Q3 2020 Cheniere Energy Inc Earnings Call
Thank you Randy and good morning, everyone and thank you for your continued support of generic.
We have a lot to cover this morning, I'd like to start by thanking this generic professionals that make my job look so easy.
As you will see from our results and guidance. It has been a challenging and rewarding quarter. During an unimaginable year. This year continues to present us with some pricing challenges and we add shinier continue to rise to those challenges maintain our focus and execute.
I am extremely proud of the results we are reporting today.
You often hear me speak about the resiliency of our people our assets and our business model that has certainly been reinforced today as not only have we navigated the continued direct and indirect challenges of Cove in 19, and a difficult global LNG market, but also the added challenges of two major hurricane.
And recently, making landfall near Sabine pass.
While Sabine pass suffered no significant damage from either hurricane Laura or Hurricane Delta.
Many of our coworkers friends neighbors and other members of the Shinier family were impacted with lost or damaged homes.
We are proud to have responded to those natural disasters quickly and impactfully in support of our employees with shelter in clothing and in the communities, where we live and work in southwest, Louisiana with a 1 million dollar donation and a supply drive with the Astros will we delivered two cents.
Hi, tractor trailers full of goods.
We also managed volatility in the LNG market over the quarter when the third quarter commenced we're in a period of relatively high cargo cancelations in low facility utilization.
By the time, we exited the quarter LNG market conditions had materially strengthened which allowed us to ramp up production and capture additional margin.
Throughout this year's volatility our visibility to achieving full year 2020 financial results within the guidance ranges remain virtually unchanged.
Additionally, we have received an increasing number of questions from our shareholders rugs.
Regarding the global energy transition in the role of natural gas and LNG in a lower carbon future NAV.
Natural gas is an affordable reliable cleaner burning global fuel source, and we're confident and natural gas playing an increasingly important role in the global energy mix for many years as countryside carbon neutrality goals for the second half of this century.
Junnier delivers abundant cleaner burning natural gas from North America to the rest of the world. So it can displace dirtier fuel sources like coal and oil helping these countries achieve their environmental goals.
We remain steadfast on allocating capital to the most attractive risk adjusted opportunities for continued growth in our core liquefaction platform as we simultaneously seek to optimize our environmental footprint and support our customers and their downstream economies and achieving third long term.
Energy security and environmental goals.
Please turn to slide five.
This year with cargo Cancelations, our quarterly results have been difficult for you all to predict.
As a reminder, during the second quarter, our long term customers utilize the optionality in our contracts by canceling cargoes at both Sabine pass and Corpus Christi.
For cargoes canceled during twoq that would have been delivered to our customers and threeq. The revenue related to those cargos over $450 million was brought forward and recognized in twoq since our obligations to deliver those cargoes were extinguished.
During the third quarter of 2020, we only generated $477 million of consolidated adjusted EBITDA and distributable cash flow of over 190 million on revenues of approximately $1.5 billion.
Net loss attributable to common stockholders for the third quarter was $463 million.
Despite a challenging 2020 I am pleased to once again confirm our 2020 full year guidance range of $3.8 billion to $4.1 billion and consolidated adjusted EBITDA and $1.0 billion to $1.3 billion and distributable cash flow.
Im also pleased to report that we are currently tracking to the midpoint of EBITDA range and the high end of the DCF range as the market has improved and we continue to execute and optimize.
Looking ahead to 2021, we look forward to delivering growth in our financial metrics driven primarily by the expected completion and commencement of operations of train three at Corpus Christi early next year.
I am pleased today to introduce full year 2021 guidance of $3.9 billion to $4.2 billion and consolidated adjusted EBITDA and $1.2 billion to $1.5 billion in distributable cash flow.
Construction progress continues to reinforce our legacy of best in class execution factor.
Backfill is progressing Corpus Christi train three and Sabine pass train six on accelerated schedules well ahead of the guaranteed timelines and within budget.
Corpus Christi train three is about 97% complete and the commissioning process is progressing very well with feed gas introduced into the train in October we.
We expect first LNG production from train three in the coming weeks.
I will now predicts substantial completion in the first quarter of 2021.
So being pass train six as approximately 71% complete and backfill continues to project substantial completion in the second half of 2022, having recently accelerated that timeframe.
Once again during the third quarter Zac and the finance team, we're very busy executing on our financial strategy year to date, we have raised over 8.5 billion from our banks and institutional capital providers in support of our long term financial strategies and priorities.
Zach will cover our third quarter capital raising activity, which was highlighted by the successful issuance of our inaugural bond for Shinier energy later on this call.
Now turn to slide six.
Where I'll discuss our upwardly revised run rate production guidance and its strategic implications.
Our efforts to maximize LNG production has yielded continuous improvement in our per train run rate production forecast, which helped drive the range of our run rate financial guidance.
At our analyst day in 2017.
We originally forecast run rate production of 4.3 to 4.6 million tons per annum per train.
Today.
We are raising that level once again to 4.9 to 5.1 million tonnes per annum as our operational expertise, our maintenance optimization and our debottlenecking programs continue to produce incremental reliable production from our existing infrastructure platform.
From our initial guidance. These increases have added an aggregate of up to 7 million tons per year of additional marketable LNG or virtually an entire additional train.
This incremental volume has strategic implications for Shinier from a high level. It means we are less contracted on a run rate basis than we were before and based on our disciplined approach to capital investment decisions, we have incremental volume to sell prior to sanctioning any new infrastructure.
Lecture.
Make no mistake Corpus Christi stage, three is shovel ready and one of the most cost competitive LNG projects worldwide.
But we are committed to capital discipline and will only sanction that project when it meets or exceeds our financial capital investment parameters.
Our most important metric is the level of contracted commercialization of our production.
Weve historically targeted a minimum of 80% of our production under contract but.
But as we continue to improve on our operation and maintenance management.
I am more comfortable with increasing that contracted production target to up to 90%.
Therefore, our commercial efforts are squarely focused on this incremental volume today, meaning the timing of stage three f. I'd will be dependent upon fermina notches stage three but this virtual additional train worth of production as well.
As we enter into additional commitments across our platform.
We will continue to deploy our time and resources to ensure that stage three remains as competitive and efficient as possible.
This incremental production is already in our portfolio and available for our marketing and emerging nation teams to contract on a short medium or long term basis.
The fact that this production requires no meaningful additional capital nor is it depended on the sanctioning of new infrastructure gives us immense flexibility to tailor the structure of these agreements to the needs of our customers.
