UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-16383
CHENIERE ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 95-4352386 | ||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
845 Texas Avenue, Suite 1250
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 375-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common Stock, $ 0.003 par value | LNG | New York Stock Exchange | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||||||||
| Emerging growth company | ☐ | ||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 2, 2024, the issuer had 226,273,139 shares of Common Stock outstanding.
CHENIERE ENERGY, INC.
TABLE OF CONTENTS
i
DEFINITIONS
As used in this quarterly report, the terms listed below have the following meanings:
Common Industry and Other Terms
| ASU | Accounting Standards Update | |||||||
| Bcf/d | billion cubic feet per day | |||||||
| Bcfe | billion cubic feet equivalent | |||||||
| CAMT | corporate alternative minimum tax | |||||||
| DOE | U.S. Department of Energy | |||||||
| EPC | engineering, procurement and construction | |||||||
| ESG | environmental, social and governance | |||||||
| FASB | Financial Accounting Standards Board | |||||||
| FERC | Federal Energy Regulatory Commission | |||||||
| FID | final investment decision | |||||||
| FTA countries | countries with which the United States has a free trade agreement providing for national treatment for trade in natural gas | |||||||
| GAAP | generally accepted accounting principles in the United States | |||||||
| Henry Hub | the final settlement price (in U.S. dollars per MMBtu) for the New York Mercantile Exchange’s Henry Hub natural gas futures contract for the month in which a relevant cargo’s delivery window is scheduled to begin | |||||||
| IPM agreements | integrated production marketing agreements in which the gas producer sells to us gas on a global LNG or natural gas index price, less a fixed liquefaction fee, shipping and other costs | |||||||
| LNG | liquefied natural gas, a product of natural gas that, through a refrigeration process, has been cooled to a liquid state, which occupies a volume that is approximately 1/600th of its gaseous state | |||||||
| MMBtu | million British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit | |||||||
| mtpa | million tonnes per annum | |||||||
| non-FTA countries | countries with which the United States does not have a free trade agreement providing for national treatment for trade in natural gas and with which trade is permitted | |||||||
| SEC | U.S. Securities and Exchange Commission | |||||||
| SOFR | Secured Overnight Financing Rate | |||||||
| SPA | LNG sale and purchase agreement | |||||||
| TBtu | trillion British thermal units; one British thermal unit measures the amount of energy required to raise the temperature of one pound of water by one degree Fahrenheit | |||||||
| Train | an industrial facility comprised of a series of refrigerant compressor loops used to cool natural gas into LNG | |||||||
| TUA | terminal use agreement | |||||||
1
Abbreviated Legal Entity Structure
The following diagram depicts our abbreviated legal entity structure as of June 30, 2024, including our ownership of certain subsidiaries, and the references to these entities used in this quarterly report:
Unless the context requires otherwise, references to the “Company,” “we,” “us” and “our” refer to Cheniere Energy, Inc. and its consolidated subsidiaries, including our publicly traded subsidiary, CQP.
2
BES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| LNG revenues | $ | 3,042 | $ | 3,919 | $ | 7,079 | $ | 11,010 | |||||||||||||||
| Regasification revenues | 34 | 33 | 68 | 67 | |||||||||||||||||||
| Other revenues | 175 | 150 | 357 | 335 | |||||||||||||||||||
| Total revenues | 3,251 | 4,102 | 7,504 | 11,412 | |||||||||||||||||||
| Operating costs and expenses (recoveries) | |||||||||||||||||||||||
| Cost (recovery) of sales (excluding items shown separately below) | 784 | 912 | 3,020 | (627) | |||||||||||||||||||
| Operating and maintenance expense | 463 | 487 | 914 | 931 | |||||||||||||||||||
| Selling, general and administrative expense | 99 | 87 | 200 | 194 | |||||||||||||||||||
| Depreciation and amortization expense | 304 | 297 | 606 | 594 | |||||||||||||||||||
| Other operating costs and expenses | 13 | 11 | 22 | 21 | |||||||||||||||||||
| Total operating costs and expenses | 1,663 | 1,794 | 4,762 | 1,113 | |||||||||||||||||||
| Income from operations | 1,588 | 2,308 | 2,742 | 10,299 | |||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest expense, net of capitalized interest | (257) | (291) | (523) | (588) | |||||||||||||||||||
| Gain (loss) on modification or extinguishment of debt | (9) | (2) | (9) | 18 | |||||||||||||||||||
| Interest and dividend income | 47 | 55 | 108 | 89 | |||||||||||||||||||
| Other income, net | 3 | — | 2 | 3 | |||||||||||||||||||
| Total other expense | (216) | (238) | (422) | (478) | |||||||||||||||||||
| Income before income taxes and non-controlling interest | 1,372 | 2,070 | 2,320 | 9,821 | |||||||||||||||||||
| Less: income tax provision | 210 | 363 | 319 | 1,679 | |||||||||||||||||||
| Net income | 1,162 | 1,707 | 2,001 | 8,142 | |||||||||||||||||||
| Less: net income attributable to non-controlling interest | 282 | 338 | 619 | 1,339 | |||||||||||||||||||
| Net income attributable to Cheniere | $ | 880 | $ | 1,369 | $ | 1,382 | $ | 6,803 | |||||||||||||||
Net income per share attributable to common stockholders—basic (1) | $ | 3.85 | $ | 5.65 | $ | 5.97 | $ | 27.99 | |||||||||||||||
Net income per share attributable to common stockholders—diluted (1) | $ | 3.84 | $ | 5.61 | $ | 5.96 | $ | 27.79 | |||||||||||||||
| Weighted average number of common shares outstanding—basic | 228.4 | 242.3 | 231.3 | 243.1 | |||||||||||||||||||
| Weighted average number of common shares outstanding—diluted | 228.9 | 243.8 | 231.9 | 244.8 | |||||||||||||||||||
| ___________________ | |||||||||||||||||||||||
(1)Earnings per share may not recalculate due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.
The accompanying notes are an integral part of these consolidated financial statements.
3
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (1)
(in millions, except share data)
| June 30, | December 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 2,442 | $ | 4,066 | |||||||
| Restricted cash and cash equivalents | 512 | 459 | |||||||||
| Trade and other receivables, net of current expected credit losses | 719 | 1,106 | |||||||||
| Inventory | 387 | 445 | |||||||||
| Current derivative assets | 38 | 141 | |||||||||
| Margin deposits | 105 | 18 | |||||||||
| Other current assets, net | 133 | 96 | |||||||||
| Total current assets | 4,336 | 6,331 | |||||||||
| Property, plant and equipment, net of accumulated depreciation | 33,079 | 32,456 | |||||||||
| Operating lease assets | 2,845 | 2,641 | |||||||||
| Derivative assets | 1,151 | 863 | |||||||||
| Deferred tax assets | 26 | 26 | |||||||||
| Other non-current assets, net | 841 | 759 | |||||||||
| Total assets | $ | 42,278 | $ | 43,076 | |||||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 124 | $ | 181 | |||||||
| Accrued liabilities | 1,706 | 1,780 | |||||||||
| Current debt, net of unamortized debt issuance costs | 798 | 300 | |||||||||
| Deferred revenue | 125 | 179 | |||||||||
| Current operating lease liabilities | 637 | 655 | |||||||||
| Current derivative liabilities | 803 | 750 | |||||||||
| Other current liabilities | 43 | 43 | |||||||||
| Total current liabilities | 4,236 | 3,888 | |||||||||
| Long-term debt, net of unamortized discount and debt issuance costs | 22,590 | 23,397 | |||||||||
| Operating lease liabilities | 2,200 | 1,971 | |||||||||
| Finance lease liabilities | 506 | 467 | |||||||||
| Derivative liabilities | 2,153 | 2,378 | |||||||||
| Deferred tax liabilities | 1,576 | 1,545 | |||||||||
| Other non-current liabilities | 419 | 410 | |||||||||
| Total liabilities | 33,680 | 34,056 | |||||||||
| Redeemable non-controlling interest | 6 | — | |||||||||
Stockholders’ equity | |||||||||||
Preferred stock: $0.0001 par value, 5.0 million shares authorized, none issued | — | — | |||||||||
Common stock: $0.003 par value, 480.0 million shares authorized; 278.5 million shares and 277.9 million shares issued at June 30, 2024 and December 31, 2023, respectively | 1 | 1 | |||||||||
Treasury stock: 51.5 million shares and 40.9 million shares at June 30, 2024 and December 31, 2023, respectively, at cost | (5,568) | (3,864) | |||||||||
| Additional paid-in-capital | 4,406 | 4,377 | |||||||||
Retained earnings | 5,625 | 4,546 | |||||||||
Total Cheniere stockholders’ equity | 4,464 | 5,060 | |||||||||
| Non-controlling interest | 4,128 | 3,960 | |||||||||
Total stockholders’ equity | 8,592 | 9,020 | |||||||||
Total liabilities, redeemable non-controlling interest and stockholders’ equity | $ | 42,278 | $ | 43,076 | |||||||
(1)Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), substantially all of which are related to CQP, as further discussed in Note 6—Non-Controlling Interests and Variable Interest Entities. As of June 30, 2024, total assets and liabilities of our VIEs were $17.4 billion and $18.2 billion, respectively, including $351 million of cash and cash equivalents and $79 million of restricted cash and cash equivalents.
The accompanying notes are an integral part of these consolidated financial statements.
4
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND REDEEMABLE NON-CONTROLLING INTEREST
(in millions)
(unaudited)
| Three and Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Non-controlling Interest | Total Equity | Redeemable Non-Controlling Interest (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 237.0 | $ | 1 | 40.9 | $ | (3,864) | $ | 4,377 | $ | 4,546 | $ | 3,960 | $ | 9,020 | $ | — | |||||||||||||||||||||||||||||||||||||
| Vesting of share-based compensation awards | 0.6 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 34 | — | — | 34 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issued shares withheld from employees related to share-based compensation, at cost | — | — | — | — | (40) | — | — | (40) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased, at cost | (7.5) | — | 7.5 | (1,203) | — | — | — | (1,203) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 502 | 337 | 839 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from redeemable non-controlling interest | — | — | — | — | — | — | — | — | 4 | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | — | — | (253) | (253) | — | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.435 per common share) | — | — | — | — | — | (103) | — | (103) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | 230.1 | 1 | 48.4 | (5,067) | 4,371 | 4,945 | 4,044 | 8,294 | 4 | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 36 | — | — | 36 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issued shares withheld from employees related to share-based compensation, at cost | — | — | — | — | (1) | — | — | (1) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased, at cost | (3.1) | — | 3.1 | (501) | — | — | — | (501) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 880 | 282 | 1,162 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from redeemable non-controlling interest | — | — | — | — | — | — | — | — | 2 | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | — | — | (198) | (198) | — | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.435 per common share declared on April 26, 2024 and $0.435 per common share declared on June 17, 2024) | — | — | — | — | — | (200) | — | (200) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | 227.0 | $ | 1 | 51.5 | $ | (5,568) | $ | 4,406 | $ | 5,625 | $ | 4,128 | $ | 8,592 | $ | 6 | |||||||||||||||||||||||||||||||||||||
(1)Redeemable non-controlling interest represents the economic interest held by a third party in one of our consolidated VIEs that is redeemable for cash under certain circumstances, including those that are outside of our control. As such, the economic interest is not a component of permanent equity on our Consolidated Balance Sheets.
The accompanying notes are an integral part of these consolidated financial statements.
5
| Three and Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Non-controlling Interest | Total Equity (Deficit) | Redeemable Non-Controlling Interest | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 245.5 | $ | 1 | 31.2 | $ | (2,342) | $ | 4,314 | $ | (4,942) | $ | 2,798 | $ | (171) | $ | — | |||||||||||||||||||||||||||||||||||||
| Vesting of share-based compensation awards | 1.0 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 43 | — | — | 43 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issued shares withheld from employees related to share-based compensation, at cost | (0.2) | — | 0.2 | (26) | (29) | — | — | (55) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased, at cost | (3.1) | — | 3.1 | (453) | — | — | — | (453) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 5,434 | 1,001 | 6,435 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | — | — | (261) | (261) | — | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.395 per common share) | — | — | — | — | — | (98) | — | (98) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | 243.2 | 1 | 34.5 | (2,821) | 4,328 | 394 | 3,538 | 5,440 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 36 | — | — | 36 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issued shares withheld from employees related to share-based compensation, at cost | — | — | — | — | (1) | — | — | (1) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased, at cost | (2.3) | — | 2.3 | (341) | — | — | — | (341) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 1,369 | 338 | 1,707 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | — | — | — | — | (252) | (252) | — | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.395 per common share) | — | — | — | — | — | (97) | — | (97) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 240.9 | $ | 1 | 36.8 | $ | (3,162) | $ | 4,363 | $ | 1,666 | $ | 3,624 | $ | 6,492 | $ | — | |||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities | |||||||||||
Net income | $ | 2,001 | $ | 8,142 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Unrealized foreign currency exchange loss (gain), net | 3 | (2) | |||||||||
| Depreciation and amortization expense | 606 | 594 | |||||||||
| Share-based compensation expense | 92 | 85 | |||||||||
| Amortization of discount and debt issuance costs | 19 | 23 | |||||||||
| Reduction of right-of-use assets | 330 | 315 | |||||||||
Loss (gain) on modification or extinguishment of debt | 9 | (18) | |||||||||
Total gains on derivative instruments, net | (393) | (5,411) | |||||||||
Net cash provided by (used for) settlement of derivative instruments | 36 | (102) | |||||||||
| Deferred taxes | 41 | 1,581 | |||||||||
| Other, net | 8 | 6 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Trade and other receivables | 387 | 1,249 | |||||||||
| Inventory | 56 | 418 | |||||||||
| Margin deposits | (88) | 98 | |||||||||
| Accounts payable and accrued liabilities | (324) | (1,551) | |||||||||
| Total deferred revenue | (41) | (78) | |||||||||
| Total operating lease liabilities | (324) | (305) | |||||||||
| Other, net | (56) | (44) | |||||||||
Net cash provided by operating activities | 2,362 | 5,000 | |||||||||
| Cash flows from investing activities | |||||||||||
| Property, plant and equipment, net | (1,153) | (1,044) | |||||||||
| Investment in equity method investments | (12) | (18) | |||||||||
| Other | (20) | (6) | |||||||||
Net cash used in investing activities | (1,185) | (1,068) | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from issuances of debt | 2,725 | 1,397 | |||||||||
| Redemptions, repayments and repurchases of debt | (3,021) | (1,098) | |||||||||
| Distributions to non-controlling interest | (451) | (513) | |||||||||
| Payments related to tax withholdings for share-based compensation | (41) | (56) | |||||||||
| Repurchase of common stock | (1,699) | (774) | |||||||||
| Dividends to stockholders | (202) | (195) | |||||||||
| Other, net | (57) | (14) | |||||||||
Net cash used in financing activities | (2,746) | (1,253) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents | (2) | 3 | |||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | (1,571) | 2,682 | |||||||||
| Cash, cash equivalents and restricted cash and cash equivalents—beginning of period | 4,525 | 2,487 | |||||||||
| Cash, cash equivalents and restricted cash and cash equivalents—end of period | $ | 2,954 | $ | 5,169 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
NOTE 1—NATURE OF OPERATIONS AND BASIS OF PRESENTATION
We operate two natural gas liquefaction and export facilities located in Cameron Parish, Louisiana at Sabine Pass and near Corpus Christi, Texas (respectively, the “Sabine Pass LNG Terminal” and “Corpus Christi LNG Terminal”).
CQP owns the Sabine Pass LNG Terminal, which has natural gas liquefaction facilities consisting of six operational Trains, for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”). The Sabine Pass LNG Terminal also has operational regasification facilities that include five LNG storage tanks, vaporizers and three marine berths. We also own and operate a 94-mile natural gas supply pipeline that interconnects the Sabine Pass LNG Terminal with several large interstate and intrastate pipelines (the “Creole Trail Pipeline”). As of June 30, 2024, we owned 100% of the general partner interest, a 48.6% limited partner interest and 100% of the incentive distribution rights of CQP.
The Corpus Christi LNG Terminal currently has three operational Trains for a total production capacity of approximately 15 mtpa of LNG, three LNG storage tanks and two marine berths. Additionally, we are constructing an expansion of the Corpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) consisting of seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG. We also own a 21.5-mile natural gas supply pipeline that interconnects the Corpus Christi LNG Terminal with several large interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the existing assets at the Corpus Christi LNG Terminal and the Corpus Christi Stage 3 Project, the “CCL Project”).
We are pursuing expansion projects to provide additional liquefaction capacity at the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”), and we have commenced commercialization to support the additional liquefaction capacity associated with these potential expansion projects. The development of these sites or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive FID.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Cheniere have been prepared in accordance with GAAP for interim financial information and in accordance with Rule 10-01 of Regulation S-X and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. Accordingly, these Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2023.
Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2024.
Recent Accounting Standards
ASU 2023-07
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280). This guidance requires a public entity, including entities with a single reportable segment, to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. We plan to adopt this guidance and conform with the applicable disclosures retrospectively when it becomes mandatorily effective for our annual report for the year ending December 31, 2024.
ASU 2023-09
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740). This guidance further enhances income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. We plan to adopt this guidance and conform with the disclosure requirements when it becomes mandatorily effective for our annual report for the year ending December 31, 2025.
8
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 2—TRADE AND OTHER RECEIVABLES, NET OF CURRENT EXPECTED CREDIT LOSSES
Trade and other receivables, net of current expected credit losses, consisted of the following (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Trade receivables | ||||||||||||||
SPL and CCL | $ | 431 | $ | 525 | ||||||||||
Cheniere Marketing | 212 | 451 | ||||||||||||
| Other | 4 | 4 | ||||||||||||
| Other receivables | 72 | 126 | ||||||||||||
| Total trade and other receivables, net of current expected credit losses | $ | 719 | $ | 1,106 | ||||||||||
NOTE 3—INVENTORY
Inventory consisted of the following (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Materials | $ | 213 | $ | 207 | ||||||||||
| LNG | 75 | 88 | ||||||||||||
| LNG in-transit | 73 | 112 | ||||||||||||
| Natural gas | 24 | 35 | ||||||||||||
| Other | 2 | 3 | ||||||||||||
| Total inventory | $ | 387 | $ | 445 | ||||||||||
NOTE 4—PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
Property, plant and equipment, net of accumulated depreciation consisted of the following (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Terminal and related assets | ||||||||||||||
| Terminal and interconnecting pipeline facilities | $ | 34,154 | $ | 34,069 | ||||||||||
| Land | 464 | 463 | ||||||||||||
| Construction-in-process | 4,555 | 3,480 | ||||||||||||
| Accumulated depreciation | (6,668) | (6,099) | ||||||||||||
| Total terminal and related assets, net of accumulated depreciation | 32,505 | 31,913 | ||||||||||||
| Fixed assets and other | ||||||||||||||
| Computer and office equipment | 39 | 37 | ||||||||||||
| Furniture and fixtures | 31 | 31 | ||||||||||||
| Computer software | 128 | 125 | ||||||||||||
| Leasehold improvements | 44 | 43 | ||||||||||||
| Other | 22 | 21 | ||||||||||||
| Accumulated depreciation | (191) | (183) | ||||||||||||
| Total fixed assets and other, net of accumulated depreciation | 73 | 74 | ||||||||||||
| Assets under finance leases | ||||||||||||||
| Marine assets | 583 | 532 | ||||||||||||
| Accumulated depreciation | (82) | (63) | ||||||||||||
| Total assets under finance leases, net of accumulated depreciation | 501 | 469 | ||||||||||||
| Property, plant and equipment, net of accumulated depreciation | $ | 33,079 | $ | 32,456 | ||||||||||
Depreciation expense was $303 million and $295 million during the three months ended June 30, 2024 and 2023, respectively, and $603 million and $591 million during the six months ended June 30, 2024 and 2023, respectively.
9
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 5—DERIVATIVE INSTRUMENTS
We have entered into the following derivative instruments:
•commodity derivatives consisting of the following (collectively, “Commodity Derivatives”):
◦natural gas and power supply contracts, including those under our IPM agreements, for the development, commissioning and operation of the Liquefaction Projects and expansion projects, as well as the associated economic hedges (collectively, the “Liquefaction Supply Derivatives”); and,
◦LNG derivatives in which we have contractual net settlement and economic hedges on the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (collectively, “LNG Trading Derivatives”); and
•foreign currency exchange (“FX”) contracts to hedge exposure to currency risk associated with cash flows denominated in currencies other than U.S. dollar (“FX Derivatives”), associated with both LNG Trading Derivatives and operations in countries outside of the United States.
We recognize our derivative instruments as either assets or liabilities and measure those instruments at fair value. None of our derivative instruments are designated as cash flow, fair value or net investment hedging instruments, and changes in fair value are recorded within our Consolidated Statements of Operations to the extent not utilized for the commissioning process, in which case such changes are capitalized.
The following table shows the fair value of our derivative instruments that are required to be measured at fair value on a recurring basis, distinguished by the fair value hierarchy levels prescribed by GAAP (in millions):
| Fair Value Measurements as of | |||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||||||||||||||||||||
Liquefaction Supply Derivatives asset (liability) | $ | (24) | $ | — | $ | (1,729) | $ | (1,753) | $ | 25 | $ | 36 | $ | (2,178) | $ | (2,117) | |||||||||||||||||||||||||||||||
LNG Trading Derivatives asset (liability) | (11) | (6) | — | (17) | 30 | (20) | — | 10 | |||||||||||||||||||||||||||||||||||||||
FX Derivatives asset (liability) | — | 3 | — | 3 | — | (17) | — | (17) | |||||||||||||||||||||||||||||||||||||||
We value the Liquefaction Supply Derivatives and LNG Trading Derivatives using a market or option-based approach incorporating present value techniques, as needed, which incorporates observable commodity price curves, when available, and other relevant data. We value our FX Derivatives with a market approach using observable FX rates and other relevant data.
We include a significant portion of the Liquefaction Supply Derivatives as Level 3 within the valuation hierarchy as the fair value is developed through the use of internal models which incorporate significant unobservable inputs. In instances where observable data is unavailable, consideration is given to the assumptions that market participants may use in valuing the asset or liability. To the extent valued using an option pricing model, we consider the future prices of energy units for unobservable periods to be a significant unobservable input to estimated net fair value. In estimating the future prices of energy units, we make judgments about market risk related to liquidity of commodity indices and volatility utilizing available market data. Changes in facts and circumstances or additional information may result in revised estimates and judgments, and actual results may differ from these estimates and judgments. We derive our volatility assumptions based on observed historical settled global LNG market pricing or accepted proxies for global LNG market pricing as well as settled domestic natural gas pricing. Such volatility assumptions also contemplate, as of the balance sheet date, observable forward curve data of such indices, as well as evolving available industry data and independent studies.
In developing our volatility assumptions, we acknowledge that the global LNG industry is inherently influenced by events such as unplanned supply constraints, geopolitical incidents, unusual climate events including drought and uncommonly mild, by historical standards, winters and summers, and real or threatened disruptive operational impacts to global energy
10
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
infrastructure. Our current estimate of volatility includes the impact of otherwise rare events unless we believe market participants would exclude such events on account of their assertion that those events were specific to our company and deemed within our control. As applicable to our natural gas supply contracts, our fair value estimates incorporate market participant-based assumptions pertaining to certain contractual uncertainties, including those related to the availability of market information for delivery points, as well as the timing of satisfaction of certain events or development of infrastructure to support natural gas gathering and transport. We may recognize changes in fair value through earnings that could significantly impact our results of operations if and when such uncertainties are resolved.
The Level 3 fair value measurements of our natural gas positions within the Liquefaction Supply Derivatives could be materially impacted by a significant change in certain natural gas and international LNG prices. The following table includes quantitative information for the unobservable inputs for the Level 3 Liquefaction Supply Derivatives as of June 30, 2024:
Net Fair Value Liability (in millions) | Valuation Approach | Significant Unobservable Input | Range of Significant Unobservable Inputs / Weighted Average (1) | |||||||||||||||||||||||
| Liquefaction Supply Derivatives | $(1,729) | Market approach incorporating present value techniques | Henry Hub basis spread | $(2.063) - $0.445 / $(0.107) | ||||||||||||||||||||||
| Option pricing model | International LNG pricing spread, relative to Henry Hub (2) | 23% - 394% / 175% | ||||||||||||||||||||||||
(1)Unobservable inputs were weighted by the relative fair value of the instruments.
(2)Spread contemplates U.S. dollar-denominated pricing.
Increases or decreases in basis or pricing spreads, in isolation, would decrease or increase, respectively, the fair value of the Liquefaction Supply Derivatives.
The following table shows the changes in the fair value of the Level 3 Liquefaction Supply Derivatives (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Balance, beginning of period | $ | (2,457) | $ | (5,426) | $ | (2,178) | $ | (9,924) | ||||||||||||||||||
Realized and change in fair value gains included in net income (1): | ||||||||||||||||||||||||||
| Included in cost of sales, existing deals (2) | 617 | 635 | 164 | 4,518 | ||||||||||||||||||||||
| Included in cost of sales, new deals (3) | 7 | 3 | 5 | 9 | ||||||||||||||||||||||
| Purchases and settlements: | ||||||||||||||||||||||||||
| Purchases (4) | — | — | — | — | ||||||||||||||||||||||
| Settlements (5) | 104 | 175 | 280 | 780 | ||||||||||||||||||||||
| Transfers out of level 3 (6) | — | 2 | — | 6 | ||||||||||||||||||||||
| Balance, end of period | $ | (1,729) | $ | (4,611) | $ | (1,729) | $ | (4,611) | ||||||||||||||||||
Favorable changes in fair value relating to instruments still held at the end of the period | $ | 624 | $ | 638 | $ | 169 | $ | 4,527 | ||||||||||||||||||
(1)Does not include the realized value associated with derivative instruments that settle through physical delivery, as settlement is equal to the contractually fixed price from trade date multiplied by contractual volume. See settlements line item in this table.
(2)Impact to earnings on deals that existed at the beginning of the period and continue to exist at the end of the period.
(3)Impact to earnings on deals that were entered into during the reporting period and continue to exist at the end of the period.
(4)Includes any day one gain (loss) recognized during the reporting period on deals that were entered into during the reporting period which continue to exist at the end of the period.
(5)Roll-off in the current period of amounts recognized in our Consolidated Balance Sheets at the end of the previous period due to settlement of the underlying instruments in the current period.
11
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
(6)Transferred out of Level 3 as a result of observable market for the underlying natural gas purchase agreements.
Commodity Derivatives
We hold Liquefaction Supply Derivatives which are primarily indexed to the natural gas market and international LNG indices. As of June 30, 2024, the remaining fixed terms of the Liquefaction Supply Derivatives ranged up to approximately 15 years, some of which commence or accelerate upon the satisfaction of certain events or development of infrastructure to support natural gas gathering and transport.
Cheniere Marketing has historically entered into, and may from time to time enter into, LNG transactions that provide for contractual net settlement. Such transactions are accounted for as LNG Trading Derivatives along with financial commodity contracts in the form of swaps or futures. The terms of LNG Trading Derivatives range up to approximately one year.
The following table shows the notional amounts of our Commodity Derivatives:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Liquefaction Supply Derivatives (1) | LNG Trading Derivatives | Liquefaction Supply Derivatives (1) | LNG Trading Derivatives | ||||||||||||||||||||
| Notional amount, net (in TBtu) | 13,520 | — | 14,019 | 49 | |||||||||||||||||||
(1)Inclusive of amounts under contracts with unsatisfied contractual conditions and exclusive of extension options that were uncertain to be taken as of both June 30, 2024 and December 31, 2023.
The following table shows the effect and location of our Commodity Derivatives recorded on our Consolidated Statements of Operations (in millions):
Gain (Loss) Recognized in Consolidated Statements of Operations | |||||||||||||||||||||||||||||
Consolidated Statements of Operations Location (1) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
| LNG Trading Derivatives | LNG revenues | $ | 1 | $ | (46) | $ | 17 | $ | 15 | ||||||||||||||||||||
| LNG Trading Derivatives | Recovery (cost) of sales | (1) | (3) | (20) | (87) | ||||||||||||||||||||||||
| Liquefaction Supply Derivatives (2) | LNG revenues | 2 | (1) | 2 | (6) | ||||||||||||||||||||||||
| Liquefaction Supply Derivatives (2) | Recovery (cost) of sales | 647 | 826 | 379 | 5,497 | ||||||||||||||||||||||||
(1)Fair value fluctuations associated with commodity derivative activities are classified and presented consistently with the item economically hedged and the nature and intent of the derivative instrument.
(2)Does not include the realized value associated with the Liquefaction Supply Derivatives that settle through physical delivery.
FX Derivatives
Cheniere Marketing holds FX Derivatives to protect against the volatility in future cash flows attributable to changes in international currency exchange rates. The FX Derivatives are executed primarily to economically hedge the foreign currency exposure arising from cash flows expended for both physical and financial LNG transactions that are denominated in a currency other than the U.S. dollar. The terms of FX Derivatives range up to approximately one year.
The total notional amount of our FX Derivatives was $214 million and $789 million as of June 30, 2024 and December 31, 2023, respectively.
12
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table shows the effect and location of our FX Derivatives recorded on our Consolidated Statements of Operations (in millions):
Gain (Loss) Recognized in Consolidated Statements of Operations | |||||||||||||||||||||||||||||
| Consolidated Statements of Operations Location | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
FX Derivatives | $ | 2 | $ | (6) | $ | 15 | $ | (8) | |||||||||||||||||||||
Fair Value and Location of Derivative Assets and Liabilities on the Consolidated Balance Sheets
All existing counterparty derivative contracts provide for the unconditional right of set-off in the event of default. We have elected to report derivative assets and liabilities arising from those derivative contracts with the same counterparty and the unconditional contractual right of set-off on a net basis. The use of derivative instruments exposes us to counterparty credit risk, or the risk that a counterparty will be unable to meet its commitments, in instances when our derivative instruments are in an asset position. Additionally, counterparties are at risk that we will be unable to meet our commitments in instances where our derivative instruments are in a liability position. We incorporate both our own nonperformance risk and the respective counterparty’s nonperformance risk in fair value measurements depending on the position of the derivative. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of any applicable credit enhancements, such as collateral postings, set-off rights and guarantees.
The following table shows the fair value and location of our derivative instruments on our Consolidated Balance Sheets (in millions):
| June 30, 2024 | |||||||||||||||||||||||
Liquefaction Supply Derivatives (1) | LNG Trading Derivatives (2) | FX Derivatives | Total | ||||||||||||||||||||
| Consolidated Balance Sheets Location | |||||||||||||||||||||||
| $ | 33 | $ | 2 | $ | 3 | $ | 38 | ||||||||||||||||
| 1,151 | — | — | 1,151 | ||||||||||||||||||||
| Total derivative assets | 1,184 | 2 | 3 | 1,189 | |||||||||||||||||||
| (784) | (19) | — | (803) | ||||||||||||||||||||
| (2,153) | — | — | (2,153) | ||||||||||||||||||||
| Total derivative liabilities | (2,937) | (19) | — | (2,956) | |||||||||||||||||||
| Derivative asset (liability), net | $ | (1,753) | $ | (17) | $ | 3 | $ | (1,767) | |||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
Liquefaction Supply Derivatives (1) | LNG Trading Derivatives (2) | FX Derivatives | Total | ||||||||||||||||||||
| Consolidated Balance Sheets Location | |||||||||||||||||||||||
| $ | 49 | $ | 92 | $ | — | $ | 141 | ||||||||||||||||
| 863 | — | — | 863 | ||||||||||||||||||||
| Total derivative assets | 912 | 92 | — | 1,004 | |||||||||||||||||||
| (651) | (82) | (17) | (750) | ||||||||||||||||||||
| (2,378) | — | — | (2,378) | ||||||||||||||||||||
| Total derivative liabilities | (3,029) | (82) | (17) | (3,128) | |||||||||||||||||||
| Derivative asset (liability), net | $ | (2,117) | $ | 10 | $ | (17) | $ | (2,124) | |||||||||||||||
(1)Does not include collateral posted with counterparties by us of $49 million and $3 million as of June 30, 2024 and December 31, 2023, respectively, which is included in margin deposits on our Consolidated Balance Sheets, and collateral posted by counterparties to us of zero and $4 million as of June 30, 2024 and December 31, 2023, respectively, which is included in other current liabilities on our Consolidated Balance Sheets.
(2)Does not include collateral posted with counterparties by us of $56 million and $15 million, as of June 30, 2024 and December 31, 2023, respectively, which is included in margin deposits on our Consolidated Balance Sheets, and
13
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
collateral posted by counterparties to us of zero and $3 million as of June 30, 2024 and December 31, 2023, respectively, which is included in other current liabilities on our Consolidated Balance Sheets.
Consolidated Balance Sheets Presentation
The following table shows the fair value of our derivatives outstanding on a gross and net basis (in millions) for our derivative instruments that are presented on a net basis on our Consolidated Balance Sheets:
Liquefaction Supply Derivatives | LNG Trading Derivatives | FX Derivatives | ||||||||||||||||||
| As of June 30, 2024 | ||||||||||||||||||||
| Gross assets | $ | 1,536 | $ | 20 | $ | 4 | ||||||||||||||
| Offsetting amounts | (352) | (18) | (1) | |||||||||||||||||
| Net assets (1) | $ | 1,184 | $ | 2 | $ | 3 | ||||||||||||||
| Gross liabilities | $ | (3,064) | $ | (33) | $ | — | ||||||||||||||
| Offsetting amounts | 127 | 14 | — | |||||||||||||||||
| Net liabilities (2) | $ | (2,937) | $ | (19) | $ | — | ||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||
| Gross assets | $ | 1,272 | $ | 94 | $ | — | ||||||||||||||
| Offsetting amounts | (360) | (2) | — | |||||||||||||||||
| Net assets (1) | $ | 912 | $ | 92 | $ | — | ||||||||||||||
| Gross liabilities | $ | (3,095) | $ | (110) | $ | (17) | ||||||||||||||
| Offsetting amounts | 66 | 28 | — | |||||||||||||||||
| Net liabilities (2) | $ | (3,029) | $ | (82) | $ | (17) | ||||||||||||||
(1)Includes current and non-current derivative assets of $38 million and $1,151 million, respectively, as of June 30, 2024 and $141 million and $863 million, respectively, as of December 31, 2023.
(2)Includes current and non-current derivative liabilities of $803 million and $2,153 million, respectively, as of June 30, 2024 and $750 million and $2,378 million, respectively, as of December 31, 2023.
NOTE 6—NON-CONTROLLING INTERESTS AND VARIABLE INTEREST ENTITIES
When we consolidate our VIEs, we include 100% of the assets, liabilities, revenues and expenses of the VIE in our Consolidated Financial Statements; however, when our ownership is less than 100%, we record a non-controlling interest as a component of equity or redeemable non-controlling interest on our Consolidated Balance Sheets, which represents the third party ownership in the net assets of the respective consolidated subsidiary. Additionally, the portion of the net income or loss attributable to the non-controlling interests is reported as net income attributable to non-controlling interest on our Consolidated Statements of Operations.
Substantially all of our consolidated VIEs’ assets and liabilities relate to CQP. We own a 48.6% limited partner interest in CQP, and we also own all of the 2% general partner interest and 100% of the incentive distribution rights in CQP. The remaining 49.4% non-controlling limited partner interest in CQP is held by affiliates of Blackstone Inc. and Brookfield Asset Management, Inc. (“Brookfield”) as well as the public.
14
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table presents the summarized consolidated assets and liabilities (in millions) of our consolidated VIEs, which are included in our Consolidated Balance Sheets. The assets in the table below may only be used to settle obligations of the respective VIEs. In addition, there is no recourse to us for the consolidated VIEs’ liabilities. The assets and liabilities in the table below include third party assets and liabilities of the VIEs only and exclude intercompany balances between the respective VIEs and Cheniere that eliminate in our Consolidated Financial Statements.
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | 351 | $ | 575 | ||||||||||
| Restricted cash and cash equivalents | 79 | 56 | ||||||||||||
| Trade and other receivables, net of current expected credit losses | 291 | 373 | ||||||||||||
| Other current assets, net | 260 | 215 | ||||||||||||
| Total current assets | 981 | 1,219 | ||||||||||||
| Property, plant and equipment, net of accumulated depreciation | 16,108 | 16,212 | ||||||||||||
| Other non-current assets, net | 298 | 309 | ||||||||||||
| Total assets | $ | 17,387 | $ | 17,740 | ||||||||||
| LIABILITIES | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accrued liabilities | $ | 684 | $ | 811 | ||||||||||
| Current debt, net of discount and debt issuance costs | 798 | 300 | ||||||||||||
| Current derivative liabilities | 235 | 196 | ||||||||||||
| Other current liabilities | 138 | 201 | ||||||||||||
| Total current liabilities | 1,855 | 1,508 | ||||||||||||
| Long-term debt, net of unamortized discount and debt issuance costs | 14,803 | 15,606 | ||||||||||||
| Derivative liabilities | 1,319 | 1,531 | ||||||||||||
| Other non-current liabilities | 249 | 160 | ||||||||||||
| Total liabilities | $ | 18,226 | $ | 18,805 | ||||||||||
NOTE 7—ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Natural gas purchases | $ | 552 | $ | 729 | ||||||||||
| Interest costs and related debt fees | 362 | 399 | ||||||||||||
| Terminal and related asset costs | 271 | 235 | ||||||||||||
| Tax-related liabilities | 190 | 68 | ||||||||||||
| Compensation and benefits | 152 | 266 | ||||||||||||
| Accrued dividends | 101 | 3 | ||||||||||||
| LNG purchases | 48 | 23 | ||||||||||||
| Other accrued liabilities | 30 | 57 | ||||||||||||
| Total accrued liabilities | $ | 1,706 | $ | 1,780 | ||||||||||
15
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 8—DEBT
Debt consisted of the following (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
SPL: | ||||||||||||||
| Senior Secured Notes: | ||||||||||||||
5.750% due 2024 | $ | — | $ | 300 | ||||||||||
5.625% due 2025 | 800 | 2,000 | ||||||||||||
5.875% due 2026 | 1,500 | 1,500 | ||||||||||||
5.00% due 2027 | 1,500 | 1,500 | ||||||||||||
4.200% due 2028 | 1,350 | 1,350 | ||||||||||||
4.500% due 2030 | 2,000 | 2,000 | ||||||||||||
4.746% weighted average rate due 2037 | 1,782 | 1,782 | ||||||||||||
Total SPL Senior Secured Notes | 8,932 | 10,432 | ||||||||||||
Revolving credit and guaranty agreement (the “SPL Revolving Credit Facility”) | — | — | ||||||||||||
Total debt - SPL | 8,932 | 10,432 | ||||||||||||
CQP: | ||||||||||||||
| Senior Notes: | ||||||||||||||
4.500% due 2029 | 1,500 | 1,500 | ||||||||||||
4.000% due 2031 | 1,500 | 1,500 | ||||||||||||
3.25% due 2032 | 1,200 | 1,200 | ||||||||||||
5.950% due 2033 | 1,400 | 1,400 | ||||||||||||
5.750% due 2034 | 1,200 | — | ||||||||||||
Total CQP Senior Notes | 6,800 | 5,600 | ||||||||||||
Revolving credit and guaranty agreement (the “CQP Revolving Credit Facility”) | — | — | ||||||||||||
Total debt - CQP | 6,800 | 5,600 | ||||||||||||
CCH: | ||||||||||||||
| Senior Secured Notes: | ||||||||||||||
5.875% due 2025 | — | 1,491 | ||||||||||||
5.125% due 2027 | 1,201 | 1,201 | ||||||||||||
3.700% due 2029 | 1,125 | 1,125 | ||||||||||||
3.788% weighted average rate due 2039 | 2,539 | 2,539 | ||||||||||||
Total CCH Senior Secured Notes | 4,865 | 6,356 | ||||||||||||
Term loan facility agreement (the “CCH Credit Facility”) | — | — | ||||||||||||
Working capital facility agreement (the “CCH Working Capital Facility”) | — | — | ||||||||||||
Total debt - CCH | 4,865 | 6,356 | ||||||||||||
Cheniere: | ||||||||||||||
4.625% Senior Notes due 2028 | 1,500 | 1,500 | ||||||||||||
5.650% Senior Notes due 2034 | 1,500 | — | ||||||||||||
Total Cheniere Senior Notes | 3,000 | 1,500 | ||||||||||||
Revolving credit agreement (the “Cheniere Revolving Credit Facility”) | — | — | ||||||||||||
Total debt - Cheniere | 3,000 | 1,500 | ||||||||||||
| Total debt | 23,597 | 23,888 | ||||||||||||
| Current debt, net of unamortized debt issuance costs | (798) | (300) | ||||||||||||
| Unamortized discount and debt issuance costs | (209) | (191) | ||||||||||||
| Total long-term debt, net of unamortized discount and debt issuance costs | $ | 22,590 | $ | 23,397 | ||||||||||
16
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Credit Facilities
Below is a summary of our committed credit facilities outstanding as of June 30, 2024 (in millions):
SPL Revolving Credit Facility | CQP Revolving Credit Facility | CCH Credit Facility | CCH Working Capital Facility | Cheniere Revolving Credit Facility | |||||||||||||||||||||||||
| Total facility size | $ | 1,000 | $ | 1,000 | $ | 3,260 | $ | 1,500 | $ | 1,250 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||
| Outstanding balance | — | — | — | — | — | ||||||||||||||||||||||||
| Letters of credit issued | 238 | — | — | 110 | — | ||||||||||||||||||||||||
| Available commitment | $ | 762 | $ | 1,000 | $ | 3,260 | $ | 1,390 | $ | 1,250 | |||||||||||||||||||
| Priority ranking | Senior secured | Senior unsecured | Senior secured | Senior secured | Unsecured | ||||||||||||||||||||||||
| Interest rate on available balance (1) | SOFR plus credit spread adjustment of 0.1%, plus margin of 1.0% - 1.75% or base rate plus 0.0% - 0.75% | SOFR plus credit spread adjustment of 0.1%, plus margin of 1.125% - 2.0% or base rate plus 0.125% - 1.0% | SOFR plus credit spread adjustment of 0.1%, plus margin of 1.5% or base rate plus 0.5% | SOFR plus credit spread adjustment of 0.1%, plus margin of 1.0% - 1.5% or base rate plus 0.0% - 0.5% | SOFR plus credit spread adjustment of 0.1%, plus margin of 1.075% - 2.20% or base rate plus 0.075% - 1.2% | ||||||||||||||||||||||||
| Commitment fees on undrawn balance (1) | 0.075% - 0.30% | 0.10% - 0.30% | 0.525% | 0.10% - 0.20% | 0.115% - 0.365% | ||||||||||||||||||||||||
| Maturity date | June 23, 2028 | June 23, 2028 | (2) | June 15, 2027 | October 28, 2026 | ||||||||||||||||||||||||
(1)The margin on the interest rate and the commitment fees is subject to change based on the applicable entity’s credit rating.
(2)The CCH Credit Facility matures the earlier of June 15, 2029 or two years after the substantial completion of the last Train of the Corpus Christi Stage 3 Project.
In addition, as of June 30, 2024, Cheniere Marketing had trade finance facilities with no outstanding borrowings and $65 million in standby letters of credit and bank guarantees issued.
Restrictive Debt Covenants
The indentures governing our senior notes and other agreements underlying our debt contain customary terms and events of default and certain covenants that, among other things, may limit us, our subsidiaries’ and its restricted subsidiaries’ ability to make certain investments or pay dividends or distributions. SPL and CCH are restricted from making distributions under agreements governing their respective indebtedness generally until, among other requirements, appropriate reserves have been established for debt service using cash or letters of credit and a historical debt service coverage ratio and projected debt service coverage ratio of at least 1.25:1.00 is satisfied.
As of June 30, 2024, each of our issuers was in compliance with all covenants related to their respective debt agreements.
Interest Expense
Total interest expense, net of capitalized interest, consisted of the following (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Total interest cost | $ | 309 | $ | 319 | $ | 620 | $ | 640 | ||||||||||||||||||
| Capitalized interest | (52) | (28) | (97) | (52) | ||||||||||||||||||||||
| Total interest expense, net of capitalized interest | $ | 257 | $ | 291 | $ | 523 | $ | 588 | ||||||||||||||||||
17
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Fair Value Disclosures
The following table shows the carrying amount and estimated fair value of our senior notes (in millions):
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Carrying Amount | Estimated Fair Value (1) | Carrying Amount | Estimated Fair Value (1) | |||||||||||||||||||||||
Senior notes | $ | 23,597 | $ | 22,569 | $ | 23,888 | $ | 23,062 | ||||||||||||||||||
(1)As of both June 30, 2024 and December 31, 2023, $3.0 billion of the fair value of our senior notes was classified as Level 3 since these senior notes were valued by applying an unobservable illiquidity adjustment to the price derived from trades or indicative bids of instruments with similar terms, maturities and credit standing. The remainder of the fair value of our senior notes are classified as Level 2, based on prices derived from trades or indicative bids of the instruments.
The estimated fair value of our credit facilities approximates the principal amount outstanding because the interest rates are variable and reflective of market rates and the debt may be repaid, in full or in part, at any time without penalty.
NOTE 9—LEASES
We are the lessee of LNG vessels leased under time charters (“vessel charters”) as well as tug vessels, office space and facilities, land sites and other equipment. All of our leases where we are the lessee are classified as operating leases except for certain of our vessel charters, tug vessels and other equipment, which are classified as finance leases.
Future annual minimum lease payments for operating and finance leases as of June 30, 2024 are as follows (in millions):
| Years Ending December 31, | Operating Leases | Finance Leases | |||||||||
| 2024 | $ | 409 | $ | 35 | |||||||
| 2025 | 671 | 72 | |||||||||
| 2026 | 538 | 75 | |||||||||
| 2027 | 441 | 77 | |||||||||
| 2028 | 287 | 73 | |||||||||
| Thereafter | 932 | 355 | |||||||||
| Total lease payments (1) | 3,278 | 687 | |||||||||
| Less: Interest | (441) | (140) | |||||||||
| Present value of lease liabilities | $ | 2,837 | $ | 547 | |||||||
(1)Does not include approximately $3.3 billion of legally binding minimum payments for leases executed as of June 30, 2024 that will commence in future periods, consisting primarily of vessel charters, with fixed minimum lease terms of up to 15 years.
The following table shows the weighted-average remaining lease term and the weighted-average discount rate for our operating leases and finance leases:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Operating Leases | Finance Leases | Operating Leases | Finance Leases | ||||||||||||||||||||
| Weighted-average remaining lease term (in years) | 6.8 | 9.3 | 6.3 | 9.7 | |||||||||||||||||||
| Weighted-average discount rate (1) | 5.0% | 7.5% | 4.7% | 7.7% | |||||||||||||||||||
(1)The weighted average discount rate is impacted by certain finance leases that commenced prior to the adoption of the current leasing standard under GAAP. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets.
18
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table includes other quantitative information for our operating and finance leases (in millions):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities (1) | $ | 568 | $ | 177 | |||||||
| Right-of-use assets obtained in exchange for finance lease liabilities (2) | 74 | 5 | |||||||||
(1)Includes $15 million reclassified from finance leases to operating leases during the six months ended June 30, 2024, as a result of modifications of the underlying tug vessel leases.
(2)Includes $33 million reclassified from operating leases to finance leases during the six months ended June 30, 2024, as a result of modifications of the underlying tug vessel leases.
LNG Vessel Subleases
We sublease certain LNG vessels under charter to third parties while retaining our existing obligation to the original lessor. All of our sublease arrangements have been assessed as operating leases. The following table shows the sublease income recognized in other revenues on our Consolidated Statements of Operations (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Fixed income | $ | 67 | $ | 97 | $ | 165 | $ | 231 | ||||||||||||||||||
| Variable income | 12 | 13 | 18 | 36 | ||||||||||||||||||||||
| Total sublease income | $ | 79 | $ | 110 | $ | 183 | $ | 267 | ||||||||||||||||||
Future annual minimum sublease payments to be received from LNG vessel subleases as of June 30, 2024 are as follows (in millions):
| Years Ending December 31, | Sublease Payments | ||||
| 2024 | $ | 78 | |||
| 2025 | 13 | ||||
| Total sublease payments | $ | 91 | |||
NOTE 10—REVENUES
The following table represents a disaggregation of revenue earned (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenues from contracts with customers | ||||||||||||||||||||||||||
LNG revenues (excluding net derivative gain (loss) below) | $ | 3,037 | $ | 3,972 | $ | 7,045 | $ | 11,009 | ||||||||||||||||||
| Regasification revenues | 34 | 33 | 68 | 67 | ||||||||||||||||||||||
| Other revenues (1) | 76 | 42 | 151 | 70 | ||||||||||||||||||||||
| Total revenues from contracts with customers | 3,147 | 4,047 | 7,264 | 11,146 | ||||||||||||||||||||||
| 5 | (53) | 34 | 1 | |||||||||||||||||||||||
| 79 | 110 | 183 | 267 | |||||||||||||||||||||||
| Other revenues | 20 | (2) | 23 | (2) | ||||||||||||||||||||||
| Total revenues | $ | 3,251 | $ | 4,102 | $ | 7,504 | $ | 11,412 | ||||||||||||||||||
(1)Includes revenues from LNG vessel subcharters that do not qualify as leases for accounting purposes.
19
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
Contract Assets and Liabilities
The following table shows our contract assets, net of current expected credit losses, which are classified as other current assets, net and other non-current assets, net on our Consolidated Balance Sheets (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Contract assets, net of current expected credit losses | $ | 298 | $ | 250 | ||||||||||
The following table reflects the changes in our contract liabilities, which are included in deferred revenue and other non-current liabilities on our Consolidated Balance Sheets (in millions):
| Six Months Ended June 30, 2024 | ||||||||
| Deferred revenue, beginning of period | $ | 294 | ||||||
| Cash received but not yet recognized in revenue | 128 | |||||||
| Revenue recognized from prior period deferral | (154) | |||||||
| Deferred revenue, end of period | $ | 268 | ||||||
Transaction Price Allocated to Future Performance Obligations
Because many of our sales contracts have long-term durations, we are contractually entitled to significant future consideration which we have not yet recognized as revenue. The following table discloses the aggregate amount of the transaction price that is allocated to performance obligations that have not yet been satisfied:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Unsatisfied Transaction Price (in billions) | Weighted Average Recognition Timing (years) (1) | Unsatisfied Transaction Price (in billions) | Weighted Average Recognition Timing (years) (1) | |||||||||||||||||||||||
| LNG revenues (2) | $ | 107.8 | 9 | $ | 111.0 | 9 | ||||||||||||||||||||
| Regasification revenues | 0.6 | 3 | 0.7 | 3 | ||||||||||||||||||||||
| Total revenues | $ | 108.4 | $ | 111.7 | ||||||||||||||||||||||
(1)The weighted average recognition timing represents an estimate of the number of years during which we shall have recognized half of the unsatisfied transaction price.
(2)We may enter into contracts to sell LNG that are conditioned upon one or both of the parties achieving certain milestones such as reaching FID on a certain liquefaction Train, obtaining financing or achieving substantial completion of a Train and any related facilities. These contracts are included in the transaction price above when the conditions are considered probable of being met and consideration is not otherwise constrained from ultimate pricing and receipt.
The following potential future sources of revenue are omitted from the table above under exemptions we have elected: (1) all performance obligations that are part of a contract that has an original expected duration of one year or less and (2) substantially all variable consideration under our SPAs and TUAs as well as variable consideration that is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation when that performance obligation qualifies as a series. The amount of revenue from variable fees that is not included in the transaction price will vary based on the future prices of the underlying variable index, primarily Henry Hub, throughout the contract terms, to the extent customers elect to take delivery of their LNG, and adjustments to the consumer price index. Certain of our contracts contain additional variable consideration based on the outcome of contingent events and the movement of various indexes. We have not included such variable consideration in the transaction price to the extent the consideration is considered constrained due to the uncertainty of ultimate pricing and receipt. Additionally, we have excluded variable consideration related to volumes that are contractually subject to additional liquefaction capacity beyond what is currently in construction or operation.
20
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
The following table summarizes the amount of variable consideration earned under contracts with customers included in the table above:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| LNG revenues | 50 | % | 64 | % | 56 | % | 73 | % | |||||||||||||||
| Regasification revenues | 8 | % | 7 | % | 8 | % | 7 | % | |||||||||||||||
NOTE 11—RELATED PARTY TRANSACTIONS
Below is a summary of our related party transactions, all in the ordinary course of business, as reported on our Consolidated Statements of Operations (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Other revenues | |||||||||||||||||||||||
Operating Agreement and Construction Management Agreement with Midship Pipeline Company, LLC (“Midship Pipeline”) (1) | $ | 2 | $ | 2 | $ | 4 | $ | 5 | |||||||||||||||
| Operating and maintenance expense | |||||||||||||||||||||||
Natural Gas Transportation and Storage Agreements with Midship Pipeline (2) | 3 | 2 | 5 | 4 | |||||||||||||||||||
Natural Gas Transportation and Storage Agreements with a related party through Brookfield (2) | 16 | 14 | 29 | 30 | |||||||||||||||||||
(1)Midship Pipeline is a subsidiary of Midship Holdings, LLC, which we recognize as an equity method investment.
(2)This related party is partially owned by Brookfield, who indirectly owns a portion of CQP’s limited partner interests.
Below is a summary of our related party balances, all in the ordinary course of business, as reported on our Consolidated Balance Sheets (in millions):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
| Trade and other receivables, net of current expected credit losses | $ | 2 | $ | 3 | ||||||||||
| Accrued liabilities | 5 | 6 | ||||||||||||
NOTE 12—INCOME TAXES
We recorded an income tax provision of $210 million and $319 million during the three and six months ended June 30, 2024, respectively, and an income tax provision of $363 million and $1.7 billion for the same periods of 2023, respectively, which was calculated using the annual effective tax rate method.
Our effective tax rate was 15.3% and 13.8% for the three and six months ended June 30, 2024, respectively, as compared to 17.5% and 17.1% for the same periods of 2023, respectively. The effective tax rate for the periods was lower than the statutory rate of 21.0% primarily due to CQP’s income that is not taxable to us.
21
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 13—NET INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
The following table reconciles basic and diluted weighted average common shares outstanding and common stock dividends declared (in millions, except per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Net income attributable to Cheniere | $ | 880 | $ | 1,369 | $ | 1,382 | $ | 6,803 | ||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 228.4 | 242.3 | 231.3 | 243.1 | ||||||||||||||||||||||
| Dilutive unvested stock | 0.5 | 1.5 | 0.6 | 1.7 | ||||||||||||||||||||||
| Diluted | 228.9 | 243.8 | 231.9 | 244.8 | ||||||||||||||||||||||
Net income per share attributable to common stockholders—basic (1) | $ | 3.85 | $ | 5.65 | $ | 5.97 | $ | 27.99 | ||||||||||||||||||
Net income per share attributable to common stockholders—diluted (1) | $ | 3.84 | $ | 5.61 | $ | 5.96 | $ | 27.79 | ||||||||||||||||||
(1)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.
On June 17, 2024, we declared a quarterly dividend of $0.435 per share of common stock that is payable on August 16, 2024 to stockholders of record as of the close of business on August 9, 2024.
NOTE 14—SHARE REPURCHASE PROGRAMS
The following table presents information with respect to common stock repurchased under our share repurchase program (in millions, except per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Total shares repurchased | 3.14 | 2.30 | 10.66 | 5.36 | |||||||||||||||||||
| Weighted average price paid per share | $ | 158.00 | $ | 146.56 | $ | 158.31 | $ | 146.90 | |||||||||||||||
| Total cost of repurchases (1) | $ | 496 | $ | 337 | $ | 1,688 | $ | 788 | |||||||||||||||
(1)Amount excludes associated commission fees and excise taxes incurred, which are excluded costs under the repurchase program.
As of June 30, 2024, we had approximately $4.5 billion remaining under our share repurchase program, subsequent to authorization by our Board of Directors to increase our previous authorization by $4.0 billion on June 14, 2024. Our share repurchase program authorization is effective through December 31, 2027.
NOTE 15—CUSTOMER CONCENTRATION
The concentration of our customer credit risk in excess of 10% of total revenues and/or trade and other receivables, net of current expected credit losses and contract assets, net of current expected credit losses was as follows:
| Percentage of Total Revenues from External Customers | Percentage of Trade and Other Receivables, Net and Contract Assets, Net from External Customers | |||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | June 30, | December 31, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Customer A | * | * | * | * | 19% | 13% | ||||||||||||||||||||||||||||||||
| Customer B | 11% | * | 11% | * | * | * | ||||||||||||||||||||||||||||||||
* Less than 10%
22
CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(unaudited)
NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental disclosure of substantive cash flow information (in millions):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash paid during the period for interest on debt, net of amounts capitalized | $ | 499 | $ | 685 | |||||||
Cash paid for income taxes, net | 21 | 54 | |||||||||
| Non-cash investing activity (1): | |||||||||||
| Unpaid purchases of property, plant and equipment, net | 229 | 53 | |||||||||
| Non-cash financing activity (1): | |||||||||||
| Unpaid excise taxes on repurchase of common stock | 15 | 6 | |||||||||
| Unpaid repurchase on common stock | — | 13 | |||||||||
| Unpaid dividends on common stock | 99 | 2 | |||||||||
(1)Reflects unpaid portion, as of the end of each period, of assets and liabilities recognized during the respective periods.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information Regarding Forward-Looking Statements
This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical or present facts or conditions, included herein or incorporated herein by reference are “forward-looking statements.” Included among “forward-looking statements” are, among other things:
•statements that we expect to commence or complete construction of our proposed LNG terminals, liquefaction facilities, pipeline facilities or other projects, or any expansions or portions thereof, by certain dates, or at all;
•statements regarding future levels of domestic and international natural gas production, supply or consumption or future levels of LNG imports into or exports from North America and other countries worldwide or purchases of natural gas, regardless of the source of such information, or the transportation or other infrastructure or demand for and prices related to natural gas, LNG or other hydrocarbon products;
•statements regarding any financing transactions or arrangements, or our ability to enter into such transactions;
•statements relating to Cheniere’s capital deployment, including intent, ability, extent and timing of capital expenditures, debt repayment, dividends, share repurchases and execution on the capital allocation plan;
•statements regarding our future sources of liquidity and cash requirements;
•statements relating to the construction of our Trains and pipelines, including statements concerning the engagement of any EPC contractor or other contractor and the anticipated terms and provisions of any agreement with any EPC or other contractor, and anticipated costs related thereto;
•statements regarding any SPA or other agreement to be entered into or performed substantially in the future, including any revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, natural gas liquefaction or storage capacities that are, or may become, subject to contracts;
•statements regarding counterparties to our commercial contracts, construction contracts and other contracts;
•statements regarding our planned development and construction of additional Trains or pipelines, including the financing of such Trains or pipelines;
•statements that our Trains, when completed, will have certain characteristics, including amounts of liquefaction capacities;
•statements regarding our business strategy, our strengths, our business and operation plans or any other plans, forecasts, projections, or objectives, including anticipated revenues, capital expenditures, maintenance and operating costs and cash flows, any or all of which are subject to change;
•statements relating to our goals, commitments and strategies in relation to environmental matters;
•statements regarding legislative, governmental, regulatory, administrative or other public body actions, approvals, requirements, permits, applications, filings, investigations, proceedings or decisions;
•statements regarding our anticipated LNG and natural gas marketing activities; and
•any other statements that relate to non-historical or future information.
All of these types of statements, other than statements of historical or present facts or conditions, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “achieve,” “anticipate,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “intend,” “plan,” “potential,” “predict,” “project,” “pursue,” “target,” the negative of such terms or other comparable terminology. The forward-looking statements contained in this quarterly report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond our control. In addition, assumptions may prove to be inaccurate. We caution that
24
the forward-looking statements contained in this quarterly report are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of a variety of factors described in this quarterly report and in the other reports and other information that we file with the SEC, including those discussed under “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2023. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These forward-looking statements speak only as of the date made, and other than as required by law, we undertake no obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.
Introduction
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future.
Our discussion and analysis includes the following subjects:
Overview
Cheniere, a Delaware corporation, is a Houston-based energy infrastructure company primarily engaged in LNG-related businesses. We provide clean, secure and affordable LNG to integrated energy companies, utilities and energy trading companies around the world. We aspire to conduct our business in a safe and responsible manner, delivering a reliable, competitive and integrated source of LNG to our customers.
LNG is natural gas (methane) in liquid form. The LNG we produce is shipped all over the world, converted back into natural gas (called “regasification”) and then transported via pipeline to homes and businesses and used as an energy source that is essential for heating, cooking, other industrial uses and back up for intermittent energy sources. Natural gas is a cleaner-burning, abundant and affordable source of energy. When LNG is converted back to natural gas, it can be used instead of coal, which reduces the amount of pollution traditionally produced from burning fossil fuels, like sulfur dioxide and particulate matter that enters the air we breathe. Additionally, compared to coal, it produces significantly fewer carbon emissions. By liquefying natural gas, we are able to reduce its volume by 600 times so that we can load it onto special LNG carriers designed to keep the LNG cold and in liquid form for efficient transport overseas.
We are the largest producer of LNG in the United States and we are the second largest LNG operator globally, based on the total production capacity of our liquefaction facilities, which totaled approximately 45 mtpa as of June 30, 2024.
We own and operate a natural gas liquefaction and export facility located in Cameron Parish, Louisiana at Sabine Pass (the “Sabine Pass LNG Terminal”), one of the largest LNG production facilities in the world, through our ownership interest in and management agreements with CQP, which is a publicly traded limited partnership that we formed in 2007. As of June 30, 2024, we owned 100% of the general partner interest, a 48.6% limited partner interest and 100% of the incentive distribution rights of CQP. The Sabine Pass LNG Terminal has six operational Trains, for a total production capacity of approximately 30 mtpa of LNG (the “SPL Project”). The Sabine Pass LNG Terminal also has operational regasification facilities that include five LNG storage tanks with aggregate capacity of approximately 17 Bcfe and vaporizers with regasification capacity of approximately 4 Bcf/d, as well as three marine berths, two of which can accommodate vessels with nominal capacity of up to 266,000 cubic meters and the third berth which can accommodate vessels with nominal capacity of
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up to 200,000 cubic meters. We also own and operate a 94-mile natural gas supply pipeline that interconnects the Sabine Pass LNG Terminal with several large interstate and intrastate pipelines (the “Creole Trail Pipeline”).
Additionally, we own and operate a natural gas liquefaction and export facility located near Corpus Christi, Texas (the “Corpus Christi LNG Terminal”) through CCL, which currently has natural gas liquefaction facilities consisting of three operational Trains for a total production capacity of approximately 15 mtpa of LNG, three LNG storage tanks with aggregate capacity of approximately 10 Bcfe and two marine berths that can each accommodate vessels with nominal capacity of up to 266,000 cubic meters. We are constructing an expansion of the Corpus Christi LNG Terminal (the “Corpus Christi Stage 3 Project”) consisting of seven midscale Trains with an expected total production capacity of over 10 mtpa of LNG. We also own and operate a 21.5-mile natural gas supply pipeline that interconnects the Corpus Christi LNG Terminal with several large interstate and intrastate natural gas pipelines (the “Corpus Christi Pipeline” and together with the existing assets at the Corpus Christi LNG Terminal and the Corpus Christi Stage 3 Project, the “CCL Project”).
Our long-term customer arrangements form the foundation of our business and provide us with significant, stable, long-term cash flows. We have contracted substantially all of our anticipated production capacity under SPAs, in which our customers are generally required to pay a fixed fee with respect to the contracted volumes irrespective of their election to cancel or suspend deliveries of LNG cargoes, and under IPM agreements, in which a gas producer sells natural gas to us on a global LNG or natural gas index price, less a fixed liquefaction fee, shipping and other costs. The SPAs also have a variable fee component, which is generally structured to cover the cost of natural gas purchases, transportation and liquefaction fuel consumed to produce LNG. Since we procure most of our feedstock for LNG production from the U.S., the structure of these contracts helps limit our exposure to fluctuations in U.S. natural gas prices. Through our SPAs and IPM agreements, we have contracted approximately 95% of the total anticipated production from the SPL Project and the CCL Project (collectively, the “Liquefaction Projects”) through the mid-2030s with approximately 16 years of weighted average remaining life as of June 30, 2024, excluding volumes from contracts with terms less than 10 years and volumes that are contractually subject to additional liquefaction capacity beyond what is currently in construction or operation. We also market and sell LNG produced by the Liquefaction Projects that is not contracted by CCL or SPL through our integrated marketing function.
We remain focused on safety, operational excellence and customer satisfaction. Increasing demand for LNG has allowed us to expand our liquefaction infrastructure in a financially disciplined manner. We have increased available liquefaction capacity at our Liquefaction Projects as a result of debottlenecking and other optimization projects. We believe these factors provide a foundation for additional growth in our portfolio of customer contracts in the future. We hold significant land positions at both the Sabine Pass LNG Terminal and the Corpus Christi LNG Terminal, which provide opportunity for further liquefaction capacity expansion. In March 2023, certain of our subsidiaries submitted an application with the FERC under the Natural Gas Act (the “NGA”) for an expansion adjacent to the CCL Project consisting of two midscale Trains with an expected total production capacity of approximately 3 mtpa of LNG (the “CCL Midscale Trains 8 & 9 Project”). Additionally, we are developing an expansion adjacent to the SPL Project with a total production capacity of up to approximately 20 mtpa of LNG, inclusive of estimated debottlenecking opportunities (the “SPL Expansion Project”). In February 2024, certain subsidiaries of CQP submitted an application to the FERC under the NGA for authorization to site, construct and operate the SPL Expansion Project, as well as an application to the DOE requesting authorization to export LNG to FTA countries and non-FTA countries, both of which applications exclude debottlenecking. The development of the CCL Midscale Trains 8 & 9 Project, the SPL Expansion Project or other projects, including infrastructure projects in support of natural gas supply and LNG demand, will require, among other things, acceptable commercial and financing arrangements before we make a positive FID.
Additionally, we are committed to the management of our most important ESG impacts, risks and opportunities. In August 2023, we published The Power of Connection, our fourth Corporate Responsibility (“CR”) report, which details our approach and progress on ESG matters. Our CR report is available at cheniere.com/our-responsibility/reporting-center. Information on our website, including the CR report, is not incorporated by reference into this Quarterly Report on Form 10-Q.
Overview of Significant Events
Our significant events since January 1, 2024 and through the filing date of this Form 10-Q include the following:
Strategic
•In July 2024, Cheniere Marketing entered into a long-term SPA with Galp Trading S.A. (“Galp”), a subsidiary of Galp Energia, SGPS, S.A., under which Galp has agreed to purchase approximately 0.5 mtpa of LNG from Cheniere
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Marketing on a free-on-board basis. Deliveries are expected to commence in the early 2030s and are subject to, among other things, a positive Final Investment Decision with respect to the second train of the SPL Expansion Project.
•In June 2024, we received a positive Environmental Assessment from the FERC relating to the CCL Midscale Trains 8 & 9 Project. We expect to receive all remaining necessary regulatory approvals for the project in 2025.
•In February 2024, certain subsidiaries of CQP submitted an application to the FERC under the NGA for authorization to site, construct and operate the SPL Expansion Project, as well as an application to the DOE requesting authorization to export LNG to FTA countries and non-FTA countries, both of which applications exclude debottlenecking.
Operational
•As of August 2, 2024, approximately 3,570 cumulative LNG cargoes totaling over 245 million tonnes of LNG have been produced, loaded and exported from the Liquefaction Projects.
Financial
•In June 2024, we announced updates to our ‘20/20 Vision’ comprehensive long-term capital allocation plan, which included an increase to our share repurchase authorization by $4 billion through 2027 and, subject to declaration by our Board of Directors, an increase to our quarterly dividend by approximately 15% to $2.00 per common share annualized, commencing with the third quarter of 2024.
•In May 2024, CQP issued $1.2 billion aggregate principal amount of 5.750% Senior Notes due 2034 (the “2034 CQP Senior Notes”). In June 2024, the net proceeds, together with cash on hand, were used to retire $1.2 billion outstanding aggregate principal amount of SPL’s 5.625% Senior Secured Notes due 2025 (the “2025 SPL Senior Notes”).
•In May 2024, in connection with the 2034 CQP Senior Notes issuance, Moody’s Ratings (“Moody’s”) upgraded CQP’s issuer credit rating to Baa2 from Ba1 and revised CQP’s outlook to stable from positive. Moody’s also upgraded SPL’s issuer credit rating to Baa1 from Baa2 and revised SPL’s outlook to stable from positive. In July 2024, Fitch Ratings upgraded CCH’s issuer credit rating to BBB+ from BBB with a stable outlook.
•In March 2024, Cheniere issued $1.5 billion aggregate principal amount of 5.650% Senior Notes due 2034 (the “2034 Cheniere Senior Notes”). The net proceeds from the 2034 Cheniere Senior Notes, together with cash on hand, were used in April 2024 to retire the approximately $1.5 billion outstanding aggregate principal amount of CCH’s 5.875% Senior Secured Notes due 2025 (the “2025 CCH Senior Notes”).
•During the three and six months ended June 30, 2024, we accomplished the following pursuant to our capital allocation priorities:
◦We repurchased over 3.1 million and approximately 10.7 million shares of our common stock, respectively, as part of our share repurchase program for approximately $496 million and $1.7 billion, respectively.
◦SPL repaid $150 million and $300 million, respectively, of outstanding aggregate principal amount of its 5.750% Senior Secured Notes due 2024.
◦We paid dividends of $0.435 and $0.870 per share, respectively, of common stock.
◦We continued to invest in accretive organic growth, including our investment in the Corpus Christi Stage 3 Project, as further described under Investing Cash Flows in Sources and Uses of Cash within Liquidity and Capital Resources.
