Q2 2025 Cheniere Energy Inc Earnings Call
[music].
Good day and welcome to the second quarter 2025, Cheniere energy earnings call 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.
Thank you operator, and good morning, everyone welcome to <unk> second quarter 2025 earnings Conference call.
Slide presentation and access to the webcast for today's call are available at Cheniere Dot com.
Joining me. This morning are Jack Fusco, <unk>, President and CEO, Anatol, <unk> Executive Vice President and Chief Commercial Officer, and Zack 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.
Slide two of our presentation contains a discussion of those forward looking statements and associated risks.
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 financial measure can be found in the appendix to the slide presentation.
As part of our discussion of Cheniere as 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 prepared remarks, we will open the call for Q&A I'll now turn the call over to Jetblue scope Cheniere as president and CEO.
Thank you Randy good morning, everyone. Thanks for joining us today as we review our results from the second quarter of 2025.
Our momentum from the first quarter propelled us forward in the second quarter, which was highlighted by our formal.
On Corpus Christi, Midscale train eight nine project and our upwardly revised run rate production and financial forecast.
Our proven growth strategy is built upon leveraging our significant brownfield platform to deliver highly visible financially accretive growth projects.
In Corpus Christi mid scale trains eight nine is further execution of that strategy.
In addition, our tireless debottlenecking efforts are bearing fruit as we were able to increase our run rate production capacity of our existing large scale trains to five out of $5 2 million tonnes per annum each.
Economically, adding about 1 million tonnes per annum of production on a run rate basis.
Our intent is to execute our growth strategy with a phased approach first on the regulatory front, we will seek to permit the maximum site capabilities for both Sabine pass and Corpus Christi.
These additional development projects represent an opportunity to further leverage our brownfield platform to over 100 million tonnes per annum.
Second we will execute our strategy in a financially disciplined way and we currently have line of sight to grow our operating platform by approximately 25% to a total of 75 million tons.
The early 2000, Thirty's and retain optionality for even more brownfield growth beyond this.
We are focused on capturing the moment and delivering accretive growth into the next decade.
Please turn to slide five where I'll highlight our key results and accomplishments for the second quarter of 2025.
In the second quarter, we generated consolidated adjusted EBITDA of approximately $1 4 billion.
Distributable cash flow of approximately $920 million and net income of approximately $1 6 billion.
Today, we are tightening our full year 2025 guidance range to $6 six 7 billion.
Consolidated adjusted EBITDA, and raising our guidance range to four four to $4 8 billion and distributable cash flow.
Given the financial visibility are highly contracted platform provides.
We are tracking well to deliver financial results within these upwardly revised ranges.
During the second quarter, we successfully completed our large scale maintenance turnaround on trains three and four at Sabine pass safely and on budget extending to being passed as record of consecutive man hours worked without a lost time incident to over $13 5 million hours.
In term of both lost production in onm expense.
This was not only the largest turnaround we've ever completed but also one of the largest turnarounds ever executed in the LNG industry and I am exceptionally proud of our team for once again, demonstrating <unk> safety first culture, and our execution and operations capabilities.
On the commercial front. I hope you saw this morning. We announced the new 1 million ton per UNAM
Spa with jeera 1 of the largest buyers of LNG in the world. And the first long-term contract we have signed with a Japanese counterparty.
To provide some context the complex turnaround solid trains three and four gallon for a little over three weeks and during that time over 1650 contractors are on site.
We've enjoyed a long and successful commercial relationship with jira on shorter term business. And we are excited to expand that relationship with this long-term Spa that extends through 2050.
The complete over 2550 work orders in over 17000 tasks, including the repair and replacement of nearly a 1000 valves and the testing of over 3500 flanges.
This agreement along with the Canadian natural IPM deal signed in second quarter.
Help provide further, certainty on our ability to meet our recently, increased run rate growth and financial forecasts.
And support future growth.
Mother nature further contributed to the challenge with some unfavorable weather during that span.
But the team once again delivered.
In addition to the large maintenance event at Sabine pass, we also optimize some planned maintenance at Corpus Christi, accelerating and executing a maintenance turnaround in the second quarter that was previously planned for the third quarter.
During the quarter, we continued to execute on our comprehensive capital allocation plan and provided an update in late June in conjunction with the FID of midscale trains 8 and 9, where we now forecast to generate over $25 billion of available cash through 2030 to reach over $25 per share and a run-rate DCF.
This work was built into our full year forecast.
But did further amplify the seasonality of the second quarter by adding to the impact from maintenance activities in term of both lost production and O&M expense.
On the commercial front I hope you saw this morning, we announced a new 1 million tonne per annum.