Now turn to slide seven.
On several of our recent quarterly calls I've spent time, highlighting our SG efforts.
Including our company wide focus on the challenges and opportunities. These important topics present, our climate and sustainability principles and our enhanced disclosures highlighted by the publication of our inaugural corporate responsibility report earlier this year.
I view, the growing importance of the SG in general and the emphasis on de carbonation, specifically has significant tailwinds to our business.
As I said earlier, we are confident that natural gas and particularly LNG has a key role to play in the global transition to a low lower carbon future given its place at the intersection of reliably powering economic activity and providing a cleaner energy source.
Worldwide.
With that being said I'd like to take the discussion one step further and.
To give you a sense of how we are synthesizing this information.
And integrating it into our strategic priorities.
At Cheniere.
We are in a unique position to bring about change when considering the diverse group of partners across our entire business.
From upstream suppliers.
Two our wide range of LNG customers in shipping providers.
Individually and collectively our reach in relationships provide a strong framework to enable the integration of climate solutions that will improve generic footprint and help ensure our partners across the full value chain realize the full environmental benefits.
From our LNG.
To carry out this integration we are methodically reviewing our business to quantify our lifecycle emissions and identify and analyze climate related opportunities across our value chain with.
With a strategic goals of resiliency transparency avoidance and reduction.
I'd like to touch on a couple of these efforts briefly.
First we are analyzing our lifecycle greenhouse gas emissions across shinier is value chain in evaluating the areas, where we have direct and indirect control.
While we have achieved a one third reduction in scope, one greenhouse gas emission intensity from 2016 to 2019.
We continue to seek ways to further reduce the environmental footprint of our own operations, including assessing the economic and operational feasibility of C. O two management solutions at Sabine pass and Corpus Christi.
Outside of our facilities were looking both upstream and downstream at climate focused opportunities. These efforts involve collaborating with our partners throughout the value chain to identify and pursue actionable solutions. While our efforts are relatively early stage. We are encouraged by the mutual support.
Port for these pursuits from our value chain partners.
Along these lines, we are actively pursuing opportunities in each of the following areas.
LNG shipping gas procurement and transportation renewable power procurement Digitization operations and supply chain management. In addition, we continue to evaluate offering environmentally beneficial products and services at our facilities that complement our core business and leverage our infrastructure ppas.
In addition, such as LNG Bunkering services for the marine fuel market.
Each of these initiatives has a potential to not only positively impact the environmental profile of Shinier and our LNG, but also the industry have large while earning returns for our shareholders and solidifying LNG engineers foothold in supporting growing energy demand.
Worldwide through this century.
And now I'll turn the call over to Anatol, who will provide an update on the LNG market.
Thanks, Jack and good morning, everyone. We hope that everyone is continuing to stay safe and healthy please turn to slide nine.
As usual, we'll start with a few comments about the current global environment, then discuss some of the more specific factors relating to the primary LNG markets.
LNG industry has faced some exceptional circumstances in 2020 and has responded with flexibility and resilience. These factors continue to unfold in the third quarter reinforcing the message and validating the ability of our industry to respond to market conditions in an orderly systematic manner. Thanks in large part to the flexibility of us LNG.
As we move through this challenging period in the market and look forward, we continue to be bullish about the way the market is rebalancing the strength of LNG demand recovery and the longer term prospects for natural gas and LNG as key vectors in the global energy transition.
Despite the impacts of Lockdowns in many markets in the second quarter. The industry has still delivered net positive demand growth totals year to date I.
Unlike most of the commodities LNG demand grew 3% year to date through September adding more than 7 million tons of consumption versus last year. The.
The US was the main beneficiary of that growth as exports increased by 34% or 8.3 million tons to approximately 33 million tons year to date.
Global LNG supplies were highest this year in the first quarter with production falling over the course of the summer to below year ago levels by Q3 LNG.
LNG production levels decreased 6% or nearly 6 million tonnes. During the third quarter. This year, our supply was curtailed across both us and non US sources in response to decreasing spot prices as the market became increasingly concerned about exceeding natural gas storage capacity in Europe. The.
The reduction in LNG supply from curtailments helped avert a storage crunch in late summer and position in the market to start responding positively to the rebound in gas and LNG demand were now seeing in many countries as we head towards the winter season.
Now, let's look at those trends in more detail in the European and Asian markets.
Turning to slide 10 global gas market was under pressure throughout the first half of 2020 as a result of a confluence of factors two consecutive unseasonably warm winters in key LNG demand centers. The Corona virus impacts of course on economic activity and record high storage levels, which when combined led to historically low gas prices world.
Right.
Today. However, there are indications that point to stabilizing market conditions in terms of both supply and demand and we're optimistic for a continued recovery both in Europe and Asia.
In Europe, lower volumes of Russian pipeline gas, where the biggest factor, helping the region rebalance during the third quarter as pipeline exports to Europe decreased by over two Bcf a day year on year upstream.
Upstream outages and maintenance elsewhere in Europe also cut indigenous production by one Bcf a day.
In addition, us LNG cargo Cancelations from June onwards added support to the market and total LNG imports into Europe decreased 0.9, Bcf, a day or 1.7 million tons year on year during the third quarter.
Gas demand in Europe recovered to 2019 levels in the third quarter. In addition for the first time since January 2019, the eurozone PMI climb to expansion levels in July and has remained at expansion level sense euros.
Euros on industrial production continues to gradually rise, providing a positive carry over for gas demand and gas fired power generation across the major European markets has stayed firm. Despite the decrease in total generation of about 5% year on year in Q3.
As a result of these factors European gas prices have recovered from their lows earlier this year incentivizing LNG customers to resume lifting cargoes from the U.S.
Recovery indicators in Asia are also encouraging LNG imports into the region increased 8.4% during the third quarter and were slightly higher year on year reduced nuclear generation in Japan, and gas demand growth in India, Taiwan, and China supported LNG use.
Year to date aggregate imports into India, Taiwan, and China increased by over 8 million tons year on year offsetting part of the decreases in South Korea and other nations.
India briefly overtook South Korea in July and August Theres, the world's third largest LNG importer.
Low spot LNG prices drove imports up 10% or 0.6 million tons year on year for the third quarter.
Decreasing domestic gas production also supported imports and the recent markdown unregulated domestic gas prices could potentially further suppress indigenous production, which is down 10% year to date LNG imports into Taiwan also increased by 9% or 0.4 million tons year on year due to summer cooling load.
