Q4 2024 Cheniere Energy Inc Earnings Call
In addition, we may include references to certain non-GAAP financial measures such as consolidated adjusted EBITDA and distributable cash flow.
A reconciliation of these measures to the most comparable GAAP measure can be found in the appendix to the slide presentation.
As part of our discussion of <unk> results. Today's call May also include selected financial information and results for Cheniere Energy Partners LP or <unk>, we do not intend to cover <unk> results separately from those of Cheniere Energy Inc.
The call agenda is shown on slide three Jack will begin with operating and financial highlights Anatol will then provide an update on the LNG market and Zach will review our financial results in 2025 guidance.
After our prepared remarks, we will open the call for Q&A.
I'll now turn the call over to Jack Fusco, <unk>, President and CEO.
Speaker Change: Thank you Randy good morning, everyone. Thanks for joining us today as we review our outstanding results from the fourth quarter and full year 2024.
Speaker Change: And discuss our vision for what I expect to be an exciting and rewarding year for Cheniere and 2025.
Speaker Change: In 2024, we once again generated excellent results across the key strategic priorities of the company driven by our uncompromising ambition to consistently deliver sustainable long term value to our stakeholders.
Speaker Change: These results underpinned by Cheniere safety first culture operational excellence customer focus and financial discipline further distinguished generic in the market and reinforce our reputation as best in class across our entire platform.
Speaker Change: We take these successes in 2025 with the wind at our backs as a global market call for new LNG capacity is ringing loud and clear.
Speaker Change: Energy security in general and natural gas in particular.
Speaker Change: Have been prioritized over the last several years.
Speaker Change: Celebrated by geopolitical conflicts in multiple theaters that have refocused government of a long term importance of natural gas.
Speaker Change: Throughout these conflicts the criticality of our long term energy supply portfolio that is diverse secure and perhaps most of all reliable has been laid bare engineers LNG stands as an ideal and powerful solution.
Speaker Change: The United States as a significant opportunity to provide that reliable and secure energy supply the world over and.
Speaker Change: And we now have a more constructive backdrop for the development and operation of large scale energy infrastructure in this country.
Speaker Change: We are engaged with the new administration in Washington, and are optimistic for a more clear transparent and predictable permitting and regulatory regime. So we can continue to safely build and operate more LNG capacity the world. So clearly needs for decades to come.
Speaker Change: Please turn to slide five.
Speaker Change: Were a highlight our key accomplishments and results for the fourth quarter and full year 2024, as well as introduce our financial guidance for 2025.
Speaker Change: In the fourth quarter, we generated consolidated adjusted EBITDA of approximately $1 6 billion, bringing our total for the full year to $6 $1 5 billion.
Speaker Change: We generated distributable cash flow of approximately $1 1 billion in the fourth quarter and approximately $3 73 billion for the full year.
Speaker Change: Net income in the fourth quarter totaled approximately $1 billion and approximately $3 3 billion for the year.
Speaker Change: Full year EBITDA landed in the middle of our recently increased guidance range and $155 million above the high end of the original range provided a year ago.
Speaker Change: DCF, we delivered results above the most recent range and $300 million above the high end of the original range.
Speaker Change: These outstanding financial results were once again enabled by the relentless focus on performance.
Speaker Change: And I am proud to share with my 1700, Cheniere colleagues around the world.
We produced a record amount of LNG in 2020 for approximately 45 million tonnes, which is over 10% of the global LNG supply in the year.
Speaker Change: And we did so while successfully completed turnarounds at both Sabine pass and Corpus Christi and most importantly, we once again delivered a top quintile safety performance.
Speaker Change: In 2020 for SPL achieved $11 million labor hours, and Corpus Christi achieved 7 million labor hours without a single lost time incident.
All of our stakeholders should take as much pride in these results is ideal.
Speaker Change: As the Cheniere production teams continue to set the safety and reliability standard in our industry.
Speaker Change: During 2020 for Zach and his team continue to make excellent progress on our comprehensive capital allocation plan deploying over $1 $5 billion towards our stage three project paying down $800 million.
Speaker Change: Of long term debt and buying back almost 14 million shares for approximately $2 two 5 billion.
Speaker Change: In addition, we increased the dividend by 15% to $2 per share annualized and announced another $4 billion share repurchase authorization last summer well ahead of schedule.
Speaker Change: Looking ahead to the full year 2025, I am pleased to introduce our 2025 financial guidance of six $5 billion to $7 billion and consolidated adjusted EBITDA.
Speaker Change: Four 1% to $4 6 billion and distributable cash flow and three to five years to $335 in per unit distributions at <unk>.
Speaker Change: These ranges reinforce at 2024 was a trough year for EBITDA and DCF.
Speaker Change: We expect year over year growth in 2025, and Corpus Christi stage three begins to enter operations.
Speaker Change: The guidance range contemplates the first three trains of Corpus Christi stage III startup production this year.
Speaker Change: Exactly we'll have more to say on guidance in a few minutes, but we are committed to delivering results within these ranges for 2025.
Speaker Change: We made significant progress on our growth during 2024 as demonstrated from our progress at our Corpus Christi stage III project Bechtel continues to execute construction and commissioning on an accelerated schedule.
Speaker Change: At year end total completions stood at 77, 2% with the construction across the entire project that over 42% complete.
Speaker Change: We were proud to achieve first LNG back in December an important milestone that helps reinforce our forecast timeline for train one to reach substantial completion by the end of the first quarter.
Speaker Change: I'll discuss stage three more on the next slide.
Speaker Change: With regard to Corpus Christi train 289.
Speaker Change: The project is nearing the final regulatory approvals required in order to reach.
Speaker Change: And we remain on track to reach FID on this brownfield expansion. This year. We've recently placed orders for long lead time items to ensure we can continue our construction efforts without delays upon receipt.
Speaker Change: Remaining necessary permits.
Speaker Change: Please turn to slide six where I'll provide more in depth look at our progress on Corpus Christi stage III.
Speaker Change: We are working closely together with backfill to move stage III to operations.
Speaker Change: Train one commissioning continues to progress to plan and I am pleased to share that this week, we completed production of our first full cargo of LNG from the stage three project.
Speaker Change: Over 5000 personnel are working to safely advance the project towards completion, and we are beginning to turn a significant number of systems over to commissioning and startup teams on train two.
