Cheniere Reports Third Quarter 2018 Results and Provides Business and Guidance Update

  • Nov 08, 2018
  • Cheniere Energy

Raises 2018 Guidance and Provides 2019 Guidance

Raises Run Rate Production and Financial Guidance

Announces 24-Year LNG Sale and Purchase Agreement with PGNiG

Achieves First LNG Production From Train 5 of SPL Project

Signs EPC Contract with Bechtel for Train 6 of SPL Project and Issues Limited Notice to Proceed

HOUSTON--(BUSINESS WIRE)--Nov. 8, 2018--

Cheniere Energy, Inc. (NYSE American: LNG):

       

Summary of Third Quarter 2018 Results (in millions, except LNG data)

Three Months Ended September 30, Nine Months Ended September 30,

2018   2017   % Change 2018   2017   % Change

Revenues $ 1,819 $ 1,403 30 % $ 5,604 $ 3,855 45 %

Net income (loss)1 $ 65 $ (289 ) $ 404 $ (520 )

Consolidated Adjusted EBITDA2 $ 569 $ 442 29 % $ 2,007 $ 1,297 55 %

LNG exported:

Number of cargoes 65 44 48 % 193 135 43 %

Volumes (TBtu) 228 160 43 % 691 482 43 %

LNG volumes loaded (TBtu) 228 162 41 % 691 483 43 %

Summary Guidance (in billions, except LNG data)

       

2018 Full Year Guidance

2018

Consolidated Adjusted EBITDA2 $ 2.45       -     $ 2.55

Distributable Cash Flow2 $ 0.5 - $ 0.6

2019 Full Year Guidance

2019

Consolidated Adjusted EBITDA2 $ 2.9 - $ 3.2

Distributable Cash Flow2 $ 0.6 - $ 0.8

Run Rate Guidance

Run Rate3

Consolidated Adjusted EBITDA2 $ 4.4 - $ 4.9

Distributable Cash Flow2 $ 2.1 - $ 2.6

Adjusted Nominal Production Capacity per Train4 (mtpa) 4.4 - 4.9

____________________

1  

Net income (loss) as used herein refers to Net income (loss) attributable to common stockholders on our Consolidated Statements of Operations.

2

Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for further details.

3

Run rate start date assumed to be first full year of operations for Trains 1-5 at the SPL Project and Trains 1-3 at the CCL Project.

4

Includes expected impacts of planned maintenance, production reliability, potential overdesign, and debottlenecking opportunities.

Recent Highlights

Strategic

In November 2018, we entered into a 24-year LNG Sale and Purchase Agreement (“SPA”) with Polish state-owned oil and gas company Polskie Gornictwo Naftowe i Gazownictwo S.A. (“PGNiG”) for the sale of approximately 1.45 million tonnes per annum (“mtpa”) of LNG on a delivered ex-ship basis. Deliveries will commence in 2019, with the full annual quantity commencing in 2023. The purchase price for LNG is indexed to the monthly Henry Hub price, plus a fee.

In November 2018, Sabine Pass Liquefaction, LLC (“SPL”) entered into an Engineering, Procurement, and Construction (“EPC”) contract with Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) for Train 6 of the SPL Project (defined below). SPL also issued limited notice to proceed to Bechtel to commence early engineering, procurement, and site works.

In September 2018, we entered into a 15-year LNG SPA with Vitol Inc. (“Vitol”) for the sale of approximately 0.7 mtpa of LNG beginning in 2018.

In August 2018, we entered into a 25-year LNG SPA with CPC Corporation, Taiwan (“CPC”) for the sale of approximately 2 mtpa of LNG beginning in 2021.

Operational

As of October 31, 2018, more than 215 cargoes have been produced, loaded, and exported from the SPL Project year to date. To date, more than 475 cumulative LNG cargoes have been exported from the SPL Project, with deliveries to 29 countries and regions worldwide.

In August 2018, feed gas was introduced to Train 1 of the CCL Project (defined below) as part of the commissioning process. In September 2018, feed gas was introduced to Train 5 of the SPL Project as part of the commissioning process, and first LNG production from Train 5 occurred in October 2018.

Financial

For the nine months ended September 30, 2018, we achieved Consolidated Adjusted EBITDA of over $2.0 billion and Distributable Cash Flow of approximately $470 million.