China's LNG demand increased by 13% or 2 million tons year on year and third quarter, while domestic production growth slowed and pipe imports continued to decline during the period the.
The economic recovery in China continued to accelerate with third quarter GDP expanding by about 5% year on year. Following a 3.2% increase in Q2 of.
Of note and despite the stresses of the pandemic policy priorities in China continued to favor broad based adoption of cleaner burning fuels to displace coal for example, China's ministry of ecology and environment proposed to have more than 7 million households in north China switch from dispersed coal heating to cleaner burning options by the end of August.
Sober.
Assuming half of the target of households, undergo coal to gas switching it's estimated to generate up to three and a half million tons of LNG equivalent of demand. This winter.
Finally, I'd like to turn to some longer term observations.
Let's turn to slide 11.
As Jack mentioned, one of the most popular and pertinent topics. We've been asked about recently is the global energy transition and the role of LNG engineer and that transition Wi.
We firmly believe in natural gas and LNG as key sources of energy for decades to come even as the at the most accelerated energy transition scenarios.
The value of our business model and our infrastructure remains intact and provides a source of significant stable highly visible long term cash flows over the next almost two decades, and we see tailwinds for further growth, both within and well past that timeline the.
The chart on the right of that slide shows several recent global LNG forecast, including our own highlighting a wide range of potential global LNG demand scenarios out to 2014.
The variances between forecasts are largely driven by environmental policy assumptions clearly.
Clearly there is significant expected LNG demand growth in almost all forecast, including east sustainable development scenario most.
Most consultants predict well over 200 million tons of incremental LNG needed in the market by 2040, even under the sustainable development scenario the projects that over 100 million tons of incremental LNG will be needed.
We remain confident in our forecast, which is more bullish for LNG growth than the scenarios as we continue to see enduring support for natural gas and LNG throughout multiple policy initiatives in countries and regions around the world that appreciate natural gas is a critical component in achieving environmental policy targets on carbon emissions.
We have listed some of these initiatives in key gas and LNG markets in the matrix on the left of the slide for reference China and India. For example, aim to increase the share of gas in their primary energy mix from 8% and 6% respectively to 15% by 2030. This can add over 14 tcf of gas demand.
And only a decade in those two countries global.
Global players are following through on these commitments to environmental goals supporting long term increased use of natural gas and LNG in the form of major infrastructure projects. Currently hundreds of billions of dollars are being invested across Europe, and Asia and natural gas projects under construction and if we included plan commitments. The total is well over.
Trillium. Some examples include India's commitment to invest over $60 billion to drive its gas based economy, Europe's commitments of well over $100 billion in gas fired power import terminals and pipelines and China's hundreds of billions of dollars all along the natural gas value chain we.
We highlight re gas capacity, which will not only expand existing import capacities in rapidly growing markets like China, and India, but also add nine new import markets raising the total to over 50 by 2024 from just 15 markets as recently as 2005.
The world is facing multiple challenges in the transition to a lower carbon future. These challenges vary from region to region and we recognize that there is no universal solution today countries' economies are forced to reconcile economic growth and energy security energy affordability and energy intensity challenges, while managing their carb.
And footprint engineer, we seek to support our customers in helping solve their long term energy challenges with flexible solutions and providing them the opportunity to improve quality of life and to balance their economies and environmental targets.
As a cleaner burning fuel with far lower emissions from coal or liquid fuels and power generation natural gas and LNG will play a positive role in ensuring reliable energy supply balancing power grids and contributing to lower carbon energy system globally.
And now I'll hand, the call over to Zack to review our financial results.
Thanks, Anna till and good morning, everyone ill.
Also hope everyone is doing well.
I'm pleased to be here today to review, our third quarter financial results discuss our 2021, an increased run rate guidance and provide an update on our capital markets initiatives and capital allocation priorities.
Turning to slide 13 for the third quarter, we generated a net loss of $463 million consolidated adjusted EBITDA of $477 million and distributable cash flow of over $190 million.
As Jack mentioned, our third quarter results were significantly impacted by the accelerated recognition of revenues in the second quarter related to canceled cargos that were scheduled to be delivered in the third quarter.
As the global LNG market has begun to return to balance the number of cancellations for fourth quarter Cargos has declined meaning that the revenue acceleration that occurred in the second quarter did not recur in the third quarter with fourth quarter results positioned to normalize.
For the nine months ended September Thirtyth, we reported net income of $109 million consolidated adjusted EBITDA of approximately $2.9 billion and distributable cash flow of over $1 billion.
Through September Thirtyth, we exported 920 tbtu of LNG from our liquefaction projects, including a 193 tbtu of LNG or 55 cargoes during the third quarter totaled.
Total volumes produced and exported in the third quarter were 30% and.
More than 80, tbtu lower than exports in the second quarter of this year as cargo Cancelations continued into and peaks during the shoulder season in the third quarter.
For the third quarter, we recognized an income of 168 Tbtu of LNG produced at our liquefaction projects and 31 Tbtu of LNG sourced from third parties.
Approximately 74% of the LNG volumes to recognized in income during the third quarter was sold under either long term Sps for RPM agreements.
The proportion materially consistent with the second quarter.
For the nine months ended September Thirtyth, we recognized an income 932 tbtu of LNG produced at our liquefaction projects and 79 Tbtu of LNG sourced from third parties.
Approximately 77% of the year to date LNG volumes recognized an income was sold under either at long term Sps or IBM agreements.
As a reminder, during the second and third quarters, our results were materially impacted by the timing of revenue recognition related to cargo cancelations.
In the second quarter, we recognized $458 million of revenues related to canceled cargoes that would have been delivered during the third quarter.
During the third quarter, we recognized $47 million of revenues related to canceled cargoes that would have been delivered during the fourth quarter.
Excluding the impact of out of period cargo Cancelations, our third quarter revenue of $1.46 billion would have been approximately $1.87 billion the impact and consolidated adjusted EBITDA.
Similar to the impact on revenue.
Income from operations for the third quarter was $72 million, a decrease of over $850 million compared to the second quarter, driven primarily by the accelerated recognition of revenue in the second quarter for cancelled cargoes that would have been delivered in the third quarter partial.
Partially offset by decreased costs incurred in response to COVID-19 pandemic during the third quarter.
Net loss attributable to common stockholders for the third quarter was $463 million or negative one dollar in 84 cents per share.