Speaker Change: In addition, all equipment and materials on trains one through seven have been procured and delivered at this point mitigating stage III risks of import tariffs.
Speaker Change: We continue to target the first three trains to ramp up production by year end of this year and all seven trains to be substantially complete by the end of 2026.
Speaker Change: Please turn to slide seven where a highlight our strategic priorities for 2025.
Speaker Change: First and foremost we expect to reinforce our track record of best in class operations in 2025.
Speaker Change: We will continue to operate our business the right way to Safeway, especially as we construct and commission Corpus Christi stage III.
Speaker Change: Our hard earned reputation in the market as a safe and reliable operator is a significant competitive advantage, one which will serve all of us well for the long term and is vital to maintain that advantage.
Speaker Change: Second we are committed to getting Corpus Christi mid scale trains eight 9%.
Speaker Change: As I just mentioned, we look forward to receiving the remaining regulatory permits in the near future and are taking the steps necessary in preparation for an FID later this year.
Speaker Change: During 2024, we locked in approximately $5 billion of long lead time equipment and other cost under limited notices to proceed with <unk> related to train to $8 nine helping to ensure the project can maximize efficiencies on both cost and schedule.
Speaker Change: Finally, we intend to strategically pursue permits to ensure the long term growth optionality.
Speaker Change: Of our Sabine pass and Corpus Christi footprint.
Speaker Change: As I said at the beginning of my remarks, we are actively engaged with the new administration and are very encouraged by the early action and stated policy goals prioritizing a clear transparent and durable permitting process.
Speaker Change: Given that improvement in the permitting environment for LNG projects here in the U S, which is a stark contrast from just a few months ago, we have an opportunity and a strategic imperative to secure permits for significant growth at both Sabine and corpus in order to Derisk the permitting.
Speaker Change: <unk> of future project development with line of sight to a total capacity of over 90 million tonnes per annum.
Speaker Change: We will of course always adhere to our disciplined capital investment parameters. So that any incremental capacity is likely to be built under a phased approach while optimizing our brownfield advantages at both facilities.
Speaker Change: But while we have this window, we intend to aggressively pursue permits at both sites and give ourselves a path to potentially more than double our current operating capacity once permits and a creative economics align.
Speaker Change: I look forward to updating you on these efforts in the coming quarters as they develop.
Speaker Change: With that I'll now hand, it over to Anatol to discuss the LNG market. Thank you all again for your continued support of Cheniere.
Anatol: Thanks, Jack and good morning, everyone before we turn to a discussion of the markets I'd like to acknowledge the constructive progress made in recent weeks towards restoring peace between Russia and Ukraine.
Anatol: While it remains a fluid situation and the peaceful solution in the near term is not a given we're encouraged by the ongoing talks and hope resolution can be achieved soon.
Anatol: Ukraine conflict over the last three years has had a tremendous impact on global energy markets not only altering supply demand balances, but also serving as a powerful reminder of the criticality of a secure and reliable energy supply portfolio.
Anatol: It has once again highlighted the vital role natural gas plays in the everyday lives of people and economies around the world.
Anatol: The resolution to the year's long War would likely result in the restoration of incremental Russian gas volumes into Europe over time.
Anatol: We believe this would aid a rebalancing in the gas markets and helps support a more affordable and stable pricing environment conducive to long term natural gas and LNG demand growth.
Anatol: Now please turn to slide nine.
Anatol: We will start with a look back at 24 and the market remain relatively tight throughout last year due to limited growth in supply capacity, coupled with strong demand outside of Europe and continued geopolitical tensions throughout the year.
Global LNG trade grew by less than 4 million tonnes year on year as project delays Russian sanctions and a lull in new projects coming online and limited supply growth.
Anatol: While new projects started up in Russia, The U S Mexico and the Congo. These projects contributed very little volume to the market due to starting up late in the year or in the case of Russia sanctions, preventing cargoes from each end markets.
Anatol: As a result, the increased LNG consumption in Asia as well as other markets such as Egypt, and Brazil was satisfied at the expense of Europe for most of the year.
Anatol: These conditions continue to support spot prices, which remained elevated, albeit thankfully lower than the unprecedented levels of 22 as the post crisis rebalancing gradually continued.
Anatol: CTF monthly settlement prices averaged around $10 90 in <unk> and 'twenty for over 20% lower than the 23 average of about $13 70 <unk>.
Anatol: Similarly, the settlement price for <unk> averaged $11 80 in <unk> and 'twenty for over 25% lower versus 'twenty three.
Anatol: Average Henry hub settlement price was 17% lower than 24 compared to <unk> 23.
Anatol: However, starting in late 'twenty for cold weather in Europe, coupled with the expiry of the gas transit agreement between Russia, and Ukraine at the end of 'twenty four plus the rebound in European spot prices with a narrowing and later a reversal of the JK mttf spread in order to attract cargoes into Europe.
Anatol: Let's turn to the next page and address this in further detail.
Anatol: In 2000 and for Europe's imports declined 19% year over year down over approximately 22 million tons due to sluggish growth in the industrial sector lower gas fired power generation and competing demand for volume outside the region.
Anatol: However, Europe's fundamentals improve during the second half of the year as regional balances reversed course, especially in the fourth quarter when Europe turned tighter amid winter weather and the expiry date for Russian natural gas flows through your crane neared.
Anatol: While gas fired generation fell 10% year on year drop in renewables output in the fourth quarter, along with persistent cold temperatures resulted in more gas fired generation, which rose 15% year on year during the fourth quarter.
Anatol: This accelerated gas withdrawals from underground storage, bringing inventory levels below the pre war five year average and roughly 17 bcm below the comparable period last year. This decline.
Anatol: Is equivalent to approximately 180 cargoes of LNG and is likely the reason we saw a swift call on cargoes into Europe towards the end of the year and at the beginning of 'twenty. Five we believe this call is likely to continue through most of this year is LNG will be critical in mitigating the loss of Russian gas in Europe, and helping replenish inventories for next winter in the <unk>.
Anatol: Absent of other incremental supply alternatives.
Anatol: While Europe has had a tale of two halves in 'twenty for Asia consistently experienced growth across its markets for most of the year.
Anatol: <unk> added over 20 million tonnes of LNG imports up 8% year on year to 283 million tons.
Anatol: China was the most significant contributor to this growth increasing 10% to 78 million tons.