During the second quarter, we deployed another approximately 1.3 billion towards our Capital allocation priorities. We funded nearly 900 million in growth. Capex mainly on stage 3, and mid-scale 8 and 9. Paid our quarterly dividend. We purchased approximately 1.4 million shares for over 300 million dollars.
SBA with Jarrod one of the largest buyers of LNG in the world and the first long term contract, we have signed with the Japanese counterparty.
Zach will have more to share on Capital allocation in a few minutes.
We've enjoyed a long and successful commercial relationship with Jarrod on shorter term business and we are excited to expand that relationship with this long term SBA that extends through 2050.
Please turn this flight 6 while providing update on our construction commission and development activities at Corpus Christi.
This agreement along with the Canadian natural IPM deal signed in second quarter.
Instruction and commissioning continue to progress on an accelerated schedule on stage 3, for the project has reached almost 87% completion and we are proud to announce that the substantial completion of midscale. Train 2 has been achieved this week.
Ill provide further certainty on our ability to meet our recently increased run rate growth and financial forecast and support future growth.
During the quarter, we continued to execute on our comprehensive capital allocation plan and provided an update in late June in conjunction with the fed of mid scale trains eight nine where we now forecast to generate over 25 billion of available cash through 2030 to reach over $25 per share.
First LNG production was achieved in June followed by a little over a month of commissioning, almost half the time. As train, 1 has Lessons Learned and trained. 1 accelerated the commissioning and enhance the early performance of trained 2
I continue to expect the first 3 trains to reach substantial completion by the end of this year and have increasing confidence, that trained 4 will be in commissioning and producing LNG by then as well.
Run rate DCF.
During the second quarter, we deployed another approximately $1 3 billion towards our capital allocation priorities, we funded nearly $900 million of growth Capex, mainly on stage III in Midscale eight nine paid our quarterly dividend and repurchased approximately one 4 million shares for over 300 million.
As noted, we made positive, FID on Corpus, Christi mid-skill trains, 89 back in June and have issued full notice to proceed to backal on that project and related debottlenecking under a fully wrapped lump sum TurnKey contract.
The overall project is expected to add a proxy 5 million tons of capacity by 2028. And I look forward to updating you on mid-skill 89 Milestones as a project Progressive.
Jack will have more to share on capital allocation in a few minutes.
Please turn to slide six we'll provide an update on our construction commissioning and development activities at Corpus Christi.
Construction and commissioning continued to progress on an accelerated schedule on stage three for the project has reached almost 87% completion and we're proud to announce that the substantial completion of mid scale train two has been achieved this week.
I'm proud of the team coming together to FID 1 of the most attractive LNG projects in the world. Taking advantage of our Brownfield positioning with best-in-class EPC and SBA Partners. While holding to the chenar standards that you have come to expect from us.
Last month, we initiated the pre-filing process with fur on our next, large-scale growth project at Corpus Christi CCL stage 4.
First LNG production was achieved in June followed by a little over a month of commissioning almost half. The time is trained one as lessons learned on train one accelerated the commissioning and enhance the early performance of train two.
Similar to the sbl Expansion Project CCL, stage 4 is designed to take full advantage of the existing site and in place infrastructure, we built in order to enable the most efficient and cost-effective incremental capacity possible.
I continue to expect the first three trains to reach substantial completion by the end of this year and have increasing confidence that train four will be in commissioning and producing LNG by then as well.
As noted we made positive <unk> Corpus Christi Midscale strains eight nine back in June and have issued full notice to proceed to backfill on that project and related debottlenecking under a fully wrapped lump sum turnkey contract.
CCL stage 4 is being developed with 4 large-scale tonico Phillips trains using the optimized Cascade design, 2 full containment LNG, storage tanks, 1 new Marine birth and other infrastructure. In addition in second quarter, we updated our FK application on the sbl Expansion Project reflecting 3, large scale trains along with supporting and debottlenecking infrastructure.
Overall project is expected to add approximately 5 million tons of capacity by 2028, and I look forward to updating you on Mexico eight nine milestones as the project progresses.
As I previously discussed, we plan to pursue these projects in a phase approach with an initial phase at each site presenting a visible path for what we believe to be the most accurate of Brownfield growth. A prevailing economics in the market today.
I am proud of the team coming together to one of the most attractive LNG projects in the world taking advantage of our brownfield positioning with best in class EPC and SBA partners, while holding to the Cheniere standards that you have come to expect from us.
We are Full Speed Ahead on all key facets of development on these projects.
With that, I'll now hand it over to Anna. Toll to discuss the LNG Market. Thank you again for your continued support of chinor.
Last month, we initiated the pre filing process with FERC on our next large scale growth project at Corpus Christi CCL stage four.
Thanks Jack and good morning everyone. Please turn to slide 8
Similar to the SPL expansion project CCL stage four is designed to take full advantage of the existing site and.
And persistent volatility driven by various trade policy issues rhