $431 million; regasification revenue was $67 million, flat, and other revenue was $24 million, down $50 million. Operating margin was approximately 34.4%, versus 49.7% a year earlier, as operating costs rose faster than revenue. Cost of sales increased $662 million, chiefly reflecting the absence of prior-year commodity derivative gains and higher natural-gas feedstock prices. Higher LNG margins and portfolio optimization activity supported earnings and operating cash flow, while lower derivative-related after-tax gains offset much of the benefit.
Cash used for property, plant and equipment was $190 million, compared with $556 million. Operating cash flow less this cash expenditure was approximately $876 million; this is a simple calculation, not a company-defined free-cash-flow measure. Net cash, cash equivalents and restricted cash increased $321 million to $2.398 billion. At March 31, cash and cash equivalents were $1.667 billion and restricted cash was $731 million; restricted balances are not generally available for unrestricted corporate use.
Total debt, net, was $30.570 billion, down from $30.843 billion at year-end 2020; current debt was $1.105 billion and long-term debt, net, was $29.465 billion. The current-debt increase largely reflects reclassification of SPL notes due in March 2022. Stockholders’ equity was $193 million, compared with a $191 million deficit at year-end; total equity, including non-controlling interest, was $2.620 billion. Cheniere reported available commitments across its listed facilities, including $1.250 billion under its revolving facility and $750 million under the CQP facilities; facility access is subject to terms and conditions.
Material changes and significant events
- Corpus Christi Train 3 achieved substantial completion on March 26, 2021, bringing the Corpus Christi project to three operating trains and approximately 15 mtpa of capacity.
- Cheniere Partners issued $1.5 billion of 4.000% notes due 2031 and used the proceeds, with cash on hand, to redeem its 5.250% notes due 2025. The refinancing contributed to $55 million of reported debt modification or extinguishment losses, including $54 million of redemption-related costs.
- Cheniere prepaid $148 million under its term loan facility. SPL also agreed to issue approximately $147 million of 2.95% notes due 2037, expected in the second half of 2021, to refinance part of its 2022 notes.
- Derivative results shifted materially: cost of sales included a $538 million year-over-year swing from non-recurrence of commodity-related derivative gains recorded in Q1 2020. Fair-value changes can make reported results volatile relative to when underlying physical transactions are delivered.
- Cash capital expenditures declined year over year. Train 3 commissioning cargo proceeds of $191 million were recorded as offsets to construction costs rather than current-period revenue.
Outlook, risks and contingencies
- Management expects LNG revenue to increase with Corpus Christi Train 3 fully operational and when Sabine Pass Train 6 enters service. Train 6 was 83.0% complete at quarter-end, with substantial completion expected in the first half of 2022.
- Corpus Christi Stage 3 is planned as an expansion of up to seven midscale trains, approximately 10 mtpa. A final investment decision remains conditional on an EPC contract, additional commercial support and financing; no FID was reported.
- Approximately 85% of existing project production capacity was contracted on a term basis, with about 18 years of average remaining contract life. Future results remain exposed to LNG and natural-gas prices, feedstock costs, marketing and derivative volatility, and counterparty performance.
- Liquidity and debt are managed through separate project and corporate capital structures. Debt agreements contain covenants and restrictions; the company reported compliance with all debt covenants at March 31, 2021. A $476 million balance of convertible unsecured notes was due May 28, 2021, with remaining term-loan commitments expected to fund repayment or repurchase of a portion.
- Other risks include construction and schedule execution, regulatory and export approvals, the planned LIBOR transition, and customer concentration. Three customers each represented at least 10% of Q1 revenue. Management said there were no material changes to previously disclosed risk factors or legal proceedings and did not expect known environmental compliance matters to have a material adverse effect.
- No formal earnings or financial guidance was provided. The filing cautions that forward-looking statements are uncertain and actual results may differ.
Important facts for investors to verify
- Subsequent repayment, refinancing or conversion of the $476 million notes due May 28, 2021, and completion of the planned SPL 2037-note issuance.
- Train 6 construction progress, remaining costs and whether the first-half 2022 completion target changes.
- Whether Corpus Christi Stage 3 secures the commercial and financing commitments needed for FID.
- How much reported earnings and cash flow depend on volatile commodity prices, derivative valuations and portfolio optimization activity.
- Availability and restrictions on cash held by project subsidiaries, and the effect of debt maturities, covenants and customer concentration on liquidity.