Anatol: Not quite back to its pre war peak, but very close.
Anatol: China's growth in LNG imports came as the country's overall gas demand grew roughly 8% across all major sectors, including transportation, which reached an estimated 15 to 16 million tonnes and 24.
Anatol: Additionally, as is the case across most of the region, China experienced heat waves. This past summer, which helped boost power generation from its growing gas fleet, which added 19 gigawatts of capacity in 'twenty for.
Anatol: This builds on the $10 three gigawatts that were added in 2003 for a current total of 145 gigawatts of installed gas power generation capacity in.
Anatol: In addition to CGT capacity the country installed an incremental 24 million tonnes per annum of re gas capacity, an increase of 20% and an additional 141 Bcf or four bcm of underground storage capacity for an estimated total of 953 Bcf or 27 bcm.
Anatol: As of the end of 'twenty four all aligned with the country's goal to reach peak coal consumption. This year peak carbon emissions by 2030 and grow natural gas to 15% of primary energy.
Anatol: As we've noted on previous calls we believe that the Asia Pacific region will continue to support LNG demand growth for decades to come in 'twenty four provides added conviction to that thesis.
Anatol: The region accounted for nearly 45% of guests demand growth in 'twenty, four which represents an all time high globally growing at a rate of two 8% year on year, representing incremental demand of approximately 11 Bcf a day.
Anatol: Let's move to the next slide.
Anatol: The global gas market has gained significant flexibility with the growth in LNG trade, which plays a key role in balancing the global gas market evidenced by the avoidance of a severe energy crisis in Europe into 'twenty four and we believe it is likely to remain a key contributor to global energy supply security for decades to come.
Anatol: Throughout 2024, there were numerous and at times compounding factors that impacted the supply and demand of LNG and contributed to sustained elevated pricing in the short end of the curve last year.
Anatol: These include extreme weather events and shortfalls on the supply side.
Anatol: A few counterbalancing elements last year. These factors coincided to create major trade deficits in some markets.
Anatol: As I mentioned earlier the start of new projects in 2004 did little to offset the supply deficits, resulting from other project delays system outages and resource maturation just to name a few <unk>.
Anatol: Completing gas resources for LNG in legacy supply areas, such as Egypt, Algeria, Trinidad and even Australia have far outweighed gains in other areas, such as Argentina, where domestic gas production growth helped reduce the country's imports of LNG last year.
Anatol: And in fact, Australia has taken train two at northwest shelf offline due to insufficient resources.
Anatol: We believe examples like these are structurally supportive of demand for LNG supply in the future while the energy security provided by destination flexible LNG further reinforces the prospects of LNG demand growth in general.
Anatol: The expected growth in the LNG market will require an additional estimated 230 MTA of LNG supplies in the coming decade, and new supply from Cheniere, both under construction and in development will not only help meet this demand, but also should help ensure improved availability deliverability and affordability of gas supply globally.
Anatol: While offsetting some of the legacy resource depletion and ensuring greater energy security to markets worldwide.
Zach: With that I'll turn the call over to Zach to review, our financial results and guidance.
Zach: Thanks, Anatol and good morning, everyone.
Zach: Pleased to be here today to review, our outstanding fourth quarter and full year 2024, our results and key financial accomplishments and to discuss our financial guidance for 2025.
Zach: Turning to slide 13 please.
Zach: For the fourth quarter and full year 2024, we generated net income of approximately $977 million and $3 $25 billion.
Zach: Consolidated adjusted EBITDA of approximately $1 6 billion and $6 155 billion.
Zach: And distributable cash flow of approximately $1 billion.
Zach: And $3 73 billion respectively.
Zach: With these results we have now reported positive net income for the second full fiscal year.
Zach: Compared to 2023, our fourth quarter and full year 2024 results reflect the moderation of international gas prices as well as a higher proportion of our LNG being sold under long term contracts and lower contributions from optimization activities upstream and downstream of our facilities.
Zach: As the extreme market volatility continues to subside since 2022 and 2023.
Zach: These impacts were partially offset by higher volumes of LNG delivered from our two sites during the year.
Zach: During the fourth quarter and full year, we recognized income 615, and 2340, <unk> 90, Btu, a physical LNG, which included 605 and 2325 <unk> from our projects.
Zach: And 10 in 2004, TVT sourced from third parties respectively.
Zach: Approximately 92% and 96% of our LNG volumes recognized in the respective periods were sold in relation to term SBA or IPM agreements.
Zach: While we have many significant achievements to highlight from 2024, and particularly proud of the execution on our 2020 vision capital allocation plan throughout the year.
Zach: In 2024, we deployed approximately $5 4 billion towards the key pillars of the plan.
Zach: Shareholder returns accretive growth and balance sheet management.
Zach: As of year end, we have allocated nearly $14 billion of our $20 billion target by 2026 that we intend to surpassed as we continued to reduce our share count and enhance our capital returns, while retaining financial flexibility to fund accretive growth across our platform.
Zach: All of which should position us to achieve our target of generating over $20 per share of run rate distributable cash flow for our shareholders.
Zach: During 2024, we repurchased approximately $13 8 million shares for approximately $2 3 billion.
Zach: Having repurchased over 10% of our outstanding shares since announcing our 2020 vision plan in September 2022, we're already over halfway to our stated initial target of 200 million shares outstanding.
This progress led us to increase our share repurchase authorization last year by $4 billion through 2027, which we're currently working through Opportunistically.
Zach: We also declared $1 87 per common share and dividends for 2024 and paid over $400 million in dividends during the year.
Zach: As previously announced with our June capital allocation update we increased our quarterly dividend by approximately 15% to $2 annualized and intend to follow through with our guidance of 10% dividend growth annually through the end of this decade.
Zach: We remain committed to our targeted payout ratio of approximately 20% over time, which will enable us to retain the financial flexibility are central to our comprehensive and balanced long term capital allocation plan and disciplined self funded growth objectives.
Zach: During the fourth quarter and full year, we repaid $350 million and $800 million of outstanding long term indebtedness respectively.
Zach: During the year, we fully repaid the SPL 2024 notes and addressed our 2025 maturities across the complex with only $300 million of principal remaining on the SPL 2025 notes, which we plan to repay with cash on hand at maturity in March.
