LNG Cheniere Energy Inc

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

Summary of Fourth Quarter and Full Year 2018 Results (in millions, except LNG data)

                          Three Months Ended December 31, Year Ended December 31, 2018 2017 % Change 2018 2017 % Change Revenues $ 2,383 $ 1,746 36 % $ 7,987 $ 5,601 43 % Net income (loss)1 $ 67 $ 127 (47 )% $ 471 $ (393 ) nm Consolidated Adjusted EBITDA2 $ 634 $ 523 21 % $ 2,641 $ 1,824 45 % LNG exported: Number of cargoes 80 70 14 % 273 205 33 % Volumes (TBtu) 285 252 13 % 976 734 33 % LNG volumes loaded (TBtu) 284 252 13 % 975 735 33 %  

Summary Full Year 2019 Guidance (in billions)

        2019 Consolidated Adjusted EBITDA2 $ 2.9      

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$ 3.2 Distributable Cash Flow2 $ 0.6

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$ 0.8  

Recent Highlights

Strategic

• In December 2018, Sabine Pass Liquefaction, LLC (“SPL”) entered into a 20-year LNG Sale and Purchase Agreement (“SPA”) with PETRONAS LNG Ltd. for the sale of approximately 1.1 million tonnes per annum (“mtpa”) of LNG, commencing on the date of first commercial delivery for Train 6 of the SPL Project (defined below).
• In November 2018, we entered into a 24-year LNG SPA with Polish state-owned oil and gas company Polskie Gornictwo Naftowe i Gazownictwo S.A. for the sale of approximately 1.45 mtpa of LNG, with deliveries to commence in 2019 and the full annual quantity to commence in 2023.
• In November 2018, 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. SPL has also issued limited notices to proceed (“LNTP”) to Bechtel to commence early engineering, procurement, and site works.

Operational

• As of February 20, 2019, over 575 cumulative LNG cargoes have been produced, loaded and exported from the SPL Project and the CCL Project (defined below), including more than 270 cargoes in 2018. LNG from the SPL Project and the CCL Project has been delivered to 32 countries and regions worldwide.
• In November 2018 and December 2018, the first LNG commissioning cargoes were exported from Train 5 of the SPL Project and Train 1 of the CCL Project, respectively.

Financial

• For the twelve months ended December 31, 2018, we achieved net income1 of over $470 million, Consolidated Adjusted EBITDA of over $2.6 billion and Distributable Cash Flow of approximately $600 million.
• In December 2018, we amended and restated our existing revolving credit facility to, among other changes, increase total commitments to $1.25 billion, reduce the interest rate and extend the maturity date to December 2022. Borrowings will be used to fund the development of the CCL Project and, provided that certain conditions are met, for general corporate purposes.

Liquefaction Projects Update

    SPL Project     CCL Project Liquefaction Train     Train 5     Train 6     Train 1     Train 2     Train 3 Project Status Commissioning     LNTP Issued     Commissioning     Under Construction Project Completion Percentage(1) 99.7% — Stage 1 - 96.7% 42.0%(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 December 31, 2018

(2) Engineering 87.0% complete, procurement 63.0% complete, and construction 11.7% complete

 

Cheniere Energy, Inc. (“Cheniere”) (NYSE American: LNG) reported net income1 of $67 million, or $0.26 per share (basic and diluted), for the three months ended December 31, 2018, compared to net income of $127 million, or $0.54 per share (basic and diluted), for the comparable 2017 period. The decrease in net income was primarily due to increased derivative loss and interest expense, net of amounts capitalized, partially offset by increased income from operations due primarily to increased LNG volumes recognized in income, driven by additional production at the SPL Project and a decrease in LNG volumes in transit at the end of the period.

Cheniere reported net income1 of $471 million, or $1.92 per share (basic) and $1.90 per share (diluted), for the twelve months ended December 31, 2018 compared to a net loss of $393 million, or $1.68 per share (basic and diluted), for the comparable 2017 period. The increase in net income was primarily due to increased income from operations as a result of additional Trains in operation at the SPL Project, decreased loss on modification or extinguishment of debt, increased derivative gain and decreased net income attributable to non-controlling interest, partially offset by increased interest expense, net of amounts capitalized.

Consolidated Adjusted EBITDA2 for the three and twelve months ended December 31, 2018 was $634 million and $2.6 billion, respectively, compared to $523 million and $1.8 billion for the comparable 2017 periods. The increase in Consolidated Adjusted EBITDA was primarily due to increased income from operations.

During the three and twelve months ended December 31, 2018, 80 and 273 LNG cargoes, respectively, were exported from the SPL Project and the CCL Project, six of which were commissioning cargoes. Eight cargoes exported from the SPL Project and the CCL Project and sold on a delivered basis were in transit as of December 31, 2018, one of which was a commissioning cargo.

“2018 was an exceptional year for Cheniere, underscored by our positive final investment decision on Corpus Christi Train 3, the execution of seven long-term LNG SPAs for more than seven mtpa of LNG, and financial results at or above the top end of our guidance ranges for the year,” said Jack Fusco, Cheniere’s President and Chief Executive Officer. “With our relentless focus on execution continuing to drive results at both project sites, we have cemented our reputation as a reliable full-service LNG operator which delivers on its promises to customers, while leveraging our infrastructure platform and LNG portfolio to support future growth and value for our stakeholders.

“We look forward to leveraging forward momentum for continued success in 2019. We are focused on progressing Sabine Pass Train 6 and expect to make a positive final investment decision on that project in the coming months. We expect to place Sabine Pass Train 5 and Corpus Christi Train 1 into service imminently, furthering our track record of placing Trains into operation ahead of schedule and within budget. The commissioning process recently began on Corpus Christi Train 2, and we expect that Train to reach substantial completion in the second half of this year.”

LNG Volume Summary

The following table summarizes the volumes of operational and commissioning LNG that were loaded from the SPL Project and the CCL Project and for which the financial impact was recognized on our Consolidated Financial Statements during the three and twelve months ended December 31, 2018:

        Three Months Ended December 31, 2018 Year Ended December 31, 2018 (in TBtu) Operational     Commissioning Operational     Commissioning Volumes loaded during the current period 264 20 955 20 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 (25 ) (3 ) (25 ) (3 ) Total volumes recognized in the current period 242   17   973   17    

In addition, during the three and twelve months ended December 31, 2018, we recognized the financial impact of 40 TBtu of LNG and 84 TBtu of LNG, respectively, on our Consolidated Financial Statements related to LNG cargoes sourced from third parties.

Summary of Financial Performance

Fourth Quarter and Full Year 2018 Results

Our financial results are reported on a consolidated basis. Our ownership interest in Cheniere Energy Partners, L.P. (“Cheniere Partners”) (NYSE American: CQP) as of December 31, 2018 consisted of 100% ownership of the general partner and a 48.6% limited partner interest.

Total revenues increased $637 million, and total operating costs and expenses increased $562 million during the three months ended December 31, 2018 as compared to the comparable 2017 period. The increases in revenues and operating costs and expenses for the three months ended December 31, 2018 were driven by increases in the average sales price and cost of LNG sold, respectively, as well as increased LNG volumes recognized in income, driven by additional production at the SPL Project and a decrease in LNG volumes in transit at the end of the period.

Total revenues increased $2.4 billion, and total operating costs and expenses increased $1.8 billion during the twelve months ended December 31, 2018 as compared to the comparable 2017 period. The increases in revenues and total operating costs and expenses for the twelve months ended December 31, 2018 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 $16 million and $74 million for the three and twelve months ended December 31, 2018, respectively, compared to $17 million and $55 million for the comparable 2017 periods.

Net income attributable to non-controlling interest decreased $227 million during the twelve months ended December 31, 2018 as compared to the twelve months ended December 31, 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 2017, partially offset by increased consolidated net income recognized by Cheniere Partners in which the non-controlling interests are held.

Capital Resources

As of December 31, 2018, we had cash and cash equivalents of $981 million available to us. In addition, we had current restricted cash of $2.2 billion designated for the following purposes: $756 million for the SPL Project, $289 million for the CCL Project, $785 million for restricted purposes under the terms of Cheniere Partners’ credit facilities and $345 million for other restricted purposes.

