Quarterly report pursuant to Section 13 or 15(d)

NOTE 10—Net Income (Loss) per Unit

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NOTE 10—Net Income (Loss) per Unit
 6 Months Ended
Jun. 30, 2011
Net Income (Loss) per Unit [Abstract]  
Earnings Per Share [Text Block]
Cash Distributions and Net Income (Loss) per Common Unit

Cash Distributions

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Generally, our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions paid to date have been made from operating surplus as defined in the partnership agreement. The following provides a summary of distributions paid by us during the six months ended June 30, 2011: 
 
 
 
 
 
 
Total Distribution (in thousands)
Date Paid
 
Period Covered by Distribution
 
Distribution Per Unit
 
Common and General Partner Units
 
Subordinated Units
February 11, 2011
 
October 1, 2010 - December 31, 2010
 
$
0.425

 
11,458

 
—

May 13, 2011
 
January 1, 2011 - March 31, 2011
 
$
0.425

 
11,567

 
—


The subordinated units will receive distributions only to the extent we have available cash above the minimum quarterly distribution requirement for our common unitholders and general partner and certain reserves.  As a result of the assignment of Cheniere Marketing's TUA to Cheniere Investments, effective July 1, 2010, our available cash for distributions was reduced. Therefore, we have not paid distributions on our subordinated units since the distribution made with respect to the quarter ended March 31, 2010.

Net Income (Loss) per Common Unit
 
Net income (loss) per common unit for a given period is based on the distributions that will be made to the unitholders with respect to the period plus an allocation of undistributed net income (loss) based on provisions of the partnership agreement, divided by the weighted average number of common units outstanding. The two class method dictates that net income (loss) for a period be reduced by the amount of available cash that will be distributed with respect to that period and that any residual amount representing undistributed net income be allocated to common unitholders and other participating unitholders to the extent that each unit may share in net income as if all of the net income for the period had been distributed in accordance with the partnership agreement. Undistributed income is allocated to participating securities based on the distribution waterfall for available cash specified in the partnership agreement. Undistributed losses (including those resulting from distributions in excess of net income) are allocated to common units and other participating securities on a pro rata basis based on provisions of the partnership agreement. Distributions are treated as distributed earnings in the computation of earnings per common unit even though cash distributions are not necessarily derived from current or prior period earnings.
    
Under our partnership agreement, the incentive distribution rights ("IDRs") participate in net income (loss) only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in undistributed net income (loss). We did not allocate earnings or losses to IDR holders for the purpose of the two class method earnings per unit calculation for any of the periods presented.

    

The following table provides a reconciliation of net income (loss) and the allocation of net income (loss) to the common units and the subordinated units for purposes of computing net income (loss) per unit (in thousands, except per unit data):
 
 
 
 
Limited Partner Units
 
 
 
 
Total
 
Common Units
 
Subordinated Units
 
General Partner
Three Months Ended June 30, 2011
 
 
 
 
 
 
 
 
Net loss
 
$
(6,868
)
 
 
 
 
 
 
Declared distributions
 
11,679

 
11,446

 
—

 
234

Assumed allocation of undistributed net loss
 
(18,547
)
 
(3,016
)
 
(15,161
)
 
(371
)
Assumed allocation of net income (loss)
 
 
 
$
8,430

 
$
(15,161
)
 
$
(137
)
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
26,754

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.32

 
$
(0.11
)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2010
 
 
 
 
 
 
 
 
Net income
 
$
58,371

 
 
 
 
 
 
Declared distributions
 
11,456

 
11,227

 
—

 
229

Assumed allocation of undistributed net income
 
46,915

 
—

 
45,977

 
938

Assumed allocation of net income
 
 
 
$
11,227

 
$
45,977

 
$
1,167

 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
26,416

 
135,384

 
 
Net income per unit
 
 
 
$
0.43

 
$
0.34

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2011
 
 
 
 
 
 
 
 
Net loss
 
$
(9,078
)
 
 
 
 
 
 
Declared distributions
 
23,246

 
22,781

 
—

 
465

Assumed allocation of undistributed net loss
 
(32,324
)
 
(5,256
)
 
(26,422
)
 
(646
)
Assumed allocation of net income (loss)
 
 
 
$
17,525

 
$
(26,422
)
 
$
(181
)
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
26,592

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.66

 
$
(0.20
)
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2010
 
 
 
 
 
 
 
 
Net income
 
$
117,195

 
 
 
 
 
 
Declared distributions
 
81,624

 
22,454

 
57,538

 
1,632

Assumed allocation of undistributed net income
 
35,571

 
—

 
34,860

 
711

Assumed allocation of net income
 
 
 
$
22,454

 
$
92,398

 
$
2,343

 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
26,416

 
135,384

 
 
Net income per unit
 
 
 
$
0.85

 
$
0.68