Zach: During the year, we also issued the inaugural investment grade bond at Cheniere Energy, Inc. Following our blueprint for strategic refinancing extending our maturity profile and reducing interest expense all while D. Securing an D SIB ordinating our balance sheet.
Zach: Looking ahead, you can expect more of this while in the near term we will continue to focus our debt paydown within the <unk> complex in preparation for financing the SPL expansion project.
Zach: The rating agencies continue to recognize our progress on balance sheet management through our corporate structure in 2024 last year, we received our <unk> credit rating upgrades since 2021 and are now investment grade at every scenario issuer by all three rating agencies.
Zach: The continued recognition from the ratings agencies reflects our capital discipline proven project execution and operational excellence and.
Zach: And having developed and structured these projects to have robust credit metrics over the long term.
Zach: During the fourth quarter and full year, we funded approximately $220 million and $1 5 billion of Capex on stage III.
Zach: Bringing total spend on the project to over $4 5 billion.
We also deployed approximately $400 million in 2024 towards future growth and debottlenecking, including procurement for certain equipment for mid scale trains eight and nine and continued development capital to progress the SPL expansion project.
Zach: To date, we have funded over $300 million of.
Zach: Of the approximately half a billion of costs that Jack mentioned, we locked in for mid scale trains eight and nine and related infrastructure.
Zach: With approximately $3 billion in consolidated cash and ample undrawn revolver and term loan liquidity throughout the Cheniere complex, we expect to continue equity funding the stage III capex, while remaining active on our opportunistic buyback program as we continue to manage our cash balances sufficiently.
Zach: Turning now to slide 14, where I will discuss our 2025 guidance and outlook for the year.
Zach: Today, we are introducing our full year 2025 guidance ranges of six 5% to 7 billion and consolidated adjusted EBITDA and four 1% to $4 6 billion and distributable cash flow and the $3 25 to $3 35 per common unit of distributions from <unk>.
Zach: From 2024 actuals to the midpoint of 2025 guidance 2025 is up 10%, 17% and 2% respectively. Solidifying 'twenty 'twenty four is a trough year with stage III startup driving higher financial performance expectations. This year.
Zach: Consistent with what we discussed on the <unk> call.
Zach: These changes reflect our production forecast of 47 to 48 million tons of LNG in 2025, which contemplates our existing nine train platform plus our outlook for production from the first three trains at Corpus Christi stage three this year.
Zach: Achieving first LNG in December and first cargo already this month together with the commissioning of train one tracking on schedule and reinforces our conviction in our forecast of 47 to 48 million tons of LNG production consistent with the October call.
Zach: As such our team has continued to Ford sell some of our Uncontacted volumes Opportunistically and.
Zach: And today, we forecast approximately one 5 million to 2 million tonnes of unsold capacity for the remainder of 2025.
Zach: Of the approximately three to 4 million tons of spot capacity for 2025 guided to on the last call. The C&I team is now locked in almost 2 million tonnes at attractive market and FX up from over 1 million tons as of the last call.
Zach: Given that exposure, we forecast that a $1 change in market margin would impact EBITDA by approximately $75 million to $100 million for the full year.
Zach: However, most of the remaining open volumes will be contingent on the timing and ramp up of the first three trains of stage III <unk>.
Zach: Looking at curves today net backs, while volatile are hovering around eight to $9 for the balance of 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.
Zach: As with the commissioning of our first nine trains we hope to improve the commissioning process for each subsequent train by employing lessons learned.
Zach: We continue to expect the remaining mid scale trains at stage III to reach substantial completion in 2026 at which point, we have several million tons of new long term contract starting in 2026, and 2027, keeping our platform over 90% contracted with creditworthy, counterparties and take or pay style cash.
Zach: Loews and averaging approximately 95% contracted through the mid 2000 <unk>.
Zach: As always our results could be impacted by the timing of certain cargos around year end and as noted on prior calls our DCF could be affected by changes in the tax code, particularly as it relates to any coming tax reform.
Zach: The IRS transition guidance in the final rules of the corporate alternative minimum tax.
Zach: These changes can impact the timing and amount of our cash tax payments this year and going forward, but should be immaterial on an NPV basis, and not impact our ability to generate over $20 billion.
Zach: Of available cash through 2026.
Zach: As Jack noted in 2025, we are focused on bringing stage III online safely while supporting this year's financial results.
Zach: Progressing trains 89%.
Zach: While <unk> remains on site constructing and commissioning stage III.
Zach: And to take advantage of a constructive permitting window to provide line of sight to a total of over 90 million tons of permitted capacity across both sites.
Zach: It helped solidify optionality for future brownfield growth long term.
Zach: 2025 is already off to a great start and we're pleased to see the meaningful progress at stage III keeping that project ahead of schedule.
Zach: Which will help us deliver on EBITDA growth in 2025.
Zach: We are encouraged by strong and improving fundamentals across our industry, but we also take comfort in the strength and resiliency of our highly contracted platform that has been demonstrated through multiple cycles.
Zach: <unk> is a trusted long term partner to all of our stakeholders.
Zach: As we remain focused on maintaining our track record of reliability safety and operational excellence. We will continue to serve as responsible transparent stewards of capital in order to grow our leading infrastructure platform and enhance the long term compounding value delivered to our stakeholders.
Zach: While delivering on our commitments by supplying our customers with reliable affordable and cleaner burning LNG.
Zach: That concludes our prepared remarks thank.
Zach: Thank you for your time and your interest in Cheniere.
Zach: Operator, we're ready to open the line for questions.
Speaker Change: I would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Thank you please limit yourself to one question and one follow up to allow everyone. An opportunity. This technology you may re signal for any additional questions. Once again that is star one if you would like to ask a question.
Speaker Change: We will now take our first question from Theresa Chen with Barclays.
Theresa Chen: Good morning. Thank you for taking my questions first it's great to see the seamless execution in the tailwind behind your business going back to the comments on the recent geopolitical developments related to Russia and Ukraine.
Theresa Chen: Ultra in Europe can you on the path forward for U S. LNG in particular and have you seen any effects on your commercial discussions for a long term contract, especially with European customers and understanding that there's quite a bit going on over there between geopolitical developments, whether it's cleaning inventories and so on and so would love to hear your thoughts here.
Theresa Chen: Theresa. Thank you very much this is Jack I'll start and I'll turn it over to Anatol. He can he can talk more specifically about his interactions with our customers. Our first we pray for world Peace.
