CHENIERE ENERGY PARTNERS, L.P. FORM 10-K

Cheniere Energy Partners Delivers Solid Financial Performance in 2024

Cheniere Energy Partners, L.P. (CQP) is a leading provider of clean, secure and affordable liquefied natural gas (LNG) to customers around the world. In 2024, the company continued to demonstrate its financial strength and resilience, despite some challenges in the global energy market.

Overview of Financial Performance

CQP reported total revenues of $8.7 billion in 2024, down from $9.7 billion in 2023. This decrease was primarily due to lower LNG pricing, as global natural gas prices declined compared to the prior year. However, the company’s production volumes increased by 31 TBtu, or about 2%, due to reduced maintenance activities and cooler weather.

Despite the revenue decline, CQP remained highly profitable, generating net income of $2.5 billion in 2024, down from $4.3 billion in 2023. The decrease in net income was mainly attributable to a $1.7 billion reduction in gains from changes in the fair value of derivative instruments, particularly related to the company’s integrated production marketing (IPM) agreement.

Revenues and Profit Trends

CQP’s revenues are primarily generated from its long-term sale and purchase agreements (SPAs) for the LNG produced at its Sabine Pass liquefaction facility in Louisiana. The company has contracted approximately 80% of its total anticipated production through the mid-2030s, providing a stable and predictable revenue stream.

Under the SPAs, customers pay a fixed fee per MMBtu of LNG, plus a variable fee generally equal to 115% of the Henry Hub natural gas price. This structure helps limit CQP’s exposure to fluctuations in U.S. natural gas prices, as the variable fees are intended to cover the cost of natural gas feedstock and liquefaction.

While LNG revenues declined in 2024 due to lower pricing, the company’s operating costs and expenses also decreased, primarily due to a $740 million reduction in the cost of natural gas feedstock. This helped offset the impact on profitability.

The company’s net income was significantly impacted by changes in the fair value of its derivative instruments, particularly the IPM agreement. These fair value adjustments can introduce volatility in CQP’s results, as they reflect future period exposures rather than the actual operational performance.

Strengths and Weaknesses

One of CQP’s key strengths is its long-term, fixed-fee SPA contracts, which provide a stable and predictable revenue stream. The company’s strategic location at the Sabine Pass LNG Terminal, with access to abundant natural gas resources and infrastructure, is also a significant advantage.

However, the company’s reliance on derivative instruments to manage risks can result in volatility in its financial results, as seen in 2024 with the reduction in gains from fair value changes. Additionally, CQP’s ability to distribute cash to unitholders is subject to certain restrictions and requirements under its debt agreements, which could limit its financial flexibility.

Outlook and Future Prospects

The global LNG market remained relatively tight in 2024, with strong demand from Asia and other regions offsetting a decline in European imports. While spot prices for LNG and natural gas were lower on average compared to 2023, the market is expected to remain volatile, particularly as Europe works to replenish its gas storage ahead of the winter season.

CQP is well-positioned to capitalize on the continued global demand for natural gas and LNG. The company has submitted applications to expand its liquefaction capacity at the Sabine Pass site, which could provide opportunities for future growth. Additionally, the company’s significant land position and strategic location offer potential for further development and investment.

However, the timing and success of any expansion projects will depend on acceptable commercial and financing arrangements. CQP will need to carefully manage its capital allocation and debt levels to maintain financial flexibility and support its growth plans.

Conclusion

Despite the challenges faced in 2024, Cheniere Energy Partners demonstrated its resilience and ability to generate significant cash flows from its long-term SPA contracts. While the company’s financial results were impacted by volatility in derivative markets, its core business model and strategic positioning continue to provide a solid foundation for the future.

As the global demand for clean, affordable energy sources grows, CQP is well-positioned to play a key role in meeting this demand. The company’s focus on disciplined, accretive growth and prudent financial management will be crucial in navigating the evolving energy landscape and delivering value to its unitholders.