An increase of $660 million from the second quarter of 2020.
This increase in net loss was driven primarily by the decrease in income from operations increased Lawson modification or extinguishment of debt primarily related to redeeming through.
The remaining CCH hold co two notes and a portion of our 2021 convertible notes.
An increased loss on our equity method investments.
Actually offset by decreased income attributable to non controlling interest increased.
Increased tax benefit deal.
Decreased interest expense and decreased interest rate derivative loss.
Before turning to guidance and capital allocation priorities I'd like to briefly touch on key financing transactions during the third quarter.
As we discussed on our prior call we redeemed the remaining outstanding CCH Holdco to convertible notes and a significant portion of our 2021 convertible notes in July using this near term loan in a transaction, which both address near term and relatively high cost maturities and prevented significant share dilution, reducing our run rate share count.
By over 40 million shares.
In August Corpus Christi Holdings for CCH received its third and final investment grade rating when Moody's upgraded CCH is senior debt to a rating of BW Cthree Yep.
The upgrade from Moody's is one of the few if not the only upgrades from high yield to investment grade and all of energy in 2020, and further reinforces the credit quality of our project level economics that are the foundation of this company.
Following the upgrade CCH Opportunistically issued $769 million, a 3.52% senior secured notes due 2039 in a private placement transaction, securing the lowest yielding bond ever across this year complex.
The proceeds from the issuance were used to prepay a portion of the CCH credit facility.
In September we refinanced a portion of the outstanding so near term loan balance.
The issuance of an inaugural bond at CES, which Jack highlighted a few minutes ago. This.
This successful issuance was upsized to $2 billion and priced at a foreign five 8% coupon, reflecting the strength with which the debt capital markets views, our business model and operational capability.
Strategically this was a very important transaction for us as it establishes CEO as a corporate issuer, where the path to future unsecured issuance is a critical step in our long term capital strategy.
We remain committed to debt migration from our operating companies to our parent level companies to improve project level resiliency reduce structural subordination that fee line in DC care the balance sheet over time, while also targeting investment grade ratings across the senior complex.
Also during the quarter infrastructure funds managed by Blackstone, and Brookfield purchased and over 40% stake in CGP from Blackstone Energy partners, which had owned since 2012.
Infrastructure funds at Blackstone and Brookfield are among the largest global long term infrastructure investors and the investment made in CQ fee.
As a testament to the quality of our contracted Ellen.
LNG asset platform and to the long term role of Shinier and LNG in meeting growing energy demand worldwide.
Turn now to slide 14.
Driven by continued excellence in operations and execution and despite a myriad of challenges. This year. We are again reconfirming. Our 2020 full year guidance of consolidated adjusted EBITDA of $3.8 billion to $4.1 billion in distributable cash flow of $1 billion to $1.3 billion.
As we look forward to the remainder of 2020, we have hedged virtually all of our remaining expected production volumes and do not expect.
Meaningful variability as a result of any moves in market pricing.
Today, we are issuing twice.
2021, consolidated adjusted EBITDA guidance of 3.9 billion to $4.2 billion distributable cash flow guidance of $1.2 billion to $1.5 billion and CTP distribution guidance of $2.60 to $2.70 per unit.
The largest variable in our projected financial results for 2021 is the timing of completion of Corpus Christi train three.
And our guidance assumes a late first quarter completion of that train.
While we have pre sold approximately 90% of our total expected production capacity for next year.
Consistent with previous years, we currently forecast that a $1 change in market margin would impact EBITDA by approximately $200 million for full year 2021.
With the variability disproportionately weighted to the upside and downside is limited to approximately half of that amount given sub one dollar margins on average across the calendar year in the market today.
Today, we are also pleased to revise upward our run rate financial guidance driven by increased run rate production guidance as Jack described increasing the operating capacity of our existing infrastructure drives increased EBITDA and cash flow and increases our return on investment.
As we have increased production guidance by over half and Mtpa per chain is essentially received an extra trains worth of production in our nine train platform.
Today, we are raising our nine train run rate consolidated adjusted EBITDA guidance to $5.3 billion to $5.7 billion and distributable cash flow guidance to $2.6 billion to $3 billion.
A run rate financial guidance ranges assume production of 4.9 to 5.1 Mtpa per train and marketing margins of $2 to $2.50 per mmbtu.
We are also increasing our run rate distributable cash flow per share guidance to dot $10.25.
To $11.75 per share an increase of $2 or over 20% at the midpoint from our prior DCF per share guidance driven both by increased run rate DCF expectations and a decrease in.
In Runrate shares outstanding by over $40 million as a result of the settlement of the CCH Holdco too and the 2021 Shinier convertible notes in cash as opposed to equity.
Please turn now to slide 15.
In addition to expected growth in both consolidated adjusted EBITDA and distributable cash flow next year. We also forecast 2021 to be an inflection point for free cash flow and we expect to generate significant positive free cash flow for the first time engineers history.
As we continue the commissioning process and near completion of Corpus Christi train three we expect a dramatic reduction in capital commitments and an increase in operational cash flow in 2021.
Leaving a significant amount of free cash flow, which will give us added flexibility on capital allocation.
One of our primary long term balance sheet priorities is achieving investment grade ratings at the senior level by the early to mid 2000 Twentys in order to solidify our long term balance sheet and provide stability to our run rate cash flow per share guidance.
Due to the incremental debt, we took on to address the convertible notes in the third quarter, our capital allocation priority over the short and medium term will be debt paydown.
Executing on that priority, we prepaid $100 million of the senior term loan in the third quarter and we expect to do the same during the fourth quarter in.
And we expect to pay down at least another half a billion dollars of debt during 2021, while still having additional free cash flow.
As we forecast our cash flow generation profile and debt reduction plans through 2021.
To fortify our current fee ratings and remain on track for investment grade metrics in the coming years, we expect to be in a position in the second half of the year. Once Corpus Christi train three is ramped up to resume capital returns via our existing buyback program by potentially initiating a dividend or both.
We view a dividend that LNG as an eventuality as the long term highly contracted nature of our business model is ideally suited for it over time, and we will evaluate timing and magnitude with our board and in consideration of market conditions, our balance sheet and the stock price.
We currently forecast the significant amount of available cash over the next five years approximately $12 billion in.
This amount is expected to provide us flexibility to reduce our consolidated debt and achieve investment grade ratings at the senior level to return capital to shareholders via buybacks and our dividends.