Theresa Chen: That we have.
Theresa Chen: It has been very concerning these last three years of what's gone on just more broadly around the world not only in the Ukraine. So we pray that that we.
Theresa Chen: We can settle things down and get back back to basics and let people.
Theresa Chen: Live and enjoy their lives.
Theresa Chen: So as you know we have a very highly contracted business model.
Theresa Chen: So we have anticipated a very volatile commodity market.
Theresa Chen: Going forward and it's no different than what we've seen in the past so whether it was COVID-19 and 2020 or the Ukraine, Russia and more.
Theresa Chen: 'twenty three and beyond.
Theresa Chen: We expect there to be a lot of volatility in our commodity driven market.
Theresa Chen: But more specifically on our engagements with our customers I think what's been extremely highlighted by this war is.
Theresa Chen: That energy security energy diversity is.
Theresa Chen: Necessary for any countries stability and growth.
Theresa Chen: So with that Anatol do you have any more to add yes. Thanks, Jack Thanks Theresa.
Theresa Chen: It is.
Theresa Chen: A backdrop of volatility and uncertainty.
Theresa Chen: As a market, where europe's call for additional LNG as inventories were depleted.
Theresa Chen: Was was heard loud and clear by the market U S sent a record amount of volume to Europe, 86% of our cargoes in January went to Europe and is helping resolve the current situation, but inventories as you know is still order of magnitude, 25% lower than they were last year you have multiple <unk>.
Theresa Chen: <unk> events, playing out as we commented in Jack or further commented hopefully theres good progress on on peace and.
Theresa Chen: And the Hot Wars starts to add on top of that we have a very favorable geopolitical environment. Both on the U S side.
Theresa Chen: Where we have good support from the administration to continue our growth ambitions as well as from Europe, which on the one hand aims to end the conflict, but on the other hand as soon as next week, we'll likely announce cessation of all energy Russian LNG imports into Europe. All of this results in a backdrop, where the reliable and.
Theresa Chen: Certain product that we offer with full destination flexibility.
Theresa Chen: It's just hard to see how there is a better solution to to navigate the uncertainties that are on the come. So we have we have a number of good tailwind in hopes that that will be true for Europe writ large.
Theresa Chen: Got it.
Theresa Chen: Turning to the other side of the world.
Theresa Chen: As the Trump administration targets U S trade deficit, which international trading partners, including top LNG in quarters in Asia.
Speaker Change: Seems to be more willingness to show up gas supply U S. LNG volumes, what do you make a case do you think that's largely political rhetoric or would you expect an acceleration in commercial development from here complementing these structural demand growth from that area of the world.
Speaker Change: Yes Theresa this is.
Speaker Change: Very similar to what happened during President Trump's first term when in November of 2017, I was invited to join the President and Secretary Ross on a trip through Asia and that resulted in our first the first long term energy.
Speaker Change: Contract with with between China and Cheniere.
Speaker Change: And.
Speaker Change: I would expect that.
Speaker Change: He is very focused on making the U S energy dominant and.
Speaker Change: I feel pretty confident he will falls through.
Speaker Change: And help us.
Speaker Change: I'll get.
Speaker Change: Get more products sold and grow our business here domestically.
Speaker Change: Yes.
Speaker Change: Just to add to <unk> comments.
Speaker Change: We have this tremendous pull from Asia for gas in general in LNG.
Speaker Change: Unlike other LNG suppliers.
Speaker Change: <unk> does not do government to government transactions that said governments are.
Speaker Change: Very important in these discussions and ultimately the our commercial deals Jack mentioned and the one we executed with Petro China in 2018, we have clearly shown the world the benefit of this destination flexibility reliability and.
Speaker Change: It's no accident that we've had a number of repeat engagements with China and other customers in Asia, and we expect that to continue to be the case, having proved this this concept and having executed and further build our relationships through these various cycles. So.
Speaker Change: Hard to say that these are not tailwind for us.
Speaker Change: Thank you very much.
Speaker Change: We will now take our next question from Justin Jenkins with Raymond James.
Justin Jenkins: Hey, Thanks, Good morning, everyone I guess, maybe a high tech onto a terrific question and Jack you mentioned that in your remarks, but maybe some more details on how the early days of the Trump administration have been versus your expectations on the regulatory and permitting backdrop and maybe also how that potential for new capacity has has played.
Speaker Change: Into contracting discussions as well.
Jack Fusco: So Justin it's been refreshing quite honestly so.
Speaker Change: When we produced.
Speaker Change: First LNG at stage III in December the first E mail that came across my desk was from the then nominated Secretary of energy.
Speaker Change: Yes.
Speaker Change: Chris Chris right.
Speaker Change: But.
Speaker Change: And then the second email came from the former Secretary of Energy, Dan <unk>, who is with.
Speaker Change: During President Trump's first administration.
Speaker Change: So it just it helps.
Speaker Change: These are very complicated very capital intensive projects. There is a lot of different moving parts at any given time to put together having regulatory certainty.
Speaker Change: Is very important it's not it's not everything that makes the project go but it is very very important in our timeline. So.
Speaker Change: The focus in communications have been very strong and very clear.
Not specified: Great. Thanks, Jack.
Speaker Change: Follow up on guidance here it looks like one to 2 million tons of stage III volume incorporated in the EBITDA guidance is that mostly just train one and maybe <unk> trained do getting into EBITDA for the year or how are you framing that that volume sensitivity in 2025.
Speaker Change: Sure Geoff just to summarize for everybody, we've guided to 47% to 48 million tons of LNG This year, which would be the most.
Speaker Change: By a few million tons that we've ever done that's based on the foundation of the first nine trains at 45 million tons, and then stage III coming online getting us to 47% to 48.
Speaker Change: Say, a little less than 1 million tons is expected to be as commissioning and that gets you to like over 46 to 47 million tons.
Speaker Change: To get to the high end of that range basically we're going to need three trains up and running.
Speaker Change: And pretty much fully there by early.
Speaker Change: Early in the fourth quarter of the year.
Speaker Change: And then to get to the low end of the range.
Speaker Change: That would mean only two trains basically hit substantial completion this year right.
Speaker Change: Right now.
Speaker Change: We feel very good that we're in.
Speaker Change: In the middle of that range and things are progressing well.
