Q3 2024 Cheniere Energy Inc Earnings Call
Today, and welcome to the Sheneer Energy, third quarter, 2024, our name's Carl and Webcast. Today's conference is being recorded.
At this time, I would like to turn the conference over to Randy Bhatia, Vice President of Investor Relations. Please go ahead.
Randy Bhatia: Thank you operator, good morning everyone and welcome to Sheneers 3rd quarter 2024 earnings conference call. The fly presentation and access to the webcast for today's call are available at Sheneer.com.
Joining me this morning, our Jack Fusco, Schenier's President and CEO, Anosal Feygin, Executive Vice President and Chief Commercial Officer, Zach Davis, Executive Vice President and CFO. Before we begin, I would like to remind all listeners that our remarks, including answers to your questions, may contain forward-looking statements.
and actual results could differ materially from what is described in these statements.
2 of our presentation contains a discussion of those forward-looking statements in a sophisticated risks. In addition, we may include references to certain non-gap financial measures such as Commodator Digestity Vedon and Distributable Cashflow. A reconciliation of these measures to the most comparable Gatmeasure can be found in the appendix to the slide presentation.
Randy Bhatia: As part of our discussion of sheners results, today's call may also include selected financial information and results for shenier energy partners LP or CQP. We do not intend to cover CQP's results separately from those of shenier energy ink.
Speaker Change: The college end is shown on slide 3. Jack will begin with operating in financial highlights and it's so will then provide an update on the LNG market. In Zach will review our financial results, increased 2024 guidance and initial outlook for 2025.
After a prepare to mark, we will open the call for Q&A. Now turn the call over to Jack Fusco, Shnir's president and CEO.
Good morning, everyone. Thanks for joining us today as we review our outstanding third quarter results, which reflect excellent performance and success achieved across the entire Schenier platform.
Randy Bhatia: Before we get into the quarterly results.
Randy Bhatia: and our fully year guidance increase. I want to spend a brief moment addressing the U.S. presidential election taking place next week.
The election is an important time for our country.
Randy Bhatia: As we are reminded of the freedom we are afforded as Americans to choose our president every four years. I encourage all of my senior colleagues in the U.S. to exercise the right to vote in order to have their voices heard.
As expected, emotions are running high, given we're so approximate to election day. But no matter the outcome, in a few months' time, upon an operation day, this country will have a new president in a new administration.
At Schneer, we look forward to working with the next president since issues and policies impacting energy security and availability are so critical to economic interests worldwide. As I mentioned, our August call, we believe our business to be bipartisan.
Randy Bhatia: Across multiple administrations spanning the political spectrum, Cheneera successfully permitted commercialized built and operated are platform.
Randy Bhatia: We fully expect that to remain the case for decades to come. We maintain a significant presence and have excellent bipartisan engagement in Washington.
as well as the state and local level with elected and appointed officials given our businesses heavily regulated and is a major source of direct and indirect economic outplay.
I look forward to furthering engagement in DC with the new administration. In order to ensure our voice is heard on important policy matters, that can affect our business both here and abroad.
Cheneers asks us an overall platform.
Randy Bhatia: The last many decades to come, and our objective is, in sure, not only our customers and stakeholders, but our country and our allies can realize the full benefit of Schenier's business.
Randy Bhatia: Well beyond the outcome of any single election.
Speaker Change: Please turn this slide five. We're highlight our key accomplishments for the quarter and introduce our increased guidance ranges for 2024.
In the third quarter, we generated consolidate adjusted Eva Dauve approximately 1.5 billion. Distribute will cash flow over approximately 829 and adding a approximately 900 million.
These excellent financial results are once again thanks to our company white commitment to operational excellence.
During the third quarter, we continue to execute on our comprehensive CAPE Education Plan, which is designed to provide investors with cash flow visibility, discipline capital management and long-term value creation.
Randy Bhatia: We've repurchased another nearly 300 million of stock during the quarter, bringing the year to date total to approximately $2 billion.
During the quarter, we also paid down 150 million of debt that's to be in pass and we funded approximately 5 million of CapEx, mainly related to stage 3. We also increased our third quarter dividend by 15% to $2 per share annualized.
During the quarter, we produced an exported 158 LNG cargos from our facilities, which was highlighted by the production and export of a thousand LNG cargo from Corpus Christi.
I would like to recognize the operational leadership team and everyone at Corpus Christi for the achievement of this major milestone and for further reinforcing chiniers globally recognize reputation as a safe and reliable operator.
Randy Bhatia: Factual continues construction, execution of Corpus Christi Stage 3 on budget non-accelerated schedule.
As of September 30, the State's Re-Project had reached approximately 68% complete.
Precommission activities continue on a train one, with nearly half the required systems turned over to commissioning and startup teams for beginning to play those systems into service.
Randy Bhatia: We expect the introduction of first gas in the train 1 to occur in the coming weeks.
First gas is an important execution milestone and from a timing perspective, with that milestone occurring soon, it is consistent with the word action of first-allangey by the end of the year.
We're fortunate this year to avoid any impact from hurricane, on operations or construction activities at both the Indian Pals and Corpus Christi.
As a result, our target of achieving first-energy production from train one, that stage 3 about the end of the year, remains within reach and substantial completion in early 2025. While I head at the guaranteed schedule.
We continue to expect to have three trains from stage 3 to the sensor completion during 2025. Zach will cover the numbers in detail. We expect to have more open volumes in 2025 than we did in 2024 driven primarily by the sensor completion of those trains.
and that reinforces our expectations that 2024 should be an inflection point for Eva Dough. Inf Financial Grows should resume in 2025, and those assets begin operations.
Look into the balance of 2024 today, we're raising and tightening the ranges of our four-year guidance.
26 to 6.3 billion in consolidated justice EBDA and 3.4 to 3.7 billion of distributed cash flow.
The guidance increase is primarily driven by better than expected production and incremental margin along with portfolio optimization activities upstream and downstream of our facility.
Randy Bhatia: On the previous call we discussed a slightly improved production forecast as a result of our main insect execution during the second quarter. And we are seeing that forecast production materialized.
Even a counting for the increase volume in the forecast, we continue to have an immaterial amount of unsolved volume remaining for the balance of the year as a team has been opportunistically selling our open capacity this fall.
Zach will have more to say on the guidance increases in his remarks in a few minutes.
Please turn this slide six-leptate you an important development related to our environmental stewardship.
Randy Bhatia: I hope you saw that yesterday we announced the establishment of a voluntary scope on Methanymissions intensity target for our liquefaction assets.
Randy Bhatia: The target calls for shinier to consistently maintain a scope one annual measured methane emissions intensity of 0.03% per ton of LNG produced across the impact in corpus Christi by 2020-7.
The establishment of the methane target represents the latest milestone in Cheneers Climate Strategy, which is built upon our principles of transparency, science, supply chain and operational excellence.
Randy Bhatia: Our measurement informed methane target of 0.03% is about 1 tenth of the hypothetical emissions intensity utilized in some recent publicized papers estimating life cycle island g emissions.
This rigorous target reflects our commitment to leverage our data driven efforts to improve admissions performance across our operations.
and its consistent with the requirements of both standard certification within the UN Environmental Program, Oil and Gas Methane Partnership 2.0, which shinier joint in 2022.
The methane target we have set is a culmination of significant more completed by our team and a series of technology providers in leading academic institutions.
Randy Bhatia: We are able to establish this target. Thanks to the collaborative work we've done through the programs I've spoken about on previous calls, especially our Quantification Monitoring Reporting and Verification for QMRV programs.
The target bills upon and compliments are QMRV program and other climate related outputs, such as our cargo emission tax, and are recently updated in a peer-reviewed lifecycle assessment.
The QMRV efforts, which have been underway for nearly two years, remain ongoing, involve multi-scale measurement activities to develop a measurement informed inventory of the mission state and that data informs the process of establishing the methane target.
Included in the data set for our methane target, for example, are readings from approximately 50 aerial emissions, measurements of our operations at our facilities over a period of more than a year.
Randy Bhatia: utilizing actual operational data and not simply emissions factors or outdated estimates provide the robust credible foundation that stakeholders can trust.
and against which our performance can be measured.
Cheneers approach to environmental performance in stewardship has always been scientific, transparent, and methodical, not reactionary or aspirational.
and we are pleased to see our strategy and efforts be recognized by ratings providers. During the quarter MSCI of Greater Cheneers, ESG rating to triple A, the high score possible.
with the upgrades specifically citing improvements, employment management reporting and greenhouse gas intensity performance.
will continue to pursue our strategy guided by the same climate and sustainable principles.
that have helped lead us to the significant achievements we have accomplished today. With that, I'll now hand it over to Anatol to discuss the LNG market. Thank you all again for your continued support of Shener.
Thanks Jack and good morning everyone. Please turn to slide eight.
Anatol: Over the last year, we've seen very limited LNG supply growth year over year with September being an exception.
Global ONG imports increased 33.6 million tons in the month, up more than 9% versus 23. This was largely due to lower levels of plant supply outages this year compared to last, rather than true capacity driven supply growth. And the impact on the market was muted.
The perceived underlying market tightness continued to support spot price levels which continued to climb during the quarter despite healthy storage inventories and relatively soft near-term market dynamics in Europe.
September TTF contract settled that $12.54 and M&Btu, up from $11.48 last year and $10.84 in July.
Similarly, J.K.M. settled September 12, 78, up from 11, 21 last year and 12, 14 in July.
The run-up in month-at prices was supported by escalating geopolitical risks, very supply outages strong demand outside of Europe, as well as some cooler weather forecasts within Europe.
In the US, Henry Hubsettled, September at $1.93. And nearly flat relative to August, but lower than July settlement of $2,663, and M&Btu despite various price-driven production cuts.
strong demand in Asia kept JKM at a premium TTF during the quarter and throughout most of the year. As shown on the top right, this spread led to an over 18 million ton shift in LNG flows from Europe to Asia for the first nine months of the year.
Randy Bhatia: However, this premium has narrowed substantially since the end of September due to cooler weather in Europe, residual Norwegian maintenance and an increasing geopolitical risk premium. I'll address the regional dynamics in more detail in the next slide.
As noted, LNG importance to Asia continues to grow in nearly all markets with third-quarter receipts increasing 10% year on year.
The JKT and China Market Areas combined contributed nearly 70% of the region's total 6.3 million tons year on year increase during the quarter.
Randy Bhatia: Long stretches of heat in Japan, South Korea and parts of China, coupled with the need to fill storage ahead of the upcoming winter season, continued to lift gas demand.
Notably, China's importance of September surpassed 7 million tons, and increase of 32% year on year as two new regas terminal started operations and new storage capacity for the supported demand.
Taiwan's demand increased by 12% year on year during the quarter, as the country shut down one reactor at a 950 MW nuclear plant in July. The country's last reactor is scheduled to be shut down in May next year, which we expect will continue to expand the country's gas-fired power demand.
During the four Thailand registered a slide to climb an imports primarily due to a boost in domestic gas production.
While this renewed production should temporarily offset some of the broader declines in the best-big-gas production, we expect little to know impact on the country's call for LNG Long Retour.
Randy Bhatia: As mentioned earlier, Asia's growing imports came at the expense of euro, where imports were generally flat during the quarter and are down over 20% on the year.