Liquefaction Projects

SPL Project and CCL Project

Through Cheniere Partners, we are developing 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”). Trains 1 and 2 are undergoing commissioning, and Train 3 is 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, and we are in the process of obtaining all necessary regulatory approvals for Corpus Christi Stage 3.

Investor Conference Call and Webcast

We will host a conference call to discuss our financial and operating results for the fourth quarter and full year 2018 on Tuesday, February 26, 2019, 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.

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.

About Cheniere

Cheniere Energy, Inc. is the leading producer and exporter of liquefied natural gas (LNG) in the United States, reliably providing a clean, secure, and affordable solution to the growing global need for natural gas. Cheniere is a full-service LNG provider, with capabilities that include gas procurement and transportation, liquefaction, vessel chartering, and LNG delivery. Cheniere has one of the largest liquefaction platforms in the world, consisting of the Sabine Pass and Corpus Christi liquefaction facilities on the U.S. Gulf Coast, with expected aggregate nominal production capacity of 36 million tonnes per annum of LNG operating or under construction. Cheniere is also pursuing liquefaction expansion opportunities and other projects along the LNG value chain. Cheniere is headquartered in Houston, Texas, and has additional offices in London, Singapore, Beijing, Tokyo, and Washington, D.C.

For additional information, please refer to the Cheniere website at www.cheniere.com and Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission.

Forward-Looking Statements

This press release contains certain statements that may include “forward-looking statements” within the meanings of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical or present facts or conditions, included herein are “forward-looking statements.” Included among “forward-looking statements” are, among other things, (i) statements regarding Cheniere’s financial and operational guidance, business strategy, plans and objectives, including the development, construction and operation of liquefaction facilities, (ii) statements regarding expectations regarding regulatory authorizations and approvals, (iii) statements expressing beliefs and expectations regarding the development of Cheniere’s LNG terminal and pipeline businesses, including liquefaction facilities, (iv) statements regarding the business operations and prospects of third parties, (v) statements regarding potential financing arrangements, and (vi) statements regarding future discussions and entry into contracts. Although Cheniere believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Cheniere’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in Cheniere’s periodic reports that are filed with and available from the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Cheniere does not assume a duty to update these forward-looking statements.

(Financial Tables Follow)

           

Cheniere Energy, Inc.

Consolidated Statements of Operations

(in millions, except per share data)

  (Unaudited) Three Months Ended Year Ended December 31, December 31, (1) 2018     2017 2018 2017 Revenues LNG revenues $ 2,245 $ 1,671 $ 7,572 $ 5,317 Regasification revenues 65 65 261 260 Other revenues 69 9 142 21 Other—related party 4   1   12   3   Total revenues 2,383 1,746 7,987 5,601   Operating costs and expenses Cost of sales (excluding depreciation and amortization expense shown separately below) 1,519 980 4,597 3,120 Operating and maintenance expense 156 137 613 446 Development expense 1 3 7 10 Selling, general and administrative expense 75 77 289 256 Depreciation and amortization expense 116 104 449 356 Restructuring expense — — — 6 Impairment expense and loss on disposal of assets —   4   8   19   Total operating costs and expenses 1,867   1,305   5,963   4,213     Income from operations 516 441 2,024 1,388   Other income (expense) Interest expense, net of capitalized interest (222 ) (208 ) (875 ) (747 ) Loss on modification or extinguishment of debt — — (27 ) (100 ) Derivative gain (loss), net (75 ) 44 57 7 Other income 16   7   48   18   Total other expense (281 ) (157 ) (797 ) (822 )   Income before income taxes and non-controlling interest 235 284 1,227 566 Income tax provision (12 ) (4 ) (27 ) (3 ) Net income 223 280 1,200 563 Less: net income attributable to non-controlling interest 156   153   729   956   Net income (loss) attributable to common stockholders $ 67   $ 127   $ 471   $ (393 )   Net income (loss) per share attributable to common stockholders—basic (2) $ 0.26   $ 0.54   $ 1.92   $ (1.68 ) Net income (loss) per share attributable to common stockholders—diluted (2) 0.26   0.54   $ 1.90   $ (1.68 )   Weighted average number of common shares outstanding—basic 256.7 235.1 245.6 233.1 Weighted average number of common shares outstanding—diluted 258.0 235.1 248.0 233.1

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(1)   Please refer to the Cheniere Energy, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission. (2) Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.      