Speaker Change: That's really the toggle between that one to 2 million tons of P&L operational production.
Speaker Change: Perfect. Thanks, Sarah.
We will take our next question from Bert <unk> with Wolfe Research.
Bert: Hi, good morning.
Bert: Can you please talk to optimization, you've already seen year to date, whether its shipping optimization with Asia Europe spreads looking tight in certain periods or procurement from gas basis volatility.
Bert: Sure, we wont get into all the details of optimization and as you know as we think about guidance and this is the initial guidance we've given for 2025.
Bert: We don't leg into.
Bert: Most of the optimization in the in the early guidance. So that will come with time as we continue to lock it in and the optimization comes from upstream of the plant through our lifting margin and then downstream of the plant as we optimize with some third party sourcing and moving cargos around and taking advantage of at times the arbitrage between <unk> in TTS.
And then obviously sub chartering.
Bert: As one would expect with sub chartering our shipping rates much lower year over year. In addition to that with stage III coming online our length in our sub chartering like portfolio, our chartering book.
Bert: Is less so I'd imagine that will be less of a driver of the optimization this year.
Bert: But it's fair to say, we've already locked in over $100 million of optimization, but to get to the upside of our guidance range.
Bert: We're keen to try to lock in a couple of hundred more.
Bert: Thanks for that.
Bert: What are you seeing as far as pricing for long term <unk> recently and has there been any notable upward pressure as costs for new bills horizon.
Bert: Yes so.
Bert: It is a competitive market as you can imagine we have a number of projects that that of course have deed over the 'twenty to 'twenty three period, but as we've said on previous calls that the.
Bert: The cost side of the equation is obvious to everyone and we are at or above the top end of our historical range of 2% to $2 50.
Bert: For Cheniere projects, we are confident that we can leverage our reliability and operational performance, having never missed a foundation customer cargo and extract a premium from that market.
Bert: So thats why were comfortable saying were at or above the top end of that range that is up meaningfully from where we were let's say three or four years ago, but I.
Bert: I would say, it's fair to say that it is not commensurate with the cost pressures that we've seen in the market and.
Bert: Zach will remind you in order to move forward for us we need to meet all of our investment parameters and we have to use every brownfield advantage and our book to.
Bert: To get to that hurdle.
Just to add to that brownfield advantage I mean, we already have bechtel onsite at corpus and we're keen to mid.
Bert: Midscale eight or nine this year.
Bert: Which will just be two added trains in.
Bert: And we have some plans to unlock more debottlenecking there to get closer to 60 million tons as a total portfolio and then we did speak to the idea that we're going to take advantage of this constructive permitting window to get over 90 million tons.
Bert: But there's definitely flexibility there to do it in phases.
Theres pretty good line of sight of first phases at both sites.
Bert: To get at least a large scale train.
Bert: So.
Bert: That is very brownfields, meaning no tanks, no pipelines know births and thats going to allow us to be cost competitive.
Bert: It allows even these.
Bert: These SBA levels that are better than they had been.
Bert: But maybe havent inflated as much as as things like labor half.
Bert: Work themselves out and put us in a really good position to continue to grow well beyond 60 million tons in the coming years.
Bert: Thank you.
Speaker Change: We will now take our next question from Jeremy Tonet with J P. Morgan.
Jeremy Tonet: Good morning.
Speaker Change: Good morning, Jeremy.
Speaker Change: And thank you for all the helpful commentary just wanted to go back to that a bit if I could on the macro side it seems like the.
Speaker Change: Concern on Russian gas coming back into the marketplace and the LNG supply in general coming in you've touched on this a number of times in the call, but just wondering if you might be able to expand a bit more I guess with regards to how you see this transpiring over time.
Speaker Change: In our minds.
Speaker Change: Lower or even stable LNG prices have been helpful to incentivizing demand, particularly in Asia, which does seem to be the long term growth avenues here and just wondering if you could share some more thoughts along these lines.
Speaker Change: Thanks, Jeremy and again as as we've commented we earned for peace and we earned for more moderate and stable.
Speaker Change: Economics of our product, we can control to a large extent safety and reliability, but market will dictate the economics.
Speaker Change: As you know the market has.
Speaker Change: The gas market for example globally grew by almost 3% last year, but of course LNG market didn't grow grew 4 million tons of over 400 million ton base. So the market needs more more LNG needs that dispatched and it needs to refill a number of markets that have been.
Speaker Change: In essence starved of this product and we hope that that starts to play out over the coming years. We've tried it out the number in the past of over 600 million tons and this is a historical number of non coincident demand by markets and the one thing that has of course played out over the last few years is the tremendous investment I mentioned, specifically China.
Speaker Change: But <unk> seen this investment in gas generation re gas infrastructure pipeline storage globally over 400 million tons of re gas capacity will be added to the current over 1000 million tonnes by by 2030 and those are just things under construction. So how does how does Europe play out who knows right.
Speaker Change: You have this this policy directive that's going to come out that says no more Russian gas into Europe on the other hand again, we hope that the pieces restored in flows are restored eye I will lean on our friends at <unk>, who are the largest suppliers of gas to the continent. These days and then estimate that.
Speaker Change: Once flows are resumed there'll be well below the prewar levels, but could get up to the range of 30 to 35, bcm, including a little bit on Nord stream, two through Europe, sorry through Ukraine, but highly highly unlikely and we agree with this through Poland. So we think it's another relief valve.
Speaker Change: We think it's great for the market the.
Speaker Change: The prices <unk> seen over the last few months into Europe are the highest that we've seen since two since.
Speaker Change: Since the start of 'twenty three so once you take out the the extreme highs of 22 right. After the war a very elevated and they had the desired response, they drew a record amount of LNG into Europe, but inventories are still 25 percentage points below a year ago and every percentage point is about <unk>.
Speaker Change: <unk> cargo. So you don't have any flow through Ukraine now youre at a huge deficit Europe will continue to need LNG and if I can quote <unk> one more time.
Speaker Change: Its estimate is an additional 350 cargoes of LNG. So again, what's the answer diverse flexible portfolio that that reliably shows up and and serves the load that desperately needs gas.
Speaker Change: Got it that's very helpful. There and then if I could just turn to Zack quick.
Quick here on capital allocation.
Speaker Change: Just wondering.
Speaker Change: We've seen others in midstream maybe.