And be in a position to invest in cash flow and credit accretive growth projects, such as Corpus Christi stage, three that meet our contractual and investment return parameters.
That concludes our prepared remarks, thank you for your time and your interest engineer opt.
Operator, we are ready to open the line for questions.
Thank you, Sir and ladies and gentlemen, if you do have any questions. At this time. Please join the queue by pressing star one on your telephone keypad.
If you just make sure you have your mute function turned off to allow us to receive that signal.
Again that star one for any questions, we'll pause for just a quick moment.
All right. Our first question will come from Jeremy today with JP Morgan.
Hi, good morning.
Hi, Jeremy how are you.
Good good thank you.
Just wanted to touch base it seems like there's some news out there with sales.
Year, possibly having new business, we had five with China Awesome agreements reached there just wondering if you could confirm that if that's the case can just is this indicative of broader market kind of all coming together a bit better for signing some some types of lot now fall term contracts at this point our EPS.
Color you could provide there would be helpful.
Jeremy I'll start and then I'll turn it over to Anatol first thanks for the question.
Look we I firmly believe Shinier has the best.
Chinese origination office in Beijing.
Any of the LNG providers Im very pleased with my team. We as you know we were one of the only to sign the long term the only to sign a long term agreement with China early on.
In 2018, and our relationship there just continues to grow stronger and stronger we've spent a significant amount of spot cargos to China here recently and I'll, let anatol address the.
Thanks, Jack Hi, Jeremy Yes, as Jack said, it's a market that we have been focused on almost as soon as we became an operating company.
With our Beijing office opening up in 2017. The team there has done a great job. It's a sign of Chinas progress slide this GDP growth gas demand growth.
Over a bcf a day of growth in total Chinese gas demand and almost a bcf of that came from LNG markets are opening up China is very committed to meeting its 15% objectives type China was launched at the end of Q3. It is a mechanism to allow.
All other companies to access the market third party access to LNG terminals and pipelines and there's a tremendous amount of gas demand growth and we are very well positioned to serve that so very proud to to be in a position to work with foreign energy one of the fastest growing up and coming second.
Tier players and we'll we'll endeavor to find multiple solutions to enable them to meet their downstream objectives of growing gas maintaining their clean.
Clean footprint and finding creative solutions for their customers. So.
Very proud of the team and hopefully a sign of things to come.
Got it sounds really exciting there.
Just wanted to pivot towards kind of some of Zacks comments with regards to capital allocation.
And it seems like based on your guidance DCF could be up to 1.5 billion at the high end. There you talked about paying down a half billion of debt that leaves a billion dollars of cash flow next year that you are able to do a lot with seems like you could start.
Start kind of immediate dividend at that point in or at least in 2022 teams may be somewhat earlier than I guess what was.
Previously described just wondering if you could talk us through why why not why not start the dividend at the back half next year seems like that could drive a whole bunch of new investors, having that income stream.
A few things there, but thanks Jeremy.
First off World. We're in ongoing discussions every quarter with the board about capital allocation, whether it be debt paydown share buybacks or eventually a dividend.
When you look at what the share price is right now and we're talking about $11, a DCF per share and a couple of years.
That decision is built pretty easy that is going to be share buybacks.
But in terms of your numbers you are right. We have around one $2 billion to $1.5 billion of DCF next year, but keep in mind, we'll still have a couple of hundred million left at corpus.
And we have other a few other de bottlenecking and development cost that we will be spending on so it's not all free cash flow you have to strip that out for us but for the year, yes, we have around $1 billion of free cash flow next year for our company that really was just negative for 20 years previously.
That's very helpful. Thank you.
All right folks who would ask just to give us an opportunity to us for everyone to ask their questions. If we could just limit ourselves to one question and one follow up having said that we'll move on to Michael Lapidus with Goldman Sachs.
Hi, guys. Thanks for taking my question, it's actually a little bit of an operational one just curious what will third or fourth time, you brains euro per train guidance in terms of production capacity.
All were something that we're still at war Backfills team will flow, that's enabling wounded build outs, while we're not seeing any of the other wearable LNG liquefaction owners announced similar increases.
And you see potential for others to do that the industry will look around in other words combat that add a lot more liquefaction supply to the industry without having without others, having to build more trains just trying to think through the dynamics for you guys, specifically, but also the volatile market.
Thank you, Michael so I'm going to address that.
Directly so first off.
Yes.
Look we have the best team that.
Of senior professionals that that exist.
It is a it's a team that is very experienced from around the world not only with Conoco Phillips optimization design.
Designs, but also a pie and a whole host of other other things.
And we have the benefit of having the full value chain, meaning the gas procurement side and our ability to deliver gas it at varying pressures and E content, which really influence the performance of that of the trains.
The team has done a fantastic job well.
We call it de bottlenecking, but also maintenance optimization and trying to extend the periods between D. Frost.
Extend our turbine.
Overhauls with with Baker Hughes and.
As well as hitting all the bottlenecks throughout that the the train so I feel very good that we've we continue to Buck what I call the low hanging fruit.
I think there's more room for us to go I don't think we're done yet.
And why that gives us a ton of flexibility.
With our customers to design solutions for them.
Without having to have at CP on additional infrastructure.
I don't want to comment on any of the other.
LNG facilities, because they're all a little bit different from a technological perspective.
But we feel very good about where ray.
What were able to achieve.
Got it thank you Jack much appreciated.
Alright, moving on our next question will come from Christine Cho with Barclays.
Good morning, Thanks for all the color in qual.
I wanted to start off with the comment that you made in the prepared remarks.
About how well quality increased from 80% to 90% of your capacity to contract.
As you increase production off the train origin, who have a track record.
Obviously, the spending to expand that capacity is very capital efficient well, how should we think about what's holding company that we would want to charge and we think that that transferable hi, what types of safe Green and is that a fair way to think about it.
Yes, Christine Thank you and Andrew first let me address the first part going from 80% to 90% that's still.
The my comfort with raising.
Our our contracted amount if you will is with my comfort in my operating and maintenance staff at the facilities.
Again, there are performance has been fantastic this year that we've been thrown everything.
Everything's been thrown at us and we've continued to perform and outperform I think what what everyone's expectations were.
So we as we get more and more comfortable with our stability of operations in our reliability and allows us to feel more comfortable with terming out.
Our production so.
As far as the cost there is a or for the price of the fixed fee. There is a lot of different variables, we can draw upon.
