Cheniere Reports Fourth Quarter and Full Year 2020 Results and Raises Full Year 2021 Guidance

Cheniere Energy, Inc. (“Cheniere”) (NYSE American: LNG) today announced its financial results for fourth quarter and full year 2020.

HIGHLIGHTS

• Consolidated Adjusted EBITDA¹ of $1.05 billion for fourth quarter 2020 and $3.96 billion for full year 2020, an increase of 35% compared to full year 2019 and within the full year 2020 guidance range. Distributable Cash Flow¹ of approximately $330 million for fourth quarter 2020 and $1.35 billion for full year 2020, an increase of approximately 75% compared to full year 2019 and above the full year 2020 guidance range. Net loss² of $194 million, or $0.77 per share, for fourth quarter 2020 and net loss of $85 million, or $0.34 per share, for full year 2020. Fourth quarter net loss was negatively impacted by non-cash changes in fair value of commodity derivatives. Full year net loss was also negatively impacted by non-cash changes in fair value of commodity derivatives, as well as certain other non-operating losses.
• Increasing full year 2021 Consolidated Adjusted EBITDA guidance to $4.1 - $4.4 billion and full year 2021 Distributable Cash Flow guidance to $1.4 - $1.7 billion based on strong execution and improved market conditions.
• Prepaid $100 million of outstanding borrowings under the Cheniere Term Loan Facility with available cash in fourth quarter 2020, in line with previously announced capital allocation priorities. During full year 2020, allocated over $650 million to debt reduction and capital returns, including redemption of $300 million principal amount of the CCH Holdco convertible notes in cash in March, prepayments totaling $200 million of borrowings under the Cheniere Term Loan Facility, and repurchases of 2.9 million shares of common stock for $155 million.
• Entered into mid-term LNG sales agreements during fourth quarter 2020 for portfolio volumes aggregating over four million tonnes of LNG with multiple counterparties and with contract tenors ranging from five to approximately 11 years, on both free on board (“FOB”) and delivered ex-ship (“DES”) terms.
• Commenced shipment of LNG commissioning cargoes from Train 3 of the CCL Project (defined below) in December as part of the commissioning process. A total of 22 TBtu of commissioning LNG has been exported from Train 3 as of February 19, 2021, and the project remains on track to achieve substantial completion in first quarter 2021.
• Loaded and shipped the first two LNG cargoes under the 25-year LNG Sale and Purchase Agreement (“SPA”) with CPC Corporation, Taiwan in December. The cargoes were delivered in first quarter 2021.

CEO COMMENT

“After a year in which the unprecedented became ordinary course, I am extremely proud to report fourth quarter and full year 2020 financial results that place us solidly within our original, unchanged Consolidated Adjusted EBITDA guidance range and above our Distributable Cash Flow guidance range for the year,” said Jack Fusco, Cheniere’s President and Chief Executive Officer. “We accomplished this while successfully managing a full spectrum of challenges last year, from a global health crisis and its wide-ranging effects, to record low LNG market pricing, and two major hurricanes making landfall near our infrastructure. The results we reported today once again prove the resilience, stability, and reliability of our business through commodity cycles.”

“I am pleased to report the recent winter storm and the resulting effect on electricity and other utilities in the Gulf Coast had no material impact on our assets or operations. We worked closely with state and local officials, suppliers, customers, and other stakeholders to mitigate the impact on our operations through the event while providing critically needed natural gas back into the system to help restore services for human needs.”

“I want to thank the entire Cheniere team for its tireless efforts to adapt to new circumstances and to rise to new challenges, excelling within them and helping us reinforce our reputation within the LNG industry for operational excellence and within the financial community for reliable execution and delivering on our promises.”

“I am confident we can continue to execute in 2021, and many tailwinds are present today. We are in the final stages of commissioning Train 3 at Corpus Christi and look forward to placing that project into service in the coming weeks. Additionally, the global LNG market has strengthened significantly since our last quarterly update, improving our outlook for the remainder of the year. Today we are raising our 2021 financial guidance and are confident in our ability to once again deliver reliable financial results this year and to progress on commercializing additional portfolio volumes as well as Corpus Christi Stage 3.”

2021 REVISED FULL YEAR FINANCIAL GUIDANCE
	Previous									Revised
Consolidated Adjusted EBITDA1	$	3.9		-		$	4.2			$	4.1		-		$	4.4
Distributable Cash Flow1	$	1.2		-		$	1.5			$	1.4		-		$	1.7

SUMMARY AND REVIEW OF FINANCIAL RESULTS
(in millions, except LNG data)	Fourth Quarter											Full Year
	2020				2019				% Change			2020				2019				% Change
Revenues	$	2,787			$	3,007			(7	)%		$	9,358			$	9,730			(4	)%
Net income (loss)2	$	(194	)		$	939			nm			$	(85	)		$	648			nm
Consolidated Adjusted EBITDA1	$	1,052			$	987			7	%		$	3,961			$	2,946			34	%
LNG exported:
Number of cargoes	130				130				—	%		391				429				(9	)%
Volumes (TBtu)	461				462				—	%		1,381				1,516				(9	)%
LNG volumes loaded (TBtu)	464				457				2	%		1,384				1,514				(9	)%