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Results of Operations
Consolidated results of operations
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| (in millions, except per share data) | 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||||||||
| LNG revenues | $ | 3,042 | $ | 3,919 | $ | (877) | $ | 7,079 | $ | 11,010 | $ | (3,931) | |||||||||||||||||||||||
| Regasification revenues | 34 | 33 | 1 | 68 | 67 | 1 | |||||||||||||||||||||||||||||
| Other revenues | 175 | 150 | 25 | 357 | 335 | 22 | |||||||||||||||||||||||||||||
| Total revenues | 3,251 | 4,102 | (851) | 7,504 | 11,412 | (3,908) | |||||||||||||||||||||||||||||
| Operating costs and expenses (recoveries) | |||||||||||||||||||||||||||||||||||
| Cost (recovery) of sales (excluding items shown separately below) | 784 | 912 | (128) | 3,020 | (627) | 3,647 | |||||||||||||||||||||||||||||
| Operating and maintenance expense | 463 | 487 | (24) | 914 | 931 | (17) | |||||||||||||||||||||||||||||
| Selling, general and administrative expense | 99 | 87 | 12 | 200 | 194 | 6 | |||||||||||||||||||||||||||||
| Depreciation and amortization expense | 304 | 297 | 7 | 606 | 594 | 12 | |||||||||||||||||||||||||||||
| Other operating costs and expenses | 13 | 11 | 2 | 22 | 21 | 1 | |||||||||||||||||||||||||||||
| Total operating costs and expenses | 1,663 | 1,794 | (131) | 4,762 | 1,113 | 3,649 | |||||||||||||||||||||||||||||
| Income from operations | 1,588 | 2,308 | (720) | 2,742 | 10,299 | (7,557) | |||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||
| Interest expense, net of capitalized interest | (257) | (291) | 34 | (523) | (588) | 65 | |||||||||||||||||||||||||||||
| Gain (loss) on modification or extinguishment of debt | (9) | (2) | (7) | (9) | 18 | (27) | |||||||||||||||||||||||||||||
| Interest and dividend income | 47 | 55 | (8) | 108 | 89 | 19 | |||||||||||||||||||||||||||||
| Other income, net | 3 | — | 3 | 2 | 3 | (1) | |||||||||||||||||||||||||||||
| Total other expense | (216) | (238) | 22 | (422) | (478) | 56 | |||||||||||||||||||||||||||||
| Income before income taxes and non-controlling interest | 1,372 | 2,070 | (698) | 2,320 | 9,821 | (7,501) | |||||||||||||||||||||||||||||
| Less: income tax provision | 210 | 363 | (153) | 319 | 1,679 | (1,360) | |||||||||||||||||||||||||||||
| Net income | 1,162 | 1,707 | (545) | 2,001 | 8,142 | (6,141) | |||||||||||||||||||||||||||||
| Less: net income attributable to non-controlling interest | 282 | 338 | (56) | 619 | 1,339 | (720) | |||||||||||||||||||||||||||||
| Net income attributable to Cheniere | $ | 880 | $ | 1,369 | $ | (489) | $ | 1,382 | $ | 6,803 | $ | (5,421) | |||||||||||||||||||||||
Net income per share attributable to common stockholders—basic | $ | 3.85 | $ | 5.65 | $ | (1.80) | $ | 5.97 | $ | 27.99 | $ | (22.02) | |||||||||||||||||||||||
Net income per share attributable to common stockholders—diluted | $ | 3.84 | $ | 5.61 | $ | (1.77) | $ | 5.96 | $ | 27.79 | $ | (21.83) | |||||||||||||||||||||||
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Volumes loaded and recognized from the Liquefaction Projects
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| (in TBtu) | 2024 | 2023 | Variance | 2024 | 2023 | Variance | ||||||||||||||||||||||||||||||||
| Volumes loaded during the current period | 552 | 534 | 18 | 1,153 | 1,136 | 17 | ||||||||||||||||||||||||||||||||
| Volumes loaded during the prior period but recognized during the current period | 30 | 39 | (9) | 37 | 56 | (19) | ||||||||||||||||||||||||||||||||
| Less: volumes loaded during the current period and in transit at the end of the period | (30) | (26) | (4) | (30) | (26) | (4) | ||||||||||||||||||||||||||||||||
| Total volumes recognized in the current period | 552 | 547 | 5 | 1,160 | 1,166 | (6) | ||||||||||||||||||||||||||||||||
Components of LNG revenues and corresponding LNG volumes delivered
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | ||||||||||||||||||||||||||||||
LNG revenues (in millions): | |||||||||||||||||||||||||||||||||||
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | $ | 2,755 | $ | 2,752 | $ | 3 | $ | 5,798 | $ | 6,492 | $ | (694) | |||||||||||||||||||||||
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 229 | 1,037 | (808) | 1,022 | 4,281 | (3,259) | |||||||||||||||||||||||||||||
| LNG procured from third parties | — | 132 | (132) | 119 | 132 | (13) | |||||||||||||||||||||||||||||
Net derivative gain (loss) | 5 | (53) | 58 | 35 | 1 | 34 | |||||||||||||||||||||||||||||
| Other revenues | 53 | 51 | 2 | 105 | 104 | 1 | |||||||||||||||||||||||||||||
| Total LNG revenues | $ | 3,042 | $ | 3,919 | $ | (877) | $ | 7,079 | $ | 11,010 | $ | (3,931) | |||||||||||||||||||||||
Volumes delivered as LNG revenues (in TBtu): | |||||||||||||||||||||||||||||||||||
LNG from the Liquefaction Projects sold under third party long-term agreements (1) | 524 | 495 | 29 | 1,062 | 1,006 | 56 | |||||||||||||||||||||||||||||
LNG from the Liquefaction Projects sold by our integrated marketing function under short-term agreements | 28 | 52 | (24) | 98 | 160 | (62) | |||||||||||||||||||||||||||||
| LNG procured from third parties | — | 14 | (14) | 11 | 14 | (3) | |||||||||||||||||||||||||||||
| Total volumes delivered as LNG revenues | 552 | 561 | (9) | 1,171 | 1,180 | (9) | |||||||||||||||||||||||||||||
(1)Long-term agreements include agreements with an initial tenor of 12 months or more.
Net income attributable to Cheniere
Net income attributable to Cheniere declined $489 million and $5.4 billion for the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023. There was a $630 million and $2.6 billion decrease in LNG revenues, net of cost of sales and excluding the effect of derivatives, for the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, the majority of which was attributable to declining international LNG and gas prices and a reduction of volumes sold under short-term agreements as a higher proportion of our LNG was sold under long-term contracts, as further described in Revenues below. The decline between the six month periods was primarily attributable to unfavorable changes in fair value and settlements of derivatives of $5.0 billion (before tax and the impact of non-controlling interest), principally attributable to our IPM agreements, where the associated gains decreased from $4.6 billion during the six months ended June 30, 2023 to $582 million during the six months ended June 30, 2024, mainly due to the impact on fair value of moderating changes in volatility in international gas prices in the current period relative to the same period of 2023. These unfavorable variances were partially offset by:
•$153 million and $1.4 billion favorable variances in income tax provision between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, primarily due to lower taxable earnings; and
•$56 million and $720 million reduction in net income attributable to non-controlling interest between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, substantially all of which is due to a decrease in CQP’s consolidated net income between the comparable periods from decreased revenues, net
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of cost of sales, between the three month periods and from declining gains from changes in fair value and settlements of derivatives between the six month periods.
The following is an additional discussion of the significant drivers of the variance in net income attributable to common stockholders by line item:
Revenues
The decreases of $851 million and $3.9 billion between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023 were primarily attributable to:
•$940 million and $3.3 billion decreases in revenues generated by our marketing function under short-term agreements between the three and six month periods, respectively, due to declining international LNG and gas prices and a reduction of volumes sold under short-term agreements as a result of additional long-term agreements commencing after the second quarter of 2023; and
•$694 million decrease in revenues attributable to declining Henry Hub pricing between the six month periods, to which the majority of our long-term LNG sales contracts are indexed. Although there was a decrease in revenue from Henry Hub pricing between the three month periods, it was mostly offset by the increase in volume from the higher proportion of our volumes sold under long-term agreements.
Operating costs and expenses (recoveries)
There was a $131 million favorable variance between the three months ended June 30, 2024 and 2023 primarily as a result of a $307 million decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices, partially offset by a $176 million unfavorable variance from changes in fair value and settlements of derivatives included in cost of sales.
There was a $3.6 billion unfavorable variance between the six months ended June 30, 2024 and 2023 primarily attributable to a $5.1 billion unfavorable variance from changes in fair value and settlements of derivatives included in cost of sales. $4.0 billion of such unfavorable variance resulted from the moderating volatility in international gas prices during the current period, resulting in decreased non-cash gain in fair value of our IPM agreements indexed to such prices during the six month periods, as described above under the caption Net income attributable to Cheniere, and the remainder of the variance resulted from decreased gains from changes in fair value and settlements of the derivatives associated with other term supply natural gas and power supply contracts. This unfavorable variance was partially offset by a $1.4 billion decrease between the periods in cost of sales excluding the effect of derivative changes described above, primarily as a result of a $1.3 billion decrease in cost of natural gas feedstock largely due to lower U.S. natural gas prices.
Other income (expense)
The $22 million and $56 million favorable variances between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023 were primarily attributable to:
•$34 million and $65 million decreases in interest expense, net of capitalized interest, between the three and six month periods, respectively, primarily due to increases in the extent of interest costs qualifying for capitalization, given the higher carrying value of assets under construction, and additionally due to lower overall interest cost due to debt reduction activities associated with our long-term capital allocation plan.
•$7 million and $27 million increases in loss on modification or extinguishment of debt between the three and six month periods, respectively, from debt reduction activities, as further detailed under Financing Cash Flows in Sources and Uses of Cash within Liquidity and Capital Resources.
•$8 million decrease in interest and dividend income between the three month periods as a result of lower average cash and cash equivalents balances between the respective periods, partially offset by higher interest rates in 2024, and a $19 million increase in interest and dividend income between the six month periods as a result of higher interest income earned on cash and cash equivalents from higher interest rates in 2024.
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Income tax provision
The $153 million and $1.4 billion favorable variances between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023, were primarily attributable to decreases in pre-tax income.
We recorded an income tax provision of $210 million and $319 million during the three and six months ended June 30, 2024, respectively, and an income tax provision of $363 million and $1.7 billion for the same periods of 2023, respectively, which was calculated using the annual effective tax rate method.
Our effective tax rate was 15.3% and 13.8% for the three and six months ended June 30, 2024, respectively, as compared to 17.5% and 17.1% for the same periods of 2023, respectively. The effective tax rate for the periods was lower than the statutory rate of 21.0% primarily due to CQP’s income that is not taxable to us. Our effective tax rate decreased between both comparable periods because a larger percentage of pre-tax income was attributable to CQP’s income that is not taxable to us.
Net income attributable to non-controlling interests
The $56 million and $720 million decreases between the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023 were attributable to a $52 million decrease in CQP’s consolidated net income between the three month periods primarily from decreased revenues, net of cost of sales, and a $1.3 billion decrease in CQP’s consolidated net income between the six month periods primarily from unfavorable changes in fair value and settlements of derivatives, of which $1.0 billion was related to the IPM agreement with Tourmaline Oil Marketing Corp.
Significant factor affecting our results of operations
Below is a significant factor that affects our results of operations.
Gains and losses on derivative instruments
Derivative instruments, which in addition to managing exposure to commodity-related marketing and price risks are utilized to manage exposure to changing interest rates and foreign exchange volatility, are reported at fair value on our Consolidated Financial Statements. For commodity derivative instruments related to our IPM agreements, the underlying LNG sales being economically hedged are accounted for under the accrual method of accounting, whereby revenues expected to be derived from the future LNG sales are recognized only upon delivery or realization of the underlying transaction. Notwithstanding the operational intent to mitigate risk exposure over time, the recognition of derivative instruments at fair value has the effect of recognizing gains or losses relating to future period exposure, and given the significant volumes, long-term duration and volatility in price basis for certain of our derivative contracts, the use of derivative instruments may result in continued volatility of our results of operations based on changes in market pricing, counterparty credit risk and other relevant factors that may be outside of our control. For example, as described in Note 5—Derivative Instruments of our Notes to Consolidated Financial Statements, the fair value of the Liquefaction Supply Derivatives incorporates, as applicable, market participant-based assumptions pertaining to certain contractual uncertainties, including those related to the availability of market information for delivery points, which may require future development of infrastructure, as well as the timing of satisfaction of certain events or development of infrastructure to support natural gas gathering and transport. We may recognize changes in fair value through earnings that could significantly impact our results of operations if and when such uncertainties are resolved.
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Liquidity and Capital Resources
The following information describes our ability to generate and obtain adequate amounts of cash to meet our requirements in the short term and the long term. In the short term, we expect to meet our cash requirements using operating cash flows and available liquidity, consisting of cash and cash equivalents, restricted cash and cash equivalents and available commitments under our credit facilities. Additionally, we expect to meet our long term cash requirements by using operating cash flows and other future potential sources of liquidity, which may include debt and equity offerings by us or our subsidiaries. The table below provides a summary of our available liquidity (in millions). Future material sources of liquidity are discussed below.
| June 30, 2024 | |||||
| Cash and cash equivalents (1) | $ | 2,442 | |||
| Restricted cash and cash equivalents (1) | 512 | ||||
| Available commitments under our credit facilities (2): | |||||
SPL Revolving Credit Facility | 762 | ||||
CQP Revolving Credit Facility | 1,000 | ||||
CCH Credit Facility | 3,260 | ||||
CCH Working Capital Facility | 1,390 | ||||
| Cheniere Revolving Credit Facility | 1,250 | ||||
| Total available commitments under our credit facilities | 7,662 | ||||
| Total available liquidity | $ | 10,616 | |||
(1)Amounts presented include balances held by our consolidated variable interest entities (“VIEs”), as discussed in Note 6—Non-controlling Interests and Variable Interest Entities of our Notes to Consolidated Financial Statements. As of June 30, 2024, assets of our VIEs, which are included in our Consolidated Balance Sheets, included $351 million of cash and cash equivalents and $79 million of restricted cash and cash equivalents.