European gas fundamentals have remained steady in recent months with lower power demand and improving but still tap it in industrial consumption.
Randy Bhatia: However, after a series of mild winters resulting in some demand destruction in the heating sector, some cooler temperatures in September across the region, tied in the market, which has been amplified by increased geopolitical risks.
European storage levels remain healthy at 95% as of mid-Actober, but price risk is skewed to the upside.
All eyes are now focused on anticipated storage levels exiting winter in early 25, especially with limited support from Ukraine storage, which remains about 30% below last year's levels.
Further reductions are expected in Russian flows, potential aliens supply disruptions from further outages or geopolitical escalations.
Along with continued LNG pull from Egypt, could lead to sustained higher European premiums in order to attract flexible cargos, particularly if we revert to normal weather temperatures in the region this year.
Additionally, it's important to also acknowledge the increased competition for LNG Carbos from rising demand and regions outside of Europe and Asia.
Randy Bhatia: Law Hydropower output in Brazil, along with a strong pull from the Mina region, supported Atlantic demand and titan, the JKM TTF spread during the quarter.
Randy Bhatia: LNG imports into the MENA region rose 57% year on year during the quarter largely due to Egypt, which relied on the spot market to help alleviate rapidly declining domestic production.
In addition to imports the Jordan's Acaba terminal, Egypt imported approximately 20 cargoes during the third quarter and another 20 cargoes are expected to be delivered by year-end.
Randy Bhatia: In the absence of any immediate relief from new LNG supply, these dynamics should continue to highlight the delicate balance of the global gas market. Further supporting the upside price risk I mentioned earlier.
Let's move to the next slide to further develop this point.
We've noted for several quarters now how the LMG market remains precariously balanced, sensitive to any signs of potential disruption, supply or demand.
from geopolitical tensions to rapid shifts and market balances driven by extraneous elements such as weather, domestic gas production levels, or the changes in the price or availability of competing fuels, all underscore the criticality of adequate, reliable and flexible LNG supplies in the global energy mix.
Randy Bhatia: In recent weeks, escalating to political tensions have triggered renewed concerns about supply reliability and adequacy amidst that precarious balance. The events have already affected the European gas and energy markets playing critical role in elevating prices and market uncertainty.
Randy Bhatia: Over the past three years, we've witnessed how geopolitics continue to have a significant impact on commodities, specifically impacting European gas infrastructure, pipe gas contracts, flows and transit routes, which has driven higher absolute price levels, as well as prolonged elevated market volatility.
Today, your swim to gas balances remain vulnerable as further cuts in Russian pipeline gas flows seem likely if the transit agreement through Ukraine is not renewed.
The development in the Middle East raised concerns about upstream and midstream gas infrastructure that could impact Egypt's gas supply security, potentially constraining global-energy market balances. Meanwhile, continued delays from projects under development prevent immediate material relief in the prompt.
Randy Bhatia: Global Liquid Faction utilization has been pushed for the Beyoncé's no norms to produce incremental volumes, but there is limited additional running room and demand continues to be rationed.
The lack of spare capacity means that the system remains particularly vulnerable, tiny unplanned outages and risks to flow under options, be the operational geopolitical otherwise.
To mitigate against these adverse impacts, we see long-term contracting and the related supply growth underpinned by these agreements as two key pillars for more resilient robust and stable market.
In the past few years we've seen an increase in longer term contracts, some in excess of 20 years which support the development of much needed new capacity.
Global supply growth and flexibility as well as affordable stable long-term contracts are key to enable energy security and affordability and to help inflight consumers worldwide from future energy crises like we saw in 2022.
and aligned with the establishment of our methane targets. We must also highlight the clear environmental advantages of LNG and the critical role it has set to play in global decarbonization.
As developed and developing economies alike, look to increase LNG in natural gas as a component of primary energy supply.
Randy Bhatia: Sheneer's leadership role in environmental stewardship only further separates us from the competition and enable us to continue developing and executing projects which deliver significant value to our shareholders.
Speaker Change: With that, I'll now turn the call over to Zach to review our financial results in guidance.
Thanks, Anatol, and good morning, everyone.
and please to be here today to review our third quarter 2024 results. The financial accomplishments are increased in tightened 2024 guidance and a current outlook for 2025.
Randy Bhatia: Perns of Slide 12.
For the third quarter 2024, we generated net income of approximately $900 million. Consolidated adjusted EBITDA of approximately $1.5 billion, and a steerable cash flow of approximately $820 million.
With these third quarter results, we've now reported positive men income on a quarterly and cumulative trailing four-quarter basis, eight quarters in a row.
Compared to last year, our third quarter 2020 four results reflect a higher proportion of our LNG being sold under long-term contracts, as well as the continued moderation of international gas prices.
These impacts were partially offset by higher volumes of LNG delivered from our two sites during the quarter.
Similarly, compared to the second quarter of this year, our production was higher, you do most of the planned maintenance at both sides occurring in June.
Randy Bhatia: During the third quarter, we recognize in income 563 TB-TU of physical LNG, which included 560 TB-TU from our projects and 3 TB-TU sourced from third parties.
Approximately 97% of our LNG volumes recognized in the quarter were sold in relation to term SPA for IPM agreements.
A strong financial results continue to support meaningful progress on our 2020 vision, capital allocation plan, with another $1 billion deployed in the third quarter towards shareholder returns, the crude of growth and balance sheet management.
Randy Bhatia: As of the third quarter, we've allocated over $12 billion of our $20 billion plus target as we continue to reduce our share count and enhance our capital returns. While retaining financial flexibility to fund the creative growth across our platform.
Randy Bhatia: All of which should position us to generate over $20 per share of run rate the Stribble Cash Flow for our shareholders later this decade.