The.
With that and we can go out longer in term or shorter in term or the quantity is bigger and longer than we may we may give them a little more of it.
Of a discount for lack of a better word but.
But we have a lot of flexibility and what we're able to offer.
And as we as we term things up you should expect those to flow into our guidance.
And be reflected in our numbers.
Anecdotally have anything to add on that no. Jack just the flexibility that you hit on allows us to transition from what underpinned. The seven trains, which was a very fixed cost structure of 20 year deals too as you know we've seen a lot of flexibility in lot of creativity as we as we ensure that we generate.
The returns that we need.
While finding a way to.
To support our customers and and.
Readably.
Creatively adjust to market conditions.
Paul Thanks for that and then I guess, just Paul follow long haul homophone gained global run rate guidance.
Market margin Q.
The Q E.
Oh, just wanted to get a Hong Kong, how confident you are the margins over the long term.
And overall, primarily because we have a large portion of it already locked up at the end by or is it all follow on the fact that you know overtime over the long term some of that capacity excess capacity will be contracted up and will likely be at least two to 50, which.
The the company.
And yet today.
The short answer is yes [laughter].
Thanks, Christine we see the again, a growing market for LNG and we think that it is supplied in large part by us projects our projects.
They are cost competitive in that two to 50 range on a delivered basis, that's how we evaluate both ourselves and our global competition and we think that as we move through this period of of oversupply with four years of record volumes coming into the market right.
Our third growth for the LNG market that that ensued.
You know the the period of Q2 and Q3 that we just went through.
The rate at which the market rebounded it's.
It's fairly astonishing and absorbed and and continued to invest in these future projects that will drive medium to long term growth, which will need to dispatch. These two plus dollar margin project. So we are looking through the cycle between what we have on the books today of course, as well as where we see the market.
Playing out over the coming years and decades, we're very comfortable with us to the to 50 range.
I would just add kristine that it's not just the reality of the market, but it really just highlights how durable our EBITDA is.
And then it's also just confirmation that we see the ability to hit all of the investment parameters for a project like stage three in this range Cigna.
Signifying how cost competitive stage three really is.
Got it thank you everyone.
And our next question will come from Michael Webber with Webber research.
Hey, good morning, guys how are you.
Good Michael how are you.
Good.
I wanted to start off with some good news that got announced today.
And maybe maybe analyzing all of this is getting a bit more specific around.
Four and I think we should be focused on it.
Yes.
In terms of its second or third tier of Chinese buyer. My this is a company that I think they bought their first I'll go back in May never commented.
And I've got a small deal PDP.
And I think your associate casinos.
In terms of.
Just curious in terms of their margins in the market is that is that in.
Symptom of owns the the reforms we saw last year around the Chinese natural gas pipeline networks and I'm just trying to think what degree do you view this as a one off versus that second or third tier Chinese buyer and finally, finding a support necessary to be more aggressive in the market. It's just it's a really interesting counterparty to show up taking that.
Oops long medical.
Thanks, Michael Yes, so ever since we started to engage in China in 16, and then of course excel.
We expanded our presence was that was the Beijing office and 17.
We've been engaged in various discussions including policy discussions to help China draw.
Dr. this natural gas penetration in the market contribute.
Contributed a chapter here and there to the to the pipe China discussions and.
We think that this is a very important.
Step that the policymakers have taken to of course take a very large amount of infrastructure into a vehicle that is intended to provide third party access transparency drive access to gas all over the country and and foreign has division to be one of the early movers allow.
On that that dimension and take advantage of this CPA as you mentioned with some other contracts that that BP deal, which which preceded Ari Chile buttoned up but is continuing to grow very aggressively it isn't a great markets in the south China for us the access and due to continued to support.
We do not see it as a one off we think that this is a contrary of companies that we engaged with for years and and look towards the continued success and continued traction there and Michael I have to say that.
One of the issues structurally in China is that the base the city gate natural gas prices didnt fluctuate with with with actual gas prices. So when the spot prices drop.
China's demand did increase because the city gate price was was kept artificially high now you're going to see some of that flow through with some of these other players and pipe China to where they can access lower.
Potentially lower prices and you'll see the demand response increase also so were extremely supportive of the reforms.
Yes, that's a really exciting data point.
And just to follow up maybe kind of.
Vaguely along those lines and maybe a different demands Inc.
Earlier this quarter all those launching Walter.
Ultimately saw the news flow around.
French counterparty potentially backing away from the on the U.S.
Supposedly related to sourcing gas small sourcing flats gas I'm, just curious to what degree does that come up.
With your customer base and specifically as you guys look to commercialize focus phase three is that it.
And is that a one off or is that something you think you will be contending world bomb to access to European markets for you as well.
Well I'll take it a couple of different ways as you know a lot of our foundation customers are European we have two very large French companies that that are long term foundation customers, both total and electricity to France and and.
The focus on.
De Carbonization is here is here to stay.
It hasn't come up with us yet, but we are anticipating that we're moving forward with with the quantifying what we can do.
To make our product.
Much more desirable.
In the event that that we need to and as you know from my talking points from managed sales talking points our initial focus.
He is on identifying and pursuing actionable scientific near term solutions.
That that we can lower our carbon footprint, we do think the whole energy transition discussion is going to be a very long road and take a whole lot of.
I have everything to make work, but go ahead anatol. Thanks, Jack Yeah, just to follow on Jack's comments as you know we view Europe as a very attractive an important market for the coming decade and beyond Europe is investing tremendously in natural gas infrastructure projects in re gas pipes.
Lines reversing pipelines power plants et cetera that are all driving natural gas demand. We continue to engage with the companies will continue to engage in Brussels as Jack said, one of our deliverables due to that discussion are transparent metrics, our actual numbers that that will form the discussion and continue to.
On the discussion as opposed to some of the allegations that you've seen out there in the press and were delivering the most concrete metrics and concrete improvements to that continued engagement with Brussels theres.
Theres no universal solution as we said, we're not going to be everything to all people, but we are confident that we are a key part of the energy transition and part of this solution going forward and you see examples of of that engagement sales infrastructure additions greater gas and LNG penetration into Europe to meet its strategic that Jeff.
Objectives of environmental benefits and and security of supply.
Got you Okay. That's fine guys appreciate it.
Okay.
And moving on from UBI EPS. The next question will come from Cerner pursue any.