Speaker Change: Deemphasize the buyback side, but it seems like Cheniere has continued to kind of plow forward on that side and the share count reduction that's been talked about at the same time, if we think about future growth and we look at corpus that two and a half years from FY <unk> to first LNG no one has exceeded that speed to market.
Speaker Change: We see material contracts signed as you've discussed in the past.
Speaker Change: The permitting window as you've described and just very attractive brownfield economics here and so just wondering how you think about balancing the sides. It seems like some more growth could be coming into the plant sooner. Given these factors just wondering if you could share your thoughts on that.
Speaker Change: Sure. Thanks for all that in and I'd say were also targeting <unk>.
Speaker Change: Substantial completion of the first train inside of three years.
Speaker Change: Not just first LNG in two and a half which we're pretty excited about.
Speaker Change: I think it comes back to the fact that I'm not sure we have.
Speaker Change: Many peers in our business that have the cash flow our operation maturity level that we have.
Speaker Change: So we're in a position now where we're going to have a relatively big capex year right.
Speaker Change: We're not yet on the home stretch of stage III, but we're going to have like a 1 billion and a half unlevered capex, there and we plan to.
Speaker Change: The mid scale, eight or nine that could be around $800 million of capex. This year. So we're talking about well over $2 billion.
Speaker Change: At the same time, we have over $3 billion of cash on the balance sheet.
Speaker Change: And we have an over $3 billion term loan still available to us to draw as we see fit in the coming years. So what you can expect is more of the same.
Speaker Change: Basically this past year, we we deployed $5 4 billion on capital allocation and DCF was $3 seven and we brought our.
Speaker Change: Cash balances down from mid 4 billion going into last year to low threes.
Speaker Change: We're going to continue to work that down.
Speaker Change: By $1 billion or two in the next year or so and eventually draw on that term loan. So you can expect us to.
Speaker Change: Fund all this capex and still have more than enough capital to do more of the same.
Speaker Change: As it relates to the buyback we will grow the dividend by 10.
Speaker Change: 10% as we guided to.
Speaker Change: And we'll pay down a healthy amount of that again as we get ready for SPL expansion in the coming years, but the $2 billion to $5 billion of buybacks in one year that shouldnt be an anomaly and it will just come down to how opportunistic we can be.
Speaker Change: Got it that's helpful I'll leave it there thanks.
Speaker Change: Your next question will come from Craig Shere with Tuohy brothers.
Craig Shere: Good morning, Thanks for fitting me in.
Speaker Change: <unk>.
Speaker Change: Doug.
Speaker Change: I can pick up on jeremy's questions from others.
Speaker Change: So we have some stubbornly high.
Speaker Change: <unk> cash balance.
Speaker Change: On the balance sheet.
Speaker Change: Even after everything you've discussed.
Speaker Change: By about growth Capex funding.
Speaker Change: Reducing debt.
Speaker Change: So al.
Speaker Change: What do you see as the catalyst for ultimately bringing.
Speaker Change: The C Corp, cash balance to a more sustainable perhaps $1 billion as it may be.
Speaker Change: Bringing the CCP distribution down to the base after refinery FY. These stage five or what should we be looking for here.
Speaker Change: I think it's just going to be methodical as it was from four five down to three and Youll see it come down even more so this year as we have over $2 billion of planned capex that we'd like to do without.
Speaker Change: Slowing down whatsoever, the rest of the capital allocation I think folks can take comfort that died.
Speaker Change: To say that to say that the buyback program could be opportunistic is an understatement basically in Q1 last year. When we actually had a lot of pressure on the stock we bought back over 50% of that number for the year.
Speaker Change: If you just look at this coming quarter that we're in today, we probably bought back more in the first two weeks of February than we did all of January.
Speaker Change: So you can see that that will continue to plug away, but with the capex coming for stage three midscale eight and nine and we will continue to develop Sabine expansion and be in a position next year to start doing meaningful <unk> TPS.
Speaker Change: We're well placed to almost have very very similar capital allocation year over year, where it will be demonstrably higher than even the four one to $4 6 billion of DCF, we just guided to.
Speaker Change: Right.
Speaker Change: And then the growth kind of sideways.
Speaker Change: My second question.
Speaker Change: And Thats.
Speaker Change: The prospective 90, plus some tpa.
<unk> platform Jack alluded to in my opening comments.
Speaker Change: Presumably that assumes.
Speaker Change: At least another 10 million Tpa permitted corpus Christi after the.
Speaker Change: Mining modular trains.
Speaker Change: Doing that math right and.
Speaker Change: What ultimately.
Speaker Change: <unk> the application hold.
Speaker Change: So as you know Craig we recently acquired 500 acres of property contiguous to our Corpus Christi site.
Speaker Change: There was a birth included in that and that purchase the birth isn't.
Speaker Change: LNG ready, but it but it gives us access water access.
Speaker Change: So on that site, we can probably.
Speaker Change: On a clean sheet of paper have somewhere around.
Speaker Change: 20 million tonnes of additional LNG.
Speaker Change: Production.
Speaker Change: So in addition to the nine state.
Speaker Change: Stage, three trains and the three big trains.
Speaker Change: That's why we just stay over over 90 million tons, but the idea that we're not well placed with brownfield growth at Sabine.
Speaker Change: In Corpus is it's just not not even close to true. So we're going to give ourselves this window to to get that Optionality and then we might just hit a bunch of singles and doubles in and grow by a few trains in phases as economics align.
Speaker Change: It will always come back to those economics in the <unk>.
Speaker Change: Fact that we can project. Thanks to this brownfield advantage at 6% to seven times Capex to EBITDA.
Speaker Change: Great. Thank you.
Speaker Change: We will now move to Jason Gabe Ellman with TD Cowen.
Speaker Change: Yeah, Hey, thanks for taking my question.
Speaker Change: I may have missed it earlier, but do you have a equity to debt funding target maybe now for stage three in isolation as you continue to fund with equity, but stage three in combination with the mid scale expansions.
Speaker Change: Sure.
Speaker Change: Basically as we think about a project. It comes back to these economics, we whenever we want to earn a 10% Unlevered return, which we back into being around seven times capex to EBITDA.
Speaker Change: <unk> leverage.
And then adding leverage bringing trains on early taking advantage of margins.
Speaker Change: That are over 250 are all upside to our shareholders.
