01—Abstract
Summary
Summary of the 10-K filed February 22, 2024. Cited figures are marked; the original filing is the authoritative source.
Cheniere Energy Partners, L.P.
(CQP) reported net income of $4.254 billiona for 2023, up from $2.498 billion in 2022, on total revenues of $9.664 billion versus $17.206 billion. The filing attributes the net income increase primarily to a $3.2 billion favorable variance from changes in fair value and settlements of derivatives, including a $1.8 billion non-cash gain on the Tourmaline IPM Agreement. Revenues declined mainly because of lower pricing per MMBtu tied to decreased Henry Hub prices, and cost of sales fell from $11.887 billion to $2.721 billion.
Net cash provided by operating activities was $3.109 billionb, and the partnership paid $2.907 billion in distributions. Net income per common unit was $6.95 versus $3.27. The Sabine Pass LNG Terminal has six operational Trains with total production capacity of approximately 30 mtpa.
Through SPAs and an IPM agreement, the partnership has contracted approximately 85% of anticipated production, with approximately 14 years of weighted average remaining life as of December 31, 2023. The five largest customers each accounted for between 11% and 23% of 2023 total revenues. Fixed fees under executed SPAs are described as approximately $3.4 billionc annually, and estimated revenues under executed SPAs total $138.6 billion.
At year-end 2023, the partnership had $575 milliond of cash and cash equivalents, $56 million of restricted cash, and total available liquidity of $2.351 billion, including $1.7 billion of available credit facility commitments. Total debt was $16.0 billion.
The partnership declared distributions of $4.12 per common unit for 2023 and a fourth-quarter 2023 distribution of $1.035 per unit. The SPL Expansion Project, with potential capacity of up to approximately 20 mtpa, entered FERC pre-filing review in May 2023, and the filing states that a positive final investment decision will require acceptable commercial and financing arrangements.
02—Key points
Key Highlights
- Net income rose to $4.254 billion in 2023 from $2.498 billion in 2022, driven mainly by a $3.2 billion favorable variance from changes in fair value and settlements of derivatives.
- Total revenues fell to $9.664 billion from $17.206 billion, primarily reflecting lower pricing per MMBtu from decreased Henry Hub prices and a $933 million decline in regasification revenues.
- Approximately 85% of anticipated Liquefaction Project production is contracted through SPAs and an IPM agreement, with approximately 14 years of weighted average remaining life as of December 31, 2023.
- Net cash provided by operating activities was $3.109 billion, compared with $4.149 billion in 2022, and distributions paid totaled $2.907 billion.
- Total debt was $16.0 billion at December 31, 2023, and total available liquidity was $2.351 billion, including $575 million of cash and cash equivalents.
- Distributions declared were $4.12 per common unit for 2023, and a $1.035 per unit distribution was declared on January 26, 2024 for the fourth quarter of 2023.
- The SPL Expansion Project, with potential capacity of up to approximately 20 mtpa, entered FERC NEPA pre-filing review in May 2023; no positive final investment decision has been made.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 22, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $9.66B$17.21B | −43.8% |
| Operating Expenses | $4.63B$13.83B | −66.5% |
| Operating Income | $5.04B$3.38B | +49.0% |
| Interest Expense | $823.00M$870.00M | −5.4% |
| Net Income | $4.25B$2.50B | +70.3% |
05—Questions
Frequently Asked Questions
Why did net income increase while revenues declined sharply?
The filing states that net income increased $1.8 billion primarily due to a $3.2 billion favorable variance from changes in fair value and settlements of derivatives. This included a $1.8 billion non-cash gain from favorable changes in the fair value of the Tourmaline IPM Agreement, compared with a $757 million loss in 2022. Revenues fell $7.5 billion mainly because of lower pricing per MMBtu tied to decreased Henry Hub prices.
How dependent is the partnership on long-term customer contracts?
The filing says long-term customer arrangements form the foundation of the business. About 85% of anticipated Liquefaction Project production is contracted under SPAs and an IPM agreement, with approximately 14 years of weighted average remaining life. Customers generally must pay a fixed fee on contracted volumes even if they cancel or suspend cargo deliveries. Five customers each accounted for between 11% and 23% of 2023 total revenues.
What liquidity and debt position supports the partnership?
At December 31, 2023, the partnership had $575 million of cash and cash equivalents, $56 million of restricted cash, and $1.7 billion of available credit facility commitments, for total available liquidity of $2.351 billion. Total debt was $16.0 billion in senior notes, and credit facilities had no outstanding loan balances. The filing states the partnership was in compliance with all debt covenants.
What are the prospects for expansion at Sabine Pass?
The SPL Expansion Project, adjacent to the existing Liquefaction Project, has potential production capacity of up to approximately 20 mtpa. Certain subsidiaries entered FERC pre-filing review under NEPA in May 2023, and a subsidiary signed a front end engineering and design contract with Bechtel Energy Inc. in April 2023. The filing states that development will require acceptable commercial and financing arrangements before a positive final investment decision is made.
What regulatory risks does the filing highlight?
In January 2024, the Biden Administration announced a temporary pause on pending DOE decisions on LNG exports to non-FTA countries. The partnership states it does not believe the pause will have a material adverse effect and that it has no projects currently pending non-FTA export approval. The filing also describes an LDEQ compliance matter concerning formaldehyde emission standards for combustion turbines, which the partnership does not expect to have a material adverse impact on its financial results.
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