Hi, good morning, everyone or afternoon, I guess at this point all I was wondering if we can go Bob can you just.
Session you home with Christine will some of the prepared remarks that you had if I understand sort of the skus and correctly, there's been a lack of upheld ease of new capacity in 19, and 20, we're headed towards a tightening of capacity and.
Or rather a deficit in the market you know in a year or two out is is the concept nail that you want to walk up some of your Cmos capacity on a longer.
Longer term range, which will 578 years type of thing and Thats kind of where and move the target from 85% to 90%.
In in sort of create a more ratable earnings base from from where you ought to just kind of want to understand strategically how youre thinking about it and how you're approaching it.
Thanks here.
So.
Again, we're transitioning from.
A period in our in our corporate evolution, where everything needed to meet the objective of of supporting essentially project financing and as we've talked about we have this additional capacity we have the success of the operations team. We've we've moved the construct of the integrated value chain.
Okay, and now have the flexibility of altering these these commercial solutions and coming up with with products that serve our customers' needs and those products include a mid term product as well as the shorter term solutions that we've always had and the long term. We think this market is.
They market it'll continue to evolve it will continue to be cyclical and all of those components short medium and long term will be part of that part of the conversation in of the LNG market for us for decades to come. So we are very happy to be in a position to offer that and as you said, yes secure margin and how.
That the stability of cash flow, which which we know is important to all of our investors.
Yes, Jeff I can put it.
Please yet.
I was just going to say putting perspective, where we're 38 39 mtpa contracted and we originally thought this would be a 40 million 10 portfolio and we've got 45 million times. So we have some work to do to just contract that up if everybody even more certainty on those cash flows gives.
As a better sense of capital allocation at the same time.
But then when it comes to stage three and projects like that yes, we are going to be looking for the same credit worthy long term contracts to justify another multi billion dollar buildout.
Yeah, I I think that makes sense or mid term product that gets you over 90% would definitely will definitely make a lot of sense.
Maybe pivoting a little bit to the guidance and they do appreciate a lot of the color that was presenting the prepared remarks can you walk us through what takes you to the high end of of your of your guidance and Conversely, what would take you to the low end of the guidance is it you know we have cobot all over again and that's the low end and then.
Everything else is about Optionality and just wondering if you can talk about some of the inputs that get us to the top end versus low end.
Yes are you mean that you have.
At a run rate of one or 2021 22 as well as in 2020 2021.
20.1.
To make it simple it's really on that open capacity that we were speaking to but I'd like to give you just a better sense of the year ahead.
So for 2021, we'll have eight trains on for the first time and we're going to have record production of high Thirtys in terms of Mtpa for the year.
So last year. When we went into 2020, we had about 2 million tons open let's translated into around 100 GB to you and which is why we said a move of a one dollar was about $100 million to EBITDA.
But this year, we're adding that a train and staying on long term contracts and selling forward leaves us with around 200, TV to you or just less than 4 million tons currently open which gets us to that 90% total contracted for for 2021.
So, though we were closer to 95% last year to 90% this year going into 2021, and just keep in mind that we got to train coming on line.
Early next year.
But I'd say, we're actually pretty similar.
If not in a better spot than last year, considering that asymmetric upside.
The margins currently are in the sub $1 range, meaning downside in EBITDA is really capped at around $100 million, which makes it more insulated than last year, but we still have that upside for every dollar is $200 million.
So we're in a pretty good spot and you can imagine we just did budget for the year and when we come up with the range.
Hi, it's around budget in the midpoint.
Perfect out really appreciate the color today and have a great weekend.
Thank you.
Our next question will come from Michael Blum with Wells Fargo.
Great good.
Good morning, everyone.
Just had one quick question, we're starting to see a second wave news kills it locked down in Europe, and possibly spread wider just wanted to get your thoughts on this.
Do you see that how you see that impacting LNG demand and basically are we in for a bit of a rollercoaster here.
Okay.
Okay.
Hey, Michael This is Jack all start here also I mean this is it's been an incredible year, we have put a lot of precautions.
Into our besides in our plans is around co vinod with biometric screening with isolating the workforce.
Et cetera.
And I know that the numbers at least here around Usten in Louisiana and Texas.
Have you have increased but we haven't seen any of the increase in cases ourselves with with our our our our workforce which is in its.
A little bit interesting, but we are definitely onguard as far as our customers so far.
As Anatol pointed out.
The recovery, especially in Asia has been more V shaped it continues to be stronger.
Everyday, but and it's all maybe you want to give more color on that.
Europe or the patient I guess, so Asia is clearly recovering and Europe is is learning how to navigate this.
Issue natural gases as you know has been very resilient, even though overall power in Europe in the 28 main European markets is down about 5% natural gas is stable.
Taking market share away from from solid fuels.
And this is a very flexible product and one of the things that are that we are advantage is the ability to respond to these different market moves whether that is an increase in demand in Asia and a moderation in demand in Europe that said Europe is in an increasingly better position we're not.
Facing the the issue of storage containment path for two reasons. One is we're finally at levels that had been worked off and are below year ago levels in terms of inventory and to obviously going into the winter is a different dynamic than going into the shoulder season of Q2, when we saw that.
That maximum stress and look where we are now nine months into figuring out how to navigate this thing all over the world and Thats, improving the outlook as well so no not taking our eye off the ball by any means but but were endowed with a flexible responsive systems that we and our customers know much better how to navigate.
Great. Thank you so much.
The next question will come from Alex, Kenya, whose with Wolfe research.
Thanks.
I had a couple I guess follow up first is just on.
Your thoughts on contracting I mean is there any any sense or greater demand for trying to have contracts that are shipped more seasonally.
And I'm wondering if that's because that's something that you would consider more seriously how that would need to line up with the kind of increased commitment on the report target for contracting overall in the portfolio in the second one is just on on kind of the run rate.
Production outlook, I mean, I did see EPS release, I guess from Conoco Phillips.
Earlier this week about additional initiatives that really de bottleneck the.
Nice Cascade process I was just wondering if those.
Those kind of discussions were kind of incorporated in your outlook or is that are those things represent maybe more incremental debottlenecking as well.
Thanks, Alex the Xenical I'll start then I'll hand, it over to Jack on the second part, but we are clearly.
Clearly the market globally has a has a forward structure that us as winter is marginally more valuable than than summer.
Our efforts our commercial efforts have grown leaps and bounds in terms of sophistication and you can look up the the original SP agencies that they make a fairly big deal most of make a fairly big deals are being ratable. We can now priced things and FX is that that solution much much more flex.