Cheniere Energy, Inc.

Consolidated Balance Sheets

(in millions, except share data)(1)

  December 31, 2018       2017 ASSETS Current assets Cash and cash equivalents $ 981 $ 722 Restricted cash 2,175 1,880 Accounts and other receivables 581 369 Accounts receivable—related party 4 2 Inventory 316 243 Derivative assets 63 57 Other current assets 114   96   Total current assets 4,234 3,369   Non-current restricted cash — 11 Property, plant and equipment, net 27,245 23,978 Debt issuance costs, net 72 149 Non-current derivative assets 54 34 Goodwill 77 77 Other non-current assets, net 305   288   Total assets $ 31,987   $ 27,906     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 58 $ 25 Accrued liabilities 1,169 1,078 Current debt 239 — Deferred revenue 139 111 Derivative liabilities 128 37 Other current liabilities 9   —   Total current liabilities 1,742 1,251   Long-term debt, net 28,179 25,336 Non-current capital lease obligations 57 — Non-current derivative liabilities 22 19 Other non-current liabilities 58 60   Commitments and contingencies   Stockholders’ equity Preferred stock, $0.0001 par value, 5.0 million shares authorized, none issued — — Common stock, $0.003 par value Authorized: 480.0 million shares at December 31, 2018 and 2017 Issued: 269.8 million shares and 250.1 million shares at December 31, 2018 and 2017, respectively Outstanding: 257.0 million shares and 237.6 million shares at December 31, 2018 and 2017, respectively 1 1 Treasury stock: 12.8 million shares and 12.5 million shares at December 31, 2018 and 2017, respectively, at cost (406 ) (386 ) Additional paid-in-capital 4,035 3,248 Accumulated deficit (4,156 ) (4,627 ) Total stockholders’ deficit (526 ) (1,764 ) Non-controlling interest 2,455   3,004   Total equity 1,929   1,240   Total liabilities and equity $ 31,987   $ 27,906  

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(1)

 

Please refer to the Cheniere Energy, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission.

 

Reconciliation of Non-GAAP Measures

Regulation G Reconciliations

In addition to disclosing financial results in accordance with U.S. GAAP, the accompanying news release contains non-GAAP financial measures. Consolidated Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that we use to facilitate comparisons of operating performance across periods. These non-GAAP measures should be viewed as a supplement to and not a substitute for our U.S. GAAP measures of performance and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.

Consolidated Adjusted EBITDA represents net income (loss) attributable to Cheniere before net income attributable to the non-controlling interest, interest, taxes, depreciation and amortization, adjusted for certain non-cash items, other non-operating income or expense items, and other items not otherwise predictive or indicative of ongoing operating performance, as detailed in the following reconciliation. Consolidated Adjusted EBITDA is not intended to represent cash flows from operations or net income (loss) as defined by U.S. GAAP and is not necessarily comparable to similarly titled measures reported by other companies.

We believe Consolidated Adjusted EBITDA provides relevant and useful information to management, investors and other users of our financial information in evaluating the effectiveness of our operating performance in a manner that is consistent with management’s evaluation of business performance. We believe Consolidated Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, depreciation and amortization which vary substantially from company to company depending on capital structure, the method by which assets were acquired and depreciation policies. Further, the exclusion of certain non-cash items, other non-operating income or expense items, and items not otherwise predictive or indicative of ongoing operating performance enables comparability to prior period performance and trend analysis.

Consolidated Adjusted EBITDA is calculated by taking net income (loss) attributable to common stockholders before net income attributable to non-controlling interest, interest expense, net of capitalized interest, changes in the fair value and settlement of our interest rate derivatives, taxes, depreciation and amortization, and adjusting for the effects of certain non-cash items, other non-operating income or expense items, and other items not otherwise predictive or indicative of ongoing operating performance, including the effects of modification or extinguishment of debt, impairment expense and loss on disposal of assets, changes in the fair value of our commodity and foreign currency exchange (“FX”) derivatives and non-cash compensation expense. We believe the exclusion of these items enables investors and other users of our financial information to assess our sequential and year-over-year performance and operating trends on a more comparable basis and is consistent with management’s own evaluation of performance.