Speaker Change: That we don't bake in to justify.
Speaker Change: Of our project. So that's that's how we plan to future.
Speaker Change: Future projects, but as it relates to stage three and mid scale at a nine and obviously the cash balance that we have and the Undrawn term loan we plan to just use that term loan.
Speaker Change: To fund.
Speaker Change: A portion of the remainder of stage III and mid scale at a nine without having to raise incremental debt.
Speaker Change: It's the same as following through with debt Paydown, We just don't do debt, Paydown, and where our equity funding a bit here and being.
Speaker Change: Very efficient with our cash.
Speaker Change: And interest costs overall in the interim but as we think about the Sabine expansion one day that'll be inside an MLP that even with a lower distribution distributing out over $2 billion. This year.
Speaker Change: We plan to continue to distribute that out.
Speaker Change: Plan to stay investment grade and <unk>.
Speaker Change: And still have billions of dollars of debt raised to fund that project in the interim. So 50 50 is the plan, we don't have to do more than that it aligns with all the other parameters of staying around under four times leverage even during construction.
Speaker Change: Going forward.
Speaker Change: Okay, Great that was my only question for me the rest of my questions have been answered. Thanks.
Speaker Change: Thank you.
Speaker Change: We will now take a question from Jean Ann Salisbury with Bank of America.
Speaker Change: Hi.
Speaker Change: We're ramping corpus stage three your first foray into modular can you speak to any learnings that you've had positive or negative around ramp up time ability to round up our nameplate or anything else that you think is important.
Speaker Change: On the question you threw me for a curve Jinan did you say our first foray into modular.
Speaker Change: I did yes.
Speaker Change: Oh, we stick built so as you know the only difference between the way the way, we do it with <unk> and the way.
Speaker Change: Somebody does it modular layers, if you're betting against American workers productivity and we tend to bet on America.
Speaker Change: And not an Italian workers.
Speaker Change: That's fair I shouldn't I guess, maybe I'll revise instead of using the phrase modularity, just a smaller and smaller size.
Speaker Change: The smaller size okay. So.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: It's gone very well I was very pleased with backhaul and my staff.
Speaker Change: First LNG before the end of last year.
Speaker Change: We're down now on train one to a very small construction.
Speaker Change: Construction work group basically doing control tuning and some cleanup work I.
Speaker Change: I would expect us.
Speaker Change: With.
Speaker Change: Next month to go operational with that train.
Speaker Change: Well ahead of schedule.
Speaker Change: And then train two is going extremely well.
Speaker Change: We're fully staffed from a construction perspective.
Speaker Change: On an accelerated schedule.
Speaker Change: Where.
Speaker Change: We've turned over over 20% of the systems to commissioning a lot of the systems that we had to bring online for train one are already active like the feed gas pipelines.
Speaker Change: AG argue the acid gas removal units.
Speaker Change: The player the LNG rundown lines. So I would my expectation is that train 234 just.
Speaker Change: Come on.
Speaker Change: Faster.
Speaker Change: Than what we've experienced here with with train one.
Speaker Change: That's great. Thank you and then as a follow up as your contracting Sabine pass expansion can you just give us your latest thinking about the minimum contract percentage of that portfolio.
Speaker Change: One of our staff.
Speaker Change: Yes, Thanks, Jean Ann It's Anatol.
Speaker Change: As you know we've we've had very good success on the SPL expansion, where you have essentially contracted train seven and have done now are our second offtake agreement for train eight.
Speaker Change: We're very comfortable with those agreements and our partners there and Zac already mentioned, we will look to see how we phase the expansion in and make the math work in terms of generating the types of returns that we require of ourselves so very healthy position and as we've covered throughout.
Speaker Change: This call there are some very robust tailwind to.
Speaker Change: Two the Cheniere platform in two U S. LNG as we as we work to be the the key provider of these destination flexible solutions to to the LNG consumers and don't get US wrong, we take advantage of the torque by we Debottleneck the facility, having open capacity, bringing trains on early before the contracts.
Speaker Change: Contractually begin.
Speaker Change: But we are a contracted infrastructure company.
Speaker Change: And we build at 6% to seven times Capex to EBITDA and we make it through years justifying by 2020.
Speaker Change: And do a hell of a lot better in years like 2022, and basically every year since.
So we're kind of building this to last and we know we're getting the right risk adjusted returns by staying around 90% on a portfolio basis.
Speaker Change: We don't do this for the benefit of the banks.
Speaker Change: We do this for the standard that we've held the company too.
Speaker Change: And how we compare everything to just buying back more stock and letting shareholders, just one more of Sabine and corpus that way.
Speaker Change: Great. Thanks, I'll leave it at that.
Speaker Change: We will now take our last question from John Mccabe with Goldman Sachs.
John Mccabe: Hey, guys. Thanks for the time, just a quick one for me.
Speaker Change: I think previously you talked about Sabine potentially being a 2026.
John Mccabe: Understand.
John Mccabe: Moving towards maybe less of 'twenty, all at once and maybe kind of one train at first with the brownfield economics can you maybe walk us through what your process on timing could look like there.
John Mccabe: I would say it's at the earliest late late 'twenty, six maybe even or more likely 2007.
John Mccabe: What's most important right now.
John Mccabe: Is this permitting window.
John Mccabe: And understanding the art of the possible at both of our sites to get to 90 plus million tons over time.
John Mccabe: So we're going to work on that permitting process and make sure that we see ourselves up not just for a super brownfield phase one.
John Mccabe: The ability to get to 15 to 20 million tons over time, and if that forces us to <unk>.
John Mccabe: In 2007, so be it because its most important that we have that optionality long term.
John Mccabe: With that said, we're already spending money on the development of Sabine expansion and I could see us starting to <unk> next year and just to be an expansion. So money is going to go out the door and we're going to start locking in costs and timeline.
John Mccabe: In a positive way to allow that project.
John Mccabe: Yes to be as successful as every other project we've done to date.
Speaker Change: Okay makes sense. Thank you.
Speaker Change: That concludes today's question and answer session I would like to turn the conference back to our presenters for any additional or closing comments.
Speaker Change: Yes.
Jack Fusco: This is Jack I just wanted to thank everybody for all of your support and we look forward to seeing you in the very near future.
Speaker Change: And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.
Jack Fusco: Yes.
Jack Fusco: Yeah.