(2)Available commitments represent total commitments less loans outstanding and letters of credit issued under each of our credit facilities as of June 30, 2024. See Note 8—Debt of our Notes to Consolidated Financial Statements for additional information on our credit facilities and other debt instruments.
Our liquidity position subsequent to June 30, 2024 will be driven by future sources of liquidity and future cash requirements. For a discussion of our future sources and uses of liquidity, see the liquidity and capital resources disclosures in our annual report on Form 10-K for the fiscal year ended December 31, 2023.
Although our sources and uses of cash are presented below from a consolidated standpoint, SPL, CQP, CCH and Cheniere operate with independent capital structures. Certain restrictions or requirements under debt and equity instruments executed by our subsidiaries limit the entity’s use of cash, including the following:
•SPL and CCH are required to deposit all cash received into restricted cash and cash equivalents accounts under certain of their debt agreements. The usage or withdrawal of such cash is restricted to the payment of liabilities related to the Liquefaction Projects and other restricted payments. In addition, SPL and CCH’s operating costs are managed by our subsidiaries under affiliate agreements, which may require SPL and CCH to advance cash to the respective affiliates, however the cash remains restricted for operation and construction of the Liquefaction Projects;
•CQP is required under its partnership agreement to distribute to unitholders all available cash on hand at the end of a quarter less the amount of any reserves established by its general partner. Beginning with the distribution paid in the second quarter of 2022, quarterly distributions by CQP are currently comprised of a base amount plus a variable amount equal to the remaining available cash per unit, which takes into consideration, among other things, amounts reserved for annual debt repayment and capital allocation goals, anticipated capital expenditures to be funded with cash, and cash reserves to provide for the proper conduct of CQP’s business;
•Our 48.6% limited partner interest, 100% general partner interest and incentive distribution rights in CQP limit our right to receive cash held by CQP to the amounts specified by the provisions of CQP’s partnership agreement; and
•SPL and CCH are restricted by affirmative and negative covenants included in certain of their debt agreements in their ability to make certain payments, including distributions, unless specific requirements are satisfied.
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Despite the restrictions noted above, we believe that sufficient flexibility exists within the Cheniere complex to enable each independent capital structure to meet its currently anticipated cash requirements. The sources of liquidity at SPL, CQP and CCH primarily fund the cash requirements of the respective entity, and any remaining liquidity not subject to restriction, as supplemented by liquidity provided by Cheniere Marketing, is available to enable Cheniere to meet its cash requirements.
Corpus Christi Stage 3 Project
The following table summarizes the project completion and construction status of the Corpus Christi Stage 3 Project as of June 30, 2024:
| Overall project completion percentage | 62.4% | ||||||||||
| Completion percentage of: | |||||||||||
| Engineering | 93.7% | ||||||||||
| Procurement | 80.3% | ||||||||||
| Subcontract work | 83.9% | ||||||||||
| Construction | 24.4% | ||||||||||
| Date of expected substantial completion | 1H 2025 - 2H 2026 | ||||||||||
Sources and Uses of Cash
The following table summarizes the sources and uses of our cash, cash equivalents and restricted cash and cash equivalents (in millions). The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, which are referred to elsewhere in this report. Additional discussion of these items follows the table.
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net cash provided by operating activities | $ | 2,362 | $ | 5,000 | |||||||
| Net cash used in investing activities | (1,185) | (1,068) | |||||||||
| Net cash used in financing activities | (2,746) | (1,253) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents | (2) | 3 | |||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | $ | (1,571) | $ | 2,682 | |||||||
Operating Cash Flows
The $2.6 billion decrease between the periods was primarily related to lower cash receipts from the sale of LNG cargoes due to a reduction in both pricing per MMBtu and volumes sold under short-term agreements, although this exposed us less to declining international LNG and gas prices in the current year as a higher proportion of our LNG was sold under long-term agreements. The decrease was partially offset by lower cash outflows for natural gas feedstock, mostly due to lower U.S. natural gas prices.
We became subject to the 15% CAMT beginning in 2024. Accordingly, our U.S. federal income tax obligations are expected to accelerate relative to prior periods, subject to and conditioned on variability in our pre-tax GAAP income, including period-to-period volatility attributable to changes in the fair value of our derivative instruments. As any accelerated CAMT tax liability provides an offsetting credit against our regular U.S. federal income tax liability for future years, we expect that any future impact will be limited to timing differences. Please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2023 for additional discussion of the potential impacts of CAMT on our future liquidity.
Investing Cash Flows
Our investing net cash outflows in both periods primarily were for the construction costs for the Corpus Christi Stage 3 Project, which were $909 million during the six months ended June 30, 2024 compared to $729 million in the comparable period of 2023. We expect to incur a similar level of capital expenditures in the second half of the year as construction work progresses on the Corpus Christi Stage 3 Project.
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Financing Cash Flows
The following table summarizes our financing activities (in millions):
| Six Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Proceeds from issuances of debt | $ | 2,725 | $ | 1,397 | ||||||||||
| Redemptions, repayments and repurchases of debt | (3,021) | (1,098) | ||||||||||||
| Distributions to non-controlling interest | (451) | (513) | ||||||||||||
| Payments related to tax withholdings for share-based compensation | (41) | (56) | ||||||||||||
| Repurchase of common stock | (1,699) | (774) | ||||||||||||
| Dividends to stockholders | (202) | (195) | ||||||||||||
| Other, net | (57) | (14) | ||||||||||||
| Net cash used in financing activities | $ | (2,746) | $ | (1,253) | ||||||||||
Debt Issuances
The following table shows our debt issuances (in millions):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Proceeds from issuances of debt | |||||||||||
| Cheniere: | |||||||||||
| 2034 Cheniere Senior Notes | $ | 1,497 | $ | — | |||||||
| CQP: | |||||||||||
| 2034 CQP Senior Notes | 1,198 | — | |||||||||
5.950% Senior Notes due 2033 | — | 1,397 | |||||||||
| SPL: | |||||||||||
| SPL Revolving Credit Facility | 30 | — | |||||||||
| Total proceeds from issuances of debt | $ | 2,725 | $ | 1,397 | |||||||
Debt Redemptions, Repayments and Repurchases
The following table shows the redemptions, repayments and repurchases of debt, including intra-quarter repayments (in millions):
| Six Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Redemptions, repayments and repurchases of debt | ||||||||||||||
| SPL: | ||||||||||||||
5.750% Senior Secured Notes due 2024 | $ | (300) | $ | (200) | ||||||||||
5.625% Senior Secured Notes due 2025 | (1,200) | — | ||||||||||||
| SPL Revolving Capital Facility | (30) | — | ||||||||||||
| CCH: | ||||||||||||||
7.000% Senior Notes due 2024 | — | (498) | ||||||||||||
5.625% Senior Notes due 2025 | (1,491) | — | ||||||||||||
5.125% Senior Notes due 2027 | — | (69) | ||||||||||||
3.700% Senior Notes due 2029 | — | (237) | ||||||||||||
| 2.742% Senior Notes due 2039 | — | (94) | ||||||||||||
| Total redemptions, repayments and repurchases of debt | $ | (3,021) | $ | (1,098) | ||||||||||
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Repurchase of Common Stock
During the six months ended June 30, 2024 and 2023, we paid $1.7 billion and $774 million to repurchase 10.7 million and 5.4 million shares of our common stock, respectively, under our share repurchase program. As of June 30, 2024, we had approximately $4.5 billion remaining under our share repurchase program.
Cash Dividends to Stockholders
During the six months ended June 30, 2024, we paid aggregate dividends of $0.870 per share of common stock, for a total of $202 million. We paid aggregate dividends of $0.790 per share of common stock for a total of $195 million during the six months ended June 30, 2023.
On June 17, 2024, we declared a quarterly dividend of $0.435 per share of common stock that is payable on August 16, 2024 to stockholders of record as of the close of business on August 9, 2024.
Summary of Critical Accounting Estimates
The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2023.
Recent Accounting Standards
For a summary of recently issued accounting standards, see Note 1—Nature of Operations and Basis of Presentation of our Notes to Consolidated Financial Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Marketing and Trading Commodity Price Risk
We have derivatives consisting of natural gas supply contracts for the commissioning and operation of the SPL Project and the CCL Project, and associated economic hedges (collectively, the “Liquefaction Supply Derivatives”). We have also entered into physical and financial derivatives to hedge the exposure to the commodity markets in which we have contractual arrangements to purchase or sell physical LNG (collectively, “LNG Trading Derivatives”). In order to test the sensitivity of the fair value of the Liquefaction Supply Derivatives and the LNG Trading Derivatives to changes in underlying commodity prices, management modeled a 10% change in the commodity price for natural gas for each delivery location and a 10% change in the commodity price for LNG, respectively, as follows (in millions):
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Fair Value | Change in Fair Value | Fair Value | Change in Fair Value | ||||||||||||||||||||
| Liquefaction Supply Derivatives | $ | (1,753) | $ | 1,466 | $ | (2,117) | $ | 1,526 | |||||||||||||||
| LNG Trading Derivatives | (17) | 14 | 10 | 12 | |||||||||||||||||||
See Note 5—Derivative Instruments of our Notes to Consolidated Financial Statements for additional details about our commodity derivative instruments.
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ITEM 4. CONTROLS AND PROCEDURES
We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.
During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. There have been no material changes to the legal proceedings disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2023.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes share repurchases for the three months ended June 30, 2024:
| Period | Total Number of Shares Purchased | Average Price Paid Per Share (1) | Total Number of Shares Purchased as a Part of Publicly Announced Plans | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans (in millions) (2) | ||||||||||||||||||||||
| April 1-30, 2024 | 1,298,558 | $158.18 | 1,298,558 | $744 | ||||||||||||||||||||||
| May 1-31, 2024 | 1,295,875 | $157.75 | 1,295,875 | $540 | ||||||||||||||||||||||
| June 1-30, 2024 | 547,066 | $158.15 | 547,066 | $4,453 | ||||||||||||||||||||||
| Total | 3,141,499 | 3,141,499 | ||||||||||||||||||||||||
(1)The price paid per share was based on the average trading price of our common stock on the dates on which we repurchased the shares.
(2)On June 14, 2024, our Board authorized an increase in the existing repurchase program by $4.0 billion, effective through December 31, 2027.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1. During the three-month period ending June 30, 2024, none of our executive officers or directors adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
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ITEM 6. EXHIBITS
| Exhibit No. | ||||||||
| Description | ||||||||
| 4.1 | ||||||||
| 10.1* | ||||||||
| 10.2 | Registration Rights Agreement, dated as of May 22, 2024, among CQP, the guarantor party thereto, BofA Securities, Inc., Citigroup Global Markets Inc., ING Financial Markets LLC, MUFG Securities Americas Inc., SMBC Nikko Securities America, Inc. and Standard Chartered Bank (incorporated by reference to Exhibit 10.1 to CQP's Current Report on Form 8-K (SEC File No. 001-33366), filed on May 22, 2024) | |||||||
| 10.3 | ||||||||
| 10.4* | ||||||||
| 10.5* | ||||||||
| 10.6* | ||||||||
| 10.7* | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS* | XBRL Instance Document | |||||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document | |||||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
| * | Filed herewith. | ||||
| ** | Furnished herewith. | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CHENIERE ENERGY, INC. | |||||||||||
| Date: | August 7, 2024 | By: | /s/ Zach Davis | ||||||||
| Zach Davis | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
| (on behalf of the registrant and as principal financial officer) | |||||||||||
| Date: | August 7, 2024 | By: | /s/ David Slack | ||||||||
| David Slack | |||||||||||
| Senior Vice President and Chief Accounting Officer | |||||||||||
| (on behalf of the registrant and as principal accounting officer) | |||||||||||
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