During the third quarter, we repurchased approximately $1.6 million shares for approximately $282 million.
Through the first nine months of the year, we've deployed approximately $2 billion into our shares and we do star share count by over 12 million shares.
We have now repurchased approximately 10% of our outstanding shares, since announcing our 2020 Vision Plan in September 2022. Reducing our shares outstanding from approximately 250 million to under 225 million today in the queue.
At this point, we are over halfway to our midterm goal of 200 million shares.
A foundational strategy of the plan is to enable us to buy back more shares when the stock underperforms on an absolute in-relative basis.
and the year-to-date results demonstrate the power of the plan's design.
Randy Bhatia: We are committed to further reducing our total shares outstanding as we completed the previous $4 billion share repurchase authorization this month. And are currently starting to work through our additional $4 billion share repurchase authorization through 2022.
Randy Bhatia: has previously announced with our June Capital allocation update, we increased our third-quarter dividend by approximately 15% to $2.00 annualized, and intend to follow through with our guidance of growing our dividend by approximately 10% annually through the end of this decade.
Randy Bhatia: This goal should trend us closer to a payout ratio of approximately 20% over time, which will enable us to retain the financial flexibility essential to our comprehensive and balanced long-term capital allocation plan and discipline's growth objectives.
Moving to the balance sheet, during the quarter, we repaid $150 million of outstanding principle of the SPL 2025 notes with cash on hand.
Randy Bhatia: We plan to repay the remaining 650 million outstanding principle of these notes with cash on hand ahead of its March 2025 maturity. As we focus our debt pay down within CQP in preparation for financing the SBL expansion project.
After repain the remaining SBL 2025s, we will not have any debt maturing anywhere in the area.
The rating agencies continue to recognize our progress on the balance sheet. Last week, SMP upwardly revised the ratings outlook at Corpus Christi Holdings, or CCH to positive.
And as noted on our last call, we received a 22nd credit rating upgrade in the third quarter when the pitch upgraded CCH to triple B+.
Randy Bhatia: The continued recognition from the rating agencies is a testament to our teams strategically managing our balance sheet, and with regard to these rating agency actions in particular reflects the progress achieved on our stage three projects.
Randy Bhatia: Speaking of stage 3, during the quarter we funded approximately $400 million of KAPX on stage 3, bringing total spend on the project to over $4.3 billion.
With approximately $3 billion in consolidated cash and over $10 billion of overall liquidity throughout the Shneer complex, we expect to continue equity funding the Stage 3 CapTex while also remaining active on our buyback program as we continue to manage down our cash balances.
Before utilizing the undrawn $3 billion CCH term loan, which would expect to eventually draw in 2025.
Randy Bhatia: Turn now to slide 13, where I will discuss our updated 2024 guidance and initial outlook for 2025.
Today, we are raising and tightening our full year 2024 guidance ranges to $6 billion to $6.3 billion in consolidated adjusted EBITDA.
and $3.4 billion to $3.7 billion in the Struuril Cash Loom.
A $250 million increase to the midpoint, as well as tightening of the ranges from $400 million to $300 million. Or less than 5% of the midpoint of guidance.
Our increased guidance is close to equally attributable to optimization activities completed upstream and downstream of our facilities since the last call, as well as slightly higher production and margins than previously forecast during the quarter and into four qu.
We were also able to tighten the ranges of another $100 million as we are effectively sold out for the balance of this year, reducing the amount of variability in our forecast in our most contracted year-to-date.
That being said, our guidance continues to reflect only contributions from completed or locked in portfolio optimization activities as we do not forecast potential contributions from future optimization opportunities. I'll be it likely more limited, dyslate in the year. And of course, our results could be impacted by the timing of certain cargo's around year end.
As noted on prior calls, our DCF could be affected by changes in the tax code, particularly as it relates to the alternative minimum tax and the treatment of certain tax positions related to our unreliased derivatives.
These changes could impact the timing and amount of our cash tax payments this year and going forward. But should be immaterial on an MPV basis and not impact our ability to generate over $20 billion at the available cash through 2026.
And while we do not forecast any contribution to revenues or EBITDA from state 3 volumes this year, we continue to target first-elangee from train 1 by year end.
Randy Bhatia: Based on the progress achieved today, we forecast train 1 to achieve substantial completion at the end of Q1 or early Q2 next year, and trains 2 and 3 to achieve substantial completion in the second half of the year.
With this assumption, we expect to produce approximately 47-48 million tons of LNG in total across our two sites next year, inclusive of forecast stage 3 volumes, and a major maintenance plan at Sabine Pass next year.
So a step change from our 45 million ton run rate across our existing 9 trains and operations, the variability is based on uncertainty around specific stage 3 commissioning and ramp up schedules, as well as year and time.
of that 47 to 48 million tons of production, we forecast over 46 to over 47 million tons of volume after commissioning, supporting 2025 EBITDA.
Randy Bhatia: After accounting for the approximately 43 million tons of long-term contracts already in place, we expect to have over 3 to over 4 million tons of spot-vime available for CMI.
The team has been active, opportunistically selling some of that 2025 spot volume since our last call.
and we currently forecast approximately two to three million tons for approximately hundred to 150 TBTU have unsold open capacity in 2025.
We therefore are also forecast that a $1 change in market margin would impact EBDA by approximately $100 million to $150 million for the full year.
In consistent with previous practice we intend to provide official 2025 financial guidance on our February call.
Looking at Curves today, Netbacks are averaging around $7 to $8 in 2025. So the timing of our stage three trains coming online and the resulting incremental marketing volumes could drive significant variability in our expected earnings for 2025 as we grow beyond our 9 train platform.
