10-QPeriod: Q2 FY2017

Cheniere Energy, Inc. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 8, 2017For Securities:LNG

Summary

Cheniere Energy, Inc. reported its financial results for the second quarter and first half of 2017, highlighting significant operational progress and substantial growth in LNG revenues. The company continued to advance its Sabine Pass LNG (SPL) and Corpus Christi LNG (CCL) projects, with multiple liquefaction trains in various stages of operation, construction, or commissioning. This operational expansion directly translated into a dramatic increase in LNG revenues, which surged by over tenfold year-over-year in the second quarter, reflecting increased volumes and higher pricing. Financially, Cheniere generated positive operating cash flows in the first half of 2017, a marked improvement from the prior year's cash outflow, driven by higher LNG sales. The company also successfully raised significant capital through debt issuances to fund its ongoing capital expenditure programs. Despite substantial ongoing investments in property, plant, and equipment, the company managed its liquidity, demonstrating progress towards commercial operation and revenue generation for its key infrastructure projects.

Financial Highlights

48 data points
Beta

Revenue

$1.24B

44.2% Gross Margin

Net Income

-$285.00M

-23.0% Net Margin

EPS (Diluted)

$-1.23

Total Assets

$26.60B

Cash & Equivalents

$796.00M

Free Cash Flow

-$792.00M

Financial Statements
Beta
Revenue$1.24B
Cost of Revenue$692.00M
Gross Profit$549.00M
R&D Expenses$1.00M
SG&A Expenses$61.00M
Operating Expenses$967.00M
Operating Income$274.00M
Interest Expense$188.00M
Net Income-$285.00M
EPS (Basic)$-1.23
EPS (Diluted)$-1.23
Shares Outstanding (Basic)232.50M
Shares Outstanding (Diluted)232.50M

Key Highlights

  • 1Revenue Growth: Total revenues increased significantly to $1,241 million in Q2 2017 from $177 million in Q2 2016, driven by a substantial ramp-up in LNG revenues.
  • 2Operational Milestones: Train 3 at the Sabine Pass LNG (SPL) Project achieved substantial completion and commenced operations in March 2017. Train 4 at SPL began commissioning in March 2017, with first LNG achieved in July 2017.
  • 3Capital Raising: The company successfully issued $800 million in 2037 SPL Senior Notes and $1.35 billion in 2028 SPL Senior Notes, and $1.5 billion in 2027 CCH Senior Notes, bolstering liquidity for project development.
  • 4Improved Operating Cash Flow: Net cash provided by operating activities was $536 million for the first six months of 2017, a significant improvement from a net cash used of $295 million in the same period of 2016.
  • 5Reduced Net Loss: Consolidated net loss attributable to common stockholders narrowed to $231 million for the first six months of 2017, from $619 million in the prior year's comparable period, reflecting improved operational performance and revenue generation.
  • 6Project Development: Construction continues on Train 5 of the SPL Project and Stages 1 (Trains 1 & 2) of the Corpus Christi LNG (CCL) Project.
  • 7Investment in Midship Pipeline: Cheniere made an equity investment in Midship Pipeline Company, LLC, supporting a natural gas pipeline project connecting Anadarko Basin production to Gulf Coast markets.

Frequently Asked Questions

The primary driver is the substantial increase in LNG revenues, which rose from $110 million in Q2 2016 to $1,171 million in Q2 2017. This surge is due to the increasing number of operational liquefaction trains at the Sabine Pass LNG (SPL) Project (Trains 1, 2, and 3 were operational for significant portions of the quarter), leading to higher LNG volumes sold and recognizing revenues, coupled with favorable pricing.

Cheniere is primarily funding its capital expenditures through a combination of project-specific debt issuances and existing credit facilities. In the first half of 2017, the company issued $800 million in 2037 SPL Senior Notes and $1.35 billion in 2028 SPL Senior Notes, along with $1.5 billion in 2027 CCH Senior Notes. They also utilize existing credit facilities and expect future funding from project debt and operating cash flows as projects become operational.

The CCL Project is progressing with Stage 1, which includes Trains 1 and 2, currently under construction and expected to reach substantial completion in the first and second half of 2019, respectively. Train 3 is also being commercialized and has regulatory approvals. The project is also developing additional trains and infrastructure through its Stage III entities.

As more trains become operational, operating costs and expenses have increased. Cost of sales and operating and maintenance expenses have risen due to higher natural gas feedstock costs, increased transportation and storage demand, and maintenance of additional facilities. Depreciation and amortization also increased as operational assets began depreciating.