Cheniere Energy Partners see Q2 earnings dip amid market volatility

Cheniere Energy Partners, a major player in the global liquefied natural gas (LNG) market, has announced its financial results for Q2 2024. The company operates two of the largest LNG facilities in the United States: the Sabine Pass LNG facility in Cameron Parish, Louisiana, and the Corpus Christi LNG facility in South Texas.

The Sabine Pass facility, operational since 2016, boasts six fully operational liquefaction trains with a production capacity of approximately 30M tonnes per annum (mta) of LNG. Meanwhile, the Corpus Christi facility began operations in 2018 and has a production capacity of around 15 mta.

Together, these facilities have processed and exported nearly 180M tonnes of LNG across approximately 2,600 cargoes as of August 2024.

For Q2 2024, Cheniere Energy Partners reported revenues of US$1.90Bn, with a net income of US$570M and adjusted EBITDA of US$832M. These figures mark a slight decline in revenue and net income compared with the same period in 2023, where the company posted US$1.93Bn in revenue and US$622M in net income.

Over the first half of 2024, the company generated US$4.20Bn in revenue and US$1.30Bn in net income, reflecting a 14% decrease in revenue and a more pronounced 51% drop in net income compared with the first half of 2023.

The decline in net income is largely attributed to changes in the fair value of the company’s derivative instruments, particularly those associated with its long-term integrated production marketing (IPM) agreements. These agreements, which are linked to international gas and LNG prices, are designed to provide stable margins over the life of the contracts. However, due to the nature of these agreements, they are subject to fluctuations in market value each reporting period, which are recognised in the company’s financial statements.

In plain terms, the IPM agreements involve purchasing natural gas at prices indexed to international markets and selling LNG under long-term contracts. The accounting rules require these contracts to be valued at current market prices every quarter, which can result in reported gains or losses depending on the direction of price movements. Importantly, this accounting practice does not reflect the actual sale of LNG, creating a mismatch in how income is recognised.

During the second quarter of 2024, Cheniere reported US$199M in non-cash favourable changes in the fair value of these agreements, a decrease compared with US$230M in the same period of 2023.

Despite these fluctuations, Cheniere’s operational performance remained robust.

The company exported 103 LNG cargoes totalling 373Tn British thermal units in Q2 2024, reflecting a 5% increase in both the number of cargoes and the total volume exported compared with the same quarter in 2023.

The higher volumes delivered, coupled with lower operating and maintenance expenses, contributed to a 10% increase in adjusted EBITDA compared with the previous year, offsetting some of the impact from lower gross margins per unit of LNG delivered.