Randy Bhatia: As a reminder, the stage three trains are being built with a design and technology that is new to us, so the length and extent of the commissioning process is somewhat uncertain.
As the initial train start commissioning, we will gain a better sense on the specific timing of these new volumes and a contribution to our financial results next year.
Randy Bhatia: As with the commissioning of our first nine trains, we hope to improve the commissioning process for each subsequent train by deploying lessons learned.
We expect the remaining four mid-scale trains to reach substantial completion in 2026. At which point, we have several million tons of new long-term contracts starting in 2026 and 2027. Keeping our platform over 90% contracted with in best and great counter-parties.
Randy Bhatia: and take her pay style cash flows and averaging approximately 95% contracted through the mid 2030s.
Earlier this year, I described 2024 as likely a trough year for EBITDA as all of our long-term contracts supporting the nine-trained platform had commenced. An international gas prices began to moderate despite spot margins remaining very healthy this year, averaging $8.
As Jack mentioned, we still expect this to be the case. A Stage 3 volume start to hit our PNL in 2025.
We remain proud of our team's unrelenting efforts to unlock additional values to support financial metrics, while above, our nine trained run rate guidance this year.
Randy Bhatia: Looking ahead to 2025 and beyond.
We will continue to leverage the vast competitive advantages afforded by our leading Brownfield infrastructure platform in order to enhance the long-term value delivered to shareholders and to continue to supply our customers flexible, reliable, and cleaner burning LNG.
That concludes our prepared remarks. Thank you for your time and your interest in shenir. Operator, we are ready to open the line for questions.
Thank you. And if you would like to ask a question, please sign up by pressing star 1 on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you could press star 1 to ask a question. And we do ask that you will limit your question to one question and one follow-up. And if you have additional questions, then you may re-enter the queue. We will pause for a brief moment to allow everyone an opportunity to sign up for questions.
Randy Bhatia: and the other.
And our first question is coming from Jeremy Tone with JP Morgan.
Randy Bhatia: it
Jeremy Toné: Hi, good morning.
Speaker Change: Good morning, Jeremy.
Thanks for all the color today, very helpful.
was just wondering a bit on the commissioning process right now. As it stands right now, if you froze where the futures are, where the spread is for LNG, those commissioning cargos would be the potential scale of reduction in cost for the project. Could you help us kind of think through that?
Zach: A Jeremy, Zach.
I'd start first with the guidance of 47 to 48 million tons of total production including commissioning and then I mentioned that we're over 46 to over 47 million tons of basically P&L production in 25.
in 25. So it's around a million times a little less than that in the guidance right now that it's mentioning that's not supporting Ebra and we'll offset half X.
because stage 3 is combined with trains 123.
Speaker Change: Those volumes in terms of the margins on those commissioning volumes will be a mix of spot volumes and contracted volumes. And that's accounted for when we talk about spot volumes in the P&L for the amount of cell over 3 to over 4 million tons.
But as you think about around 1 million tons or 50 TBTU, we're talking about hundreds of millions of dollars that will help offset capex and just be another funding source for us in the coming year.
Speaker Change: i
got a very helpful day, hundreds of millions of dollars. Thank you. And then just want to come back to the SPO expansion and kind of commercialization effort at this point, you know, with the FTA authorization, how does that, I guess impact discussions that you're having with customers right now and I guess what's your outlook for that project and how contracted are you looking for at this point?
Hamilton: Hey Jeremy, it's Hamilton Good Morning. So as you know, we've got older magnets in 10 million tons. There are three.
Katoparty's 4-Mitskele 9, and then the balance for Train 7, and we started on Train 8 at SPL. We're taking our time now as we kind of optimize and figure out what the best path is for our Brawl field advantages and we're really pursuing our these efforts with certain select counter-parties and being very...
Judicious at how we move that project forward as we figure out the best way to get the right balance of economics returns and contract will support. But ultimately, it's not going to be very different from our 90% plus contracted 7 times KFXD, but that target as we navigate that. And as you've heard Zach mentioned on previous calls, it'll probably be a phase that approach. So we're in very good shape, we've got great engagement. Obviously, as the world thinks through all of these challenges and as we continue to deliver now over 3700 cargo from our two facilities without missing a beat. We're in a very good position on our commercial engagement.
Zach: Stevens.
Got it, very helpful. Thank you for that.
Zach: i
and next questions coming from the line of Teresa Chan with Barclays.
Good morning, thank you for taking my questions. Maybe first on the commercial front, as a follow-up to Jeremy's question. Just as your competing projects in the US Gulf Coast.
and Texas Cinew and Continuetiface delays in other challenges while stage three remains on time on budget. How does influence or impact your commercial discussions before the upcoming projects?
Teresa, Teresa, thank you for the question and I can tell you, you know, we have a very strong relationship with Beckville that we've.
We've built over the last decade that has allowed us to work very closely as a team to be sure that we deliver our projects on budget ahead of schedule and that the performance.
Zach: is guaranteed.
that are reliability, the 1000 cargo's at Corpus Christi, that 2700 cargo's that we've produced.
That Sabine have made Anatol's job a little bit easier.
because we're finally being recognized as a very reliable.
Safe Provider of LNG, and I'll let Anatol.
Cover how those conversations have been going. Yeah, thanks for being check. The Anatol's job keeps getting easier and easier. What we announced earlier, well, I guess last night, about the methane target, we've been...
going down the path of these scientific, very processed driven assessments of our own emissions profile and all of our QMRV efforts.
Zach: We've talked to you guys about how that's been recognized by our counterparts for the last couple of years but things as transparent as establishing a methane target are another key component. So we've got the reliability, as you pointed out, Jack mentioned, the ENCBC execution, the reliability of our products and delivering projects on time, on budget and serving our customers with an ever cleaner product. So yeah, lots of tailwinds for Anatol's efforts.
Great, thank you and not trying to make Anatol's job harder but I do have a follow on your comments related to the regas.
Outlook in Asia.
Speaker Change: So related to your views on China's regas capacity coming online or Asia in general, where do you think we go from here? Do you think that any sort of cyclical softness?
Over the near-medium term, could potentially be celebrate this pace of expansions. Is there any elasticity in that timeline?
Well, the expansion has been so rapid that, you know, just algorithmically I would not be shocked if the pace of growth slows. But China's going to be a 250-plus million ton regas capacity market. We expect it to get to about 140, 140 million tons of imports.
Zach: over the next five to seven years. And the rest of Egypt is going to continue to grow. I'm not a fan of...
Zach: summarizing the environment as quote, Chindia and quote, but if you look at Asia's growth overall, those two economies are responsible, everything else is kind of rounds up and down to to very little change.
Zach: and we expect them to continue to grow at very robust race. And one of the things that we talk about that I think would be very beneficial to the market over the medium term is to the extent that prices moderate as this new supply enters the market over the next three to five years.
Zach: A number of gas-y economies that have been really starved of product at these elevated price levels, we expect to reenter and to avail themselves of more gas. Unfortunately, they don't have the credit and the scale to have the kind of long-term contracts that afford them, the stability, the stable and reliable supply that we're touting here. But I don't see any cyclical slowdown or...
Zach: you know, a moderation of growth rate for gas which is growing and LNG actually has grown over 5% as a cake or over last decade and I think that will continue.
Thank you.
Zach: The End
Speaker Change: The next question is coming from Michael Blom with Wells Fargo.
Michael Blom: Thanks for coming on everyone. I wanted to ask about Jack.
The Beat & Rage from this quarter are these portfolio optimization initiatives and the higher production that drove the guidance increase in 2024. Is that sustainable as we look at 2025?
Speaker Change: We would hope so, but we won't know until we see that show up in the actual. We have a budget that we rigorously go through with the operations team and then we go through with the board and we'll be in a position to give you a...
but a good range for next year in February in terms of the mantle guidance.
Michael Blom: but when it comes to optimization, we're the second largest operator of LNG in the world.
and we have a lot of ships that we charter and we buy a lot of gas in this country.
So there should be opportunities but to say what the quantum is, that would be hard to define ahead of time.
Michael Blom: but in terms of the guidance increased this time.
I'd say I split it three ways on the optimization side. Obstring of the plants, there were better-based differentials that we just couldn't have forecasted earlier on that were able to be captured. Then we were able to, opportunity to sub-charted more of our length ahead of stage three coming online for the rest of the year.
and then with some of the positions we have all over the world in a few third party sourcing, we were able to optimize the portfolio downstream and together that was around a hundred plus million dollars and to the guidance.
Michael Blom: on the production side. Honestly, that would be hard to forecast ahead of time considering we had a relatively smooth hurricane season for the engineer, the ambient temperatures were also lower.
and they were able to just to outperform at F-Op sites and honestly pick up from earlier in the year where production slightly down.
Michael Blom: So that alone with $8, $9 margins for the rest of this year added another $100 plus million dollars. So, how to say we can bake that in and I would assume in a February guidance, we wouldn't be baking that in initially.
Okay, great, now that's good color appreciated. And then I was wondering if you can give us a sense of your assumptions.
on the timelines of the three stage three trains that you're expecting.
to complete in 2025 and give him your track record and the back-tell track record. I mean, I realize this is a new technology, but do you think a force train could possibly be achieved in 2025? Thanks.
Michael, this is Jack, as you know, I'm pushing the organization pretty hard right now on our construction efforts.
We have today over 70 operators succunded to be back to our commissioning and in start-up mode. And I tend to be a glass as half full kind of guy, but I think our guiding you to three trains.
Michael Blom: would be enough for me to pop a bottle of champagne and celebrate. Four trains I think would be a little much for us to...
for us to accomplish as a team. I'm just being totally transparent and honest with you. But I'll turn over to Zach and he can tell you what his assumptions are in his production model.
to just for a little more clarity on the high end if we're going to make it to 48 million times a production next year. You'd have to assume that that trains 1, 2 and 3 reach the completion by the end of Q1, Q2 and Q3 respectively.
and then on the lower end where at 4th of April, July, 47.
We have decent visibility on train one, so we're hopeful that can still come online and late Q1 or early Q2.
but then it would be a little bit later in the second half of the year for trains two and three to end up at the 47 millionton level. Ideally we'll have a bit more of an understanding of how things are going by the next call but even by the next call we don't expect to have substantial completion of even train one.
Very clear, thank you.
Michael Blom: The End
The next question is coming from Keith Stanley with Wolf Research.
Hi, good morning. First, first just curious on the 100 to 150 TBTO of Open Exposure.
How comfortable would you be trying to hedge more of that ahead of the winter? Or do you prefer to keep that open just operationally until you have the stage 3 train starting to come online?
So this is Zach. I thought you noticed from folks this morning and I just want to make it clear. As you think about 2025, first and foremost, it's about the CMI Spock capacity. CMI Spock capacity that we guided to is over 3 to over 4 million tons.
Speaker Change: Since the call, we were able to be opportunistic and sell some of our 2025s a length.
Michael Blom: and we sold over a million tons in a market that was trading around eight dollars at the time for next year. So that's locking in nicely around a half a billion dollars for the company.
Michael Blom: That was mainly locking in, production from the existing nine trains.
just because we have more clarity, more understanding of how those produce over time.
We're as it would be very difficult for us to self-dysically or even to self-head financially, volumes that are not as certain. So some of those will have to be closer to the date of loading than to be as proactive as we have been.