Distributable Cash Flow is defined as cash received, or expected to be received, from Cheniere’s ownership and interests in CQP and Cheniere Corpus Christi Holdings, LLC, cash received (used) by Cheniere’s integrated marketing function (other than cash for capital expenditures) less interest, taxes and maintenance capital expenditures associated with Cheniere and not the underlying entities. Management uses this measure and believes it provides users of our financial statements a useful measure reflective of our business’s ability to generate cash earnings to supplement the comparable GAAP measure.

We believe Distributable Cash Flow is a useful performance measure for management, investors and other users of our financial information to evaluate our performance and to measure and estimate the ability of our assets to generate cash earnings after servicing our debt, paying cash taxes and expending sustaining capital, that could be used for discretionary purposes such as common stock dividends, stock repurchases, retirement of debt, or expansion capital expenditures. Management uses this measure and believes it provides users of our financial statements a useful measure reflective of our business’s ability to generate cash earnings to supplement the comparable GAAP measure. Distributable Cash Flow is not intended to represent cash flows from operations or net income (loss) as defined by U.S. GAAP and is not necessarily comparable to similarly titled measures reported by other companies.

Non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or in lieu of an analysis of our results as reported under GAAP, and should be evaluated only on a supplementary basis.

Consolidated Adjusted EBITDA

The following table reconciles our Consolidated Adjusted EBITDA to U.S. GAAP results for the three and twelve months ended December 31, 2018 and 2017 (in millions):

        Three Months Ended Year Ended December 31, December 31, 2018     2017 2018     2017 Net income (loss) attributable to common stockholders $ 67 $ 127 $ 471 $ (393 ) Net income attributable to non-controlling interest 156 153 729 956 Income tax provision 12 4 27 3 Interest expense, net of capitalized interest 222 208 875 747 Loss on modification or extinguishment of debt — — 27 100 Derivative loss (gain), net 75 (44 ) (57 ) (7 ) Other income (16 ) (7 ) (48 ) (18 ) Income from operations $ 516   $ 441   $ 2,024   $ 1,388   Adjustments to reconcile income from operations to Consolidated Adjusted EBITDA: Depreciation and amortization expense 116 104 449 356 Loss (gain) from changes in fair value of commodity and FX derivatives, net (19 ) (34 ) 77 33 Total non-cash compensation expense 21 8 76 28 Impairment expense and loss on disposal of assets — 4 8 19 Legal settlement expense —   —   7   —   Consolidated Adjusted EBITDA $ 634   $ 523   $ 2,641   $ 1,824    

Consolidated Adjusted EBITDA and Distributable Cash Flow

The following table reconciles our actual Consolidated Adjusted EBITDA and Distributable Cash Flow to Net income attributable to common stockholders for the three and twelve months ended December 31, 2018 and forecast amounts for full year 2019 (in billions):

                  Three Months Twelve Months Ended Ended

December 31, 2018

December 31, 2018

    Full Year 2019 Net income attributable to common stockholders $ 0.07 $ 0.47 $ 0.0 - $ 0.3 Net income attributable to non-controlling interest 0.16 0.73 0.6 - 0.6 Income tax provision 0.01 0.03 0.0 Interest expense, net of capitalized interest 0.22 0.88 1.5 Depreciation and amortization expense 0.12 0.45 0.8 Other expense, financing costs, and certain non-cash operating expenses 0.06   0.09               0.1   Consolidated Adjusted EBITDA $ 0.63   $ 2.64       $ 2.9         $ 3.2   Distributions to CQP non-controlling interest (0.14 ) (0.58 ) (0.6 ) SPL and CQP cash retained and interest expense (0.36 ) (1.44 ) (1.5 ) Cheniere interest expense, income tax and other (0.01 ) (0.03 )             (0.3 ) Cheniere Distributable Cash Flow $ 0.13   $ 0.60       $ 0.6         $ 0.8  

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Note: Totals may not sum due to rounding.

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Cheniere Energy, Inc.InvestorsRandy Bhatia, 713-375-5479Megan Light, 713-375-5492orMedia RelationsEben Burnham-Snyder, 713-375-5764