In September 2018, we closed the previously announced merger of Cheniere Energy Partners LP Holdings, LLC (“Cheniere Partners Holdings”) with our wholly owned subsidiary. As a result of the merger, all of the publicly-held shares of Cheniere Partners Holdings not owned by us were canceled and shareholders received 0.4750 shares of our common stock for each publicly-held share of Cheniere Partners Holdings.

In September 2018, Cheniere Energy Partners, L.P. (“Cheniere Partners”) (NYSE American: CQP) issued an aggregate principal amount of $1.1 billion of 5.625% Senior Notes due 2026 (the “2026 CQP Senior Notes”). Net proceeds of the offering, after deducting commissions, fees and expenses, were used to prepay all of the outstanding indebtedness under Cheniere Partners’ credit facilities (the “CQP Credit Facilities”). After applying the proceeds from this offering, only a $115 million revolving credit facility remains as part of the CQP Credit Facilities, and both the 2026 CQP Senior Notes and Cheniere Partners’ outstanding $1.5 billion of 5.250% Senior Notes due 2025 became unsecured.

Liquefaction Projects Update

       

SPL Project     CCL Project

Liquefaction Train     Train 5     Train 6     Train 1     Train 2     Train 3

Project Status Commissioning     Permitted Commissioning    

Under Construction

   

Under Construction

Project Completion Percentage(1) 98.5% — Stage 1 - 93.9% 36.3%(2)

Expected Substantial Completion 1Q 2019 — 1Q 2019 2H 2019 2H 2021

Note: Projects update excludes Trains in operation

(1)

Project completion percentages as of September 30, 2018

(2)

Engineering 79.2% complete, procurement 57.3% complete, and construction 5.9% complete

Cheniere Energy, Inc. (“Cheniere”) (NYSE American: LNG) reported a net income1 of $65 million, or $0.26 per share (basic and diluted), for the three months ended September 30, 2018, compared to a net loss of $289 million, or $1.24 per share (basic and diluted), for the comparable 2017 period. Cheniere reported net income1 of $404 million, or $1.67 per share (basic) and $1.65 per share (diluted), for the nine months ended September 30, 2018 compared to a net loss of $520 million, or $2.24 per share (basic and diluted), for the comparable 2017 period. The increases in net income were primarily due to increased income from operations as a result of additional Trains in operation at the SPL Project, decreased net income attributable to non-controlling interest, increased derivative gain, and decreased loss on modification or extinguishment of debt, partially offset by increased interest expense, net of amounts capitalized.

Consolidated Adjusted EBITDA2 for the three and nine months ended September 30, 2018 was $569 million and $2.0 billion, respectively, compared to $442 million and $1.3 billion for the comparable 2017 periods. The increase in Consolidated Adjusted EBITDA was primarily due to increased income from operations.

During the three and nine months ended September 30, 2018, 65 and 193 LNG cargoes, respectively, were exported from the SPL Project, none of which were commissioning cargoes. One cargo exported from the SPL Project and sold on a delivered basis was in transit as of September 30, 2018.

“Our focus on execution and operational excellence, coupled with favorable LNG supply and demand fundamentals, drove solid financial results again in the third quarter, and today we are raising our full year 2018 Consolidated Adjusted EBITDA and Distributable Cash Flow guidance,” said Jack Fusco, Cheniere’s President and Chief Executive Officer. “Our commercial momentum continues, with SPAs recently completed with CPC and Vitol, and today we’re pleased to announce a long-term SPA with PGNiG. These SPAs support our growth plans and solidify our position as the leader in U.S. LNG.

“As we look forward to 2019, we expect to build upon our reputation of superior execution by placing Corpus Christi Trains 1 and 2 and Sabine Pass Train 5 into service safely, ahead of schedule, and within budget, and continue to leverage our world-scale infrastructure position to commercialize and grow our LNG platform. To that end, we have finalized the Sabine Pass Train 6 EPC contract with Bechtel, and we are releasing Bechtel to commence early engineering, procurement, and construction activities for Train 6 ahead of making a Final Investment Decision.