With all that said, Q1 and Q4 will still be our biggest production quarters, just with lower ambient temperatures and the fact that our major maintenance will happen in the summer.
and then as you can imagine with the cadence of the train coming online at fast, they'll be one train operating in Q2 and then ideally in second half of the year to more come online. So Q2 is probably our lowest level of production for the year.
Michael Blom: So we might have more confidence going into next year or early next year to start selling at the latter part of the year as we have more production. But assume we still quite a bit already considering it's only October still.
and I'll let that all make sense. Second question on just a market question. What are your expectations for your team demand into next year and over the medium term after a big drop in power driven demand into the year? I think you said you're seeing some stabilization in your team's demand.
Speaker Change: Yeah, thanks, Steve. So, you know, the one big issue that we'll play out is how the...
Last BCF a day or so of a pipe flows through Ukraine from gas from playout, the expectation, our expectation market expectation is that that does not get renewed.
Michael Blom: So the Delta in European gas demand is much smaller than that. We're seeing good stabilization in the larger economies in terms of industrial power as you pointed out is a big swing factor if it is a robust wind period that has a...
Michael Blom: a couple million ton impact on the overall demand. But structurally, you know, the thing that has changed is that we don't see infrastructure being a constraint anymore, not just on the regas side, but also on pipeline and the ability to move gas into Europe. And we think that natural gas demand and hence LNG demand for Europe is going to remain fairly stable through the middle of next decade. Then it's more of a question mark and we expect this to decline modestly, but we expect it to stay in this.
Michael Blom: Yeah, kind of 120, 130 million ton market range for a number of years.
Speaker Change: Thank you.
Michael Blom: i
Michael Blom: i
The next question is coming from being no lens with default.
Speaker Change: I appreciate it. I want to ask.
Speaker Change: You talk about my entire price is analogy and all of the potential disruptions in the police, Ukraine and elsewhere and people sort of hedging their bets and that leading to potentially more long-term contracting.
Although certainly for U.S. operators and just generally globally, it doesn't seem like there's a terrible amount of actual activity.
Speaker Change: on the long term side. You may be particularly to the US. You think people, your customers, or maybe just waiting until after the election or I guess I would have thought a little bit more activity given all the noise out there.
Thanks Ben, I think as we've discussed in previous quarters what we're going through now is a...
kind of post 22 23 fog of war period where 75 million tons were executed and the market is figuring out that it's not that easy to execute these statements, right? From a timing standpoint, from a regulatory, from an economics standpoint, commercial as well.
Speaker Change: So the market is thinking through how to react to that. You're absolutely right. We're only handful of long-term transactions. You know, ours would gout being one of three, I think, 20 years deals in the quarter. So, but that is, I would say that's not a reflection of
Speaker Change: kind of market appetite for more and I think you'll continue to see a very healthy market for projects that can be advanced economically and reliably. So you're right, we're going through a period of re-evaluation by customers and as Theresa just said, you know, against that backdrop, my job is very easy.
and then secondly for me is on the shipping side actually there's been a pretty sharp decline in shipping spot rates and then maybe there's a Premier League
Speaker Change: Long-term contract that is an opportunity to use your net-long position, it's an opportunity to re-contract and you have open availability. Just curious that there's any way strategically for you to maybe take advantage of and especially soft elements you should think market at the moment.
Speaker Change: Hey Ben, I guess the number one drivers, Zach has alluded to is our management of that fleet and the fact that we have...
and Shipping lined up and committed for our own volumes and in many cases like the producer transactions that we partner with as well.
and the team has done a great job and one of the big drivers of optimization opportunities has been chartering out that length as these optimization opportunities presented themselves.
We are, I think today the second largest charter or a VLNG vessels.
Speaker Change: We have been for a number of years by far the largest, the most dynamic player in Charging Vessels in and out. So you're absolutely right. There are opportunities to optimize and portfolio. We are, of course, on the eve of commissioning stage three and these lower,
Speaker Change: Lower Day raids provides some other opportunities on that front as we await the production from trade once. So, that's one of the reasons why we don't take into our guidance things that we have not locked in on that front because...
You never know what pitch is going to come your way, whether it'll be a 300,000 day rate, you know, one winter or, you know, 20,000 in the process we're seeing today.
God. Okay, I appreciate it. Thank you.
Speaker Change: The End
Our next question is coming from Bob Brackett with Bernstein Research.
Good morning, I am looking at the 25 guide and thinking about a guide that looks like flat severe in past year, but you commented about plant major maintenance there. Can I infer that it's about the same scale of major maintenance in last year or something more I should be thinking about?
Thanks Bob, so the major maintenance at Sabine's Train 3-4.
Speaker Change: is going to be longer this coming year than it was this past year.
However, what's off setting that is some of the smaller debolunk efforts that we've already pursued like the synth and like we've mentioned on previous calls, that helps us get to a point where we can do such a major maintenance on two trains.
Speaker Change: and still be around 45 million tons on the existing nine.
Speaker Change: Very good. Thank you.
Speaker Change: Our next question is coming from GNAN Salgeberry with Bank of America.
GNAN Salgeberry: Hi, good morning. Assuming the current path remains for the DOA to lift their permit pause after the environmental assessment, have you heard anything from them about how future permit requirements could change or what extra environmental requirements they would be looking forward to to grant permits? And how is junior position for that on on corpus eight nine in the city and past expansion?
Hi, Jack Fusco.
We have, as you know, we work really closely with the Department of Energy.
There's a lot of speculation around which way the...