Net loss increased during fourth quarter 2020 as compared to fourth quarter 2019 primarily due to decreased operating income and decreased income tax benefit. Operating income decreased primarily due to a decrease in total margins³, primarily attributable to increased non-cash losses from changes in fair value of commodity and foreign exchange (“FX”) derivatives, principally related to the impact of commodity curve shifts on our long-term Integrated Production Marketing (“IPM”) agreements for the purchase of natural gas and on our forward sales of LNG. LNG volumes recognized in income and margins per MMBtu of LNG delivered to customers were comparable for fourth quarter 2020 and fourth quarter 2019. Tax benefit decreased during fourth quarter 2020 due to a nonrecurrence of the release of a significant portion of the valuation allowance previously recorded against our deferred tax assets in 2019.

During fourth quarter 2020, net loss was negatively impacted by approximately $515 million related to non-cash changes in fair value of commodity and FX derivatives, primarily related to the impact of commodity curve shifts on our IPM agreements for the purchase of natural gas and on our forward sales of LNG.

Our IPM agreements and certain gas supply agreements qualify as derivatives, requiring mark-to-market (“MTM”) accounting. From period to period, we will experience non-cash gains and losses as price movements occur in the underlying commodity curves related to these forward purchases of natural gas. The long-term duration and international price basis of our IPM agreements make them particularly susceptible to fluctuations in fair market value from period to period. While operationally we seek to eliminate commodity risk by matching our natural gas purchases and LNG sales on the same pricing index, our long-term LNG SPAs do not currently qualify for MTM accounting, meaning that the fair market value impact of only one side of the transaction is recognized on our financial statements until the delivery of natural gas and sale of LNG occurs. Our IPM agreements are designed to provide stable margins on purchases of natural gas and sales of LNG over the life of the agreement and have a fixed fee component, similar to that of LNG sold under our long-term, fixed fee LNG SPAs.

Net loss increased during full year 2020 as compared to full year 2019 primarily due to increased tax expense, increased interest expense and interest rate derivative loss, increased loss on modification or extinguishment of debt, and increased loss on our equity method investments, partially offset by an increase in operating income. Operating income increased due to an increase in total margins, partially offset by increased operating costs and expenses primarily due to additional Trains in operation and costs incurred in response to the COVID-19 pandemic. Total margins increased primarily due to increased LNG sold including both physical and cancelled cargoes, primarily as a result of additional Trains in operation, partially offset by increased non-cash losses from changes in fair value of commodity and FX derivatives. Margins per MMBtu of LNG delivered to customers increased slightly during full year 2020 as compared to full year 2019, primarily due to an increase in the proportion of volumes sold under higher-margin long-term contracts, partially offset by a decrease in market margins for short-term cargoes sold.

Consolidated Adjusted EBITDA increased $65 million, or 7%, during fourth quarter 2020 as compared to fourth quarter 2019, primarily due to accelerated recognition of revenues for cargoes cancelled during fourth quarter 2020 that would have been delivered during first quarter 2021 and a slight decrease in selling, general and administrative expense.

Consolidated Adjusted EBITDA increased $1.02 billion, or 34%, during full year 2020 as compared to full year 2019, primarily due to increased LNG sold including both physical and cancelled cargoes, primarily as a result of additional Trains in operation, as well as slightly increased margins per MMBtu of LNG delivered to customers as detailed above, partially offset by increased operating costs and expenses primarily due to additional Trains in operation.

During fourth quarter and full year 2020, we recognized $38 and $969 million, respectively, in revenues associated with LNG cargoes cancelled by customers, of which $38 million would have been recognized subsequent to December 31, 2020, if the cargoes were lifted pursuant to the customers’ delivery schedules. LNG revenues during fourth quarter 2020 excluded $47 million that would have been recognized during the quarter if the cargoes had been lifted, as these revenues were recognized during third quarter 2020 when cancellations were received. Excluding the impact of cargo cancellations related to periods subsequent to December 31, 2020 and those received in prior periods for the current periods, our total revenues would have been $2.80 and $9.32 billion for fourth quarter and full year 2020, respectively.

Share-based compensation expenses included in income totaled $26 and $110 million for fourth quarter and full year 2020, respectively, compared to $37 and $131 million for the comparable 2019 periods.

Our financial results are reported on a consolidated basis. Our ownership interest in Cheniere Energy Partners, L.P. (“Cheniere Partners”) (NYSE American: CQP) as of December 31, 2020 consisted of 100% ownership of the general partner and a 48.6% limited partner interest.

BALANCE SHEET MANAGEMENT

Capital Resources

As of December 31, 2020, we had cash and cash equivalents of $1.6 billion on a consolidated basis, of which $1.2 billion was held by Cheniere Partn