Notably in easily and ER and that is a discussion that we have from time to time with our customers. So we have no issues with that and then on top of that as you know we have some seasonality in terms of our our production capacity, where when it's nice and cool in Louisiana. The ops guys have an easier time, making making more of it so.
We evaluate all of these options and normalize them and factor that into our decision of how to move forward.
And in regards to conoco they have been a good partner.
With us.
Ryan Lance is a is a good friend and they've supported us and our de bottlenecking and optimization efforts.
Throughout this whole process I think their announcement was on future CLP trains, but having said that every time, we do better.
The licensing fee goes up so they are out there.
They are helping us as much as they possibly can.
Great. Thanks very much.
And moving on we have Sean Morgan with Evercore.
Hey, guys. So a question just on the EPS fees that are rolling off I think there is pretty material Sps in this little legacy in from older markets and an older plants. Then then she nears using it on all this trains and so all of those bonds rolling off through 2025, and I'm wondering with which how should.
Here's a little ball positioned to compete for these new volumes flowing in and you see there being a lot more tendering in the market or do you think that like existing Sps with long term financing you replaced by similar existing SP AIDS with long term timer tenors.
Thanks, Ron Yes sales as the markets.
Continued to grow dramatically you know over the over the past decades Ed.
Conveniently doubled every every decade and historically when this was a very bespoke sort of point to point market. The contractual solutions were fairly standard at that 20 year, Mark and as you said there is a very large amount of volume that that reprices. If you will over there.
Many years and decades and that is one of the sources of opportunity for us to take advantage of that the solutions that customers will want will vary there will be a portfolio approach, we believe a and lots of customers will want the flexible transparent pricing stable pricing that are long term.
Contracts offer others will choose to re contract mid term and that's something that we can we can help with as well as as well as load. Following if you will that that we can provide that the margin. So.
It is another very large opportunity as that volume reprices out of the legacy projects out of North Africa, Cotter et cetera, and I would say that that the customers are demanding more energy diversity. So they don't want to buy from one supplier necessarily they want to buy from multiple suppliers and ensure a reliable brought.
There are there are also looking at a.
Diversity product from a how much do they want oil index versus Henry hub index.
And so I think we'll get our fair share of some of those those contracts and we.
We just continue to try to work.
Work on our operational excellence and make sure that they consider us to be in affordable reliable supplier of of of LNG.
Okay. Thanks, and then we touched briefly on yesterday, but I had a question sort of as it relates to the cost of local and we went through this slide and there's a lot of kind of.
It's sort of cursory ideas of ways to make it a lower carbon more yes, you finally.
And I think Mike touched on the Europe has the European governments are getting kind of more activist in sort of choosing contracts, but how do you look at it sort of balancing your European customers might be a little bit more environmental environmentally sensitive to.
Other customers that are going to be a lot more economically sensitive like India or China.
Yes, no and that's exactly what we're doing right now is when we say were our initial focus is in identifying and pursuing were worse backing them up so we know directly and indirectly water with the carbon footprint looks like.
For at cargoes of.
Of LNG at least.
From a calculated basis, not not an actual basis, which is which is.
One of the solutions, we'd like to get resolved, but.
But we are quickly identifying prioritizing and and stacking them up on which ones. We can make economic sense, and which were going to have to put on the back burner for a while until the market wants to pay us for those types of solutions.
Okay. Thanks, Jack Thanks Santyl.
Right folks moving on our final question is going to come from Ben Nolan with Stifel.
All right I made it.
So I I got a couple the first congrats on the run rate I think that's fantastic and I'm certainly it's a good track record here I was thinking maybe.
Or if you could expound on this and you you were clear on sort of debt repayment from a capital allocation perspective, but obviously it seems like a higher run rate is probably most impactful.
For CTP and potential for them to or that vehicle to really ramp up its distributions.
Even more than probably could have otherwise Don can you, maybe talk through where that where that might be.
In terms of a priority going forward.
Sure so.
We've really slowly and steadily increase the CTP distribution over the last few years, because we're still in construction.
So you'll see us we adjusted EPS increased it by two cents annualized and we'll continue to do that until we finished train six so so you could see.
What range, we gave for this coming year and it's about the same type of step up as it was on the previous year and that's really related to just holding back the cash to make sure. We can fund the remaining let's say 900 million or so of Unlevered capex for for train six but clearly on the right.
Run rate it did go up but if you look at the numbers. It didn't go up all that much but it is almost at $4 at this point.
And the reason for that is because we have an IDR structure. So at this point since we're in the high split.
50% of every incremental dollar actually goes to see I will eventually in terms of distributable cash flow when we get to $3 billion at the <unk>.
Little over half of that is actually up distributions go into less from not just the LP units, but from those ideas.
Right no I appreciate that although again, that's probably add.
And that structurally and incentive to to actually increase the distributions at the switching switching gears for my follow up a little bit and today I guess yesterday.
Yeah, He made a new discovery out and South West Texas.
You know, obviously you guys already done some of the.
In step with them.
Well, there's been a lot of them slowing down there and I can imagine that that maybe those discussions are not as robust as they used to be but that's a really big discovery.
Could you maybe talk through.
We we've talked a lot about.
The Chinese and European as are others looking to buy could you maybe.
I'll talk about sort of where we are maybe producers are and whether or not you think that.
Hi, there could be a return.
Some of those pushed volumes.
Thanks, Ben Yeah. This Dennis all up you know, we've always said that though we're optimistic on the ATM business and see a number of opportunities there, but it is not not a huge samples that he oh Gee is a wonderful partner, obviously that that ITM transaction started this year its a.
It's been a challenging year for for all producers and ER and as you can imagine discussions while while ongoing or not are not top of mind like they were a year year and a half ago, but we we firmly see that the growth of North American production needs.
Needs to be exported and ER and we provide the single largest access points to to those markets. So we're optimistic that that that engagements will will become more robust as we move forward and certainly Ian.
Jeeze contribution will be will be front and center as well as a handful of other large credit worthy counterparties that have Ah that have positions that are proximal to our facilities.
Okay. That's helpful. Thanks, guys.
Thanks Ben.
And thank you everybody. Thanks for your support of Shinier.
And ladies and gentlemen that does conclude our question and answer session and our call for today. We do appreciate you joining US you may now disconnect.
Dave.
Oh.
Mm.