The pause may head. It's clear to us that nothing's going to happen until after next week.
and then from that point it could be a pretty broad book end on...
which way the band could go. So I would wait until next week, but before I give you anything concrete, but I would say that we are in very, very good shape with 8.9.
and actually with this being expansion that it's clear that ground-filled expansions are going to be treated a lot differently than...
GNAN Salgeberry: and the Great Field expansion is going forward and I think we're in a really good position to maximize the benefits of our existing platform.
The helpful, thank you. And as I followed up, there was a rush by a USP's to sign up for Ellen Gideals the last few years, which under some of Sheniors IPM contracts, can you speak to whether that demand is still strong, given just that the USTTFR has kind of come in and it's expected to come in a bit from here.
and Sanitol, you know, that appetite that we, in some sense launched now five plus years ago remains very robust, one of the dynamics that of course has played out.
In the interim is the consolidation has improved the credit quality and capital discipline has improved the credit quality of that cohort.
The number of transactions that are variations on that theme, shorter tenor, some...
deals with intermediaries that reflect the quantum of appetite for those deals. As you know, we've said that while we have very good engagement, we don't expect this to be a double digit number of counter parties, again, being very selective in terms of...
GNAN Salgeberry: Scale, credit and ability to physically deliver volumes into our infrastructure. There are lots of things we like about those IPM transactions, but like with everything else we're being very methodical. The appetite to do them is multiples of what you're seeing from us.
that makes sense thanks. I'll leave it there.
Speaker Change: Our next question is coming from John Kaay with Goldman Sachs.
John Kaay: Well, thanks a lot of time. It might be a longer question than top of the hour, but I'll take it anyway. You guys have kept your $2 to $2.50 kind of baked in marketing range for the outer your e-bidic guidance.
John Kaay: Even though we've seen kind of, you know, EPC costs go up pretty dramatically for new projects, etc. Through there, I guess could you spend a second just walking us through again, your kind of thought process on that, whether that, you know, implied cost of new capacity in the market could be changing?
I mean, what would push you guys to kind of think about moving that number?
I'll go first on the guidance, but on the 250, I think we're trying to make it as clear as possible for you folks.
John Kaay: and what we see in the run rate and everyone can make their own assumptions considering
Found to this year is at $9.00 netback next year's $8.00
You're after $6 an even in $27 we're talking about $4 net tax today. So, in the fact that with every dollar turn, even in the run rate, we're renting what like $300 million of EBITDA.
So we try to give that guidance that way. In terms of SBAs, I'm going to hand it over to Anatol. Basically we're pushing the limits of that range right now.
and that range still works for us.
specifically on these brown field expansions.
Thanks to all the equipment and infrastructure we already have in place.
The good question for some others that are trying to do green fields, but for mid-scaling to nine to be an extension, and everything else we want to do at Corpus and Sabine, we're in a great spot that we can do that still at around seven times cat-back to EBITDA.
Speaker Change: Yeah, thanks John. I think your kind of fundamental premise is right as you heard from Zach that...
Speaker Change: A things are not getting cheaper or easier and execution risks are becoming more and more apparent to the counter parties.
Speaker Change: That said, while the market for kind of US Gulf Coast projects has reached the high end of that range. I wouldn't say that today the competitive landscape allows for...
and Breaching that Meaningfully. So we're still in or around that range, but at the high end, we'll see what the future brings.
Speaker Change: Alright, let's go, thanks for the time.
Speaker Change: i
Speaker Change: And our final question is coming from Craig here with Tool Brothers.
Thanks for hitting me on the graduation from a quarter.
Speaker Change: Zach, you know, if I'm doing the math right, even after dividend share by Bats in your stage 3 funding, I think you ended 3 quarter with more C-Corp cash than you did in 2Q.
and of course your construction revolver remains on the top.
How do you think about growth capex funding into Major Train 8-9 FID? If your corporate cash balance is remain well above the 1 billion mark, that's kind of the long term target.
Hey Craig, thanks for the question. I mean, yet the cash balance on 930 is around $3 billion on a consolidated basis. That was around $4.00 billion going into this year.
and considering we've already deployed.
I think around $4.2 billion in across the four pillars of capital allocation, but year to date BCS is around $2.7 billion that makes about the right sense.
You can assume that we'll be continually deploying probably more than our DCF.
to work the cash balance down over time.
But as we have this cash balance, as margins are more elevated
We're going to use that cash to obviously continue the buy-back at a pretty good pace.
as well as continue the equity fund stage three, which we've done 100% life to date.
At some point we'll have that $3 billion of liquidity from that term loan that we can use as just general liquidity for the company and still stay comfortably IG at all the entities. But in the meantime it's pretty efficient for us to use.
the Sexist Cash, work it down, get closer to a billion plus at some point next year.
and last one hopefully pretty quick. Want to pick up on genms? Question about DOE authorizations.
If we had a Harris administration and there was more of a mission mandate.
Do you see your kind of industry leading, you know?
Methane intensity targets and emission tags kind of mitigating the needs for CCS projects that maybe some peers would have to do since they can't prove what they got.
I don't know how to call it Craig but I can tell you that we continue to focus on our program.
Speaker Change: and using science and real measurement data rather than hypothetical.
you know, guest events of what emissions are and we continue to make some very good progress not only here in the US but also in Europe and worldwide abroad. I would expect that
that the clean energy transition, that the Biden administration that's been so focused on will continue under a Harris administration. So yes, I would expect it to be.
and more of a focus for that administration and under a Trump administration. But we'll have to see what happens next week and then go from there.
Speaker Change: Thank you.
Speaker Change: i
And I will now turn the call back to the company, Jr. for any quality remarks.
Hi, this is Jack. I just want to say thank you again for all of your support and please be safe on this Halloween night.
And this concludes today's call. Thank you for your participation. You may now disconnect.
Speaker Change: The End
The End