“Today we are also raising our run rate Consolidated Adjusted EBITDA and Distributable Cash Flow guidance. The increase in these metrics is driven by increased expected run-rate LNG production, as we have identified significant incremental production potential from debottlenecking opportunities, maintenance optimization, and plant overdesign.”

LNG Volume Summary

The following table summarizes the volumes of operational and commissioning LNG that were loaded from the SPL Project and for which the financial impact was recognized on our Consolidated Financial Statements during the three and nine months ended September 30, 2018:

       

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018

(in TBtu) Operational   Commissioning Operational   Commissioning

Volumes loaded during the current period 228 — 691 —

Volumes loaded during the prior period but recognized during the current period 3 — 43 —

Less: volumes loaded during the current period and in transit at the end of the period (3 ) —   (3 ) —

Total volumes recognized in the current period 228   —   731   —

In addition, during the three and nine months ended September 30, 2018, we recognized the financial impact of 23 TBtu of LNG and 44 TBtu of LNG, respectively, on our Consolidated Financial Statements related to LNG cargoes sourced from third parties.

Summary of Financial Performance

Third Quarter 2018 Results

Our financial results are reported on a consolidated basis. Our ownership interest in Cheniere Partners as of September 30, 2018 consisted of 100% ownership of the general partner and a 48.6% limited partner interest.

Total revenues increased $416 million and $1.7 billion during the three and nine months ended September 30, 2018 as compared to the respective 2017 periods. Total operating costs and expenses increased $288 million and $1.2 billion during the three and nine months ended September 30, 2018, compared to the respective 2017 periods. The increases in revenues and total operating costs and expenses for the three and nine months ended September 30, 2018, compared to the respective 2017 periods, were primarily driven by the timing of completion of Trains at the SPL Project and the length of each Train’s operations within the periods being compared.

Selling, general and administrative expense included share-based compensation expenses of $20 million and $58 million for the three and nine months ended September 30, 2018, respectively, compared to $13 million and $38 million for the comparable 2017 periods.

Net income attributable to non-controlling interest decreased $217 million and $230 million during the three and nine months ended September 30, 2018 as compared to the three and nine months ended September 30, 2017, primarily due to the non-recurrence of non-cash amortization of the beneficial conversion feature on Cheniere Partners’ Class B units that occurred during the comparable periods in 2017, partially offset by increased consolidated net income recognized by Cheniere Partners in which the non-controlling interests are held.

Capital Resources

As of September 30, 2018, we had cash and cash equivalents of $989 million available to us. In addition, we had current and non-current restricted cash of $1.9 billion designated for the following purposes: $649 million for the SPL Project, $220 million for the CCL Project, $808 million for restricted purposes under the terms of Cheniere Partners’ credit facilities and $266 million for other restricted purposes.

Liquefaction Projects

SPL Project and CCL Project

Through Cheniere Partners, we are developing up to six natural gas liquefaction Trains at the Sabine Pass LNG terminal adjacent to the existing regasification facilities (the “SPL Project”). Trains 1 through 4 are operational, Train 5 is undergoing commissioning, and Train 6 is being commercialized and has all necessary regulatory approvals in place.

We are also developing three Trains near Corpus Christi, Texas (the “CCL Project”). Train 1 is undergoing commissioning, and Trains 2 and 3 are under construction.

Our Trains are expected to have a nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, potential overdesign, and debottlenecking opportunities, of approximately 4.5 mtpa of LNG per Train, and average run rate adjusted nominal production capacity of approximately 4.4 to 4.9 mtpa of LNG per Train.

Corpus Christi Stage 3

We are developing up to seven midscale liquefaction Trains adjacent to the CCL Project (“Corpus Christi Stage 3”), each with an expected nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, potential overdesign, and debottlenecking opportunities, of approximately 1.4 mtpa of LNG. The total expected nominal production capacity of the seven midscale Trains is approximately 9.5 mtpa of LNG. In June 2018, we filed an application with FERC to site, construct, and operate Corpus Christi Stage 3.

Investor Conference Call and Webcast

We will host a conference call to discuss our financial and operating results for the third quarter of 2018 on Thursday, November 8, 2018, at 10 a.m. Eastern time / 9 a.m. Central time. A listen-only webcast of the call and an accompanying slide presentation may be accessed through our website at www.cheniere.com. Following the call, an archived recording will be made available on our website.