Cheniere Energy Partners LP (Cheniere Partners) has posted $622 million in net income for the second quarter, up 82 percent against the same period a year ago due to higher commodity derivatives.
That adds up to $4.85 million in first half net earnings, up 35 percent compared to January-June 2022, the partnership said in a press release.
“The increases were primarily due to non-cash favorable changes in fair value of commodity derivatives”, said Cheniere Partners, which produces liquefied natural gas (LNG) and operates LNG logistics.
Derivative gains came mostly from a distribution contract Cheniere Partners signed with Tourmaline Oil Marketing Corp. One of the partners, Cheniere Energy Inc., announced July 15, 2021 a 15-year deal with the fellow LNG producer under which Tourmaline would supply 140 billion British thermal unit (Btu) a day of natural gas starting 2023. Cheniere Energy Inc. gets the distribution right for the LNG derived from the supply, about 0.85 million metric tons per annum (MMtpa).
“Our IPM [integrated production marketing] agreement is structured to provide stable margins on purchases of natural gas and sales of LNG over the life of the agreement and has a fixed fee component, similar to that of LNG sold under our long-term, fixed fee LNG sale and purchase agreement”, Texas state-based Cheniere Partners explained in the earnings announcement.
However, it noted “the long-term duration and international price basis of our IPM agreement makes it particularly susceptible to fluctuations in fair market value from period to period”.
“As a result of continued moderation of international gas price volatility and declines in international forward commodity curves during the three and six months ended June 30, 2023, we recognized approximately $187 million and $1.2 billion of non-cash favorable changes in fair value attributable to the Tourmaline IPM agreement”, Cheniere Partners said.
Cash generation was negatively impacted by “decreased total margins per MMBtu of LNG delivered and decreased regasification revenues related to the previously announced early termination of the Terminal Use Agreement between Sabine Pass LNG, L.P. and Chevron”, Cheniere Partners said.
Chevron Corp. was to buy two MMtpa of LNG from Cheniere Energy Inc.’s Sabine Pass liquefaction facility in Louisiana state, as announced by the owner June 22, 2022. The facility has a total capacity of 30 MMtpa, according to the owner.
“During the three and six months ended June 30, 2023, we recognized in income 353 TBtu and 756 TBtu of LNG, respectively, loaded from the SPL Project, none of which was related to commissioning activities”, Cheniere Partners said.
Cheniere Energy Inc. separately reported $1.369 billion in net income for the second quarter, nearly double that of the same period last year despite LNG revenue dropping to $3.919 billion from $7.873 billion year over year.
It mainly attributed the revenue decrease to weaker prices at Henry Hub, the international natural gas benchmark based in Louisiana to which most of Cheniere Energy Inc.’s long-term contracts are indexed.
Also dragging down LNG revenue were “a reduction of volumes sold under short-term agreements and declining international prices”, Cheniere Energy Inc. said in a filing with the Securities and Exchange Commission.
Cheniere Energy Inc. sold 561 trillion Btu in the April-June period, down 13 trillion Btu from the same quarter last year, according to the regulatory disclosure.
Cheniere Partners ended the last quarter with a total liquidity of $3.7 billion including $1.8 billion in cash and cash equivalents, according to its earnings release. It had current debt obligations of $1.796 billion.
In shareholder terms, Cheniere Partners’ net profit was $0.84 per common unit. It has declared a dividend of $1.03 per common share, while maintaining total distribution for the full year to $4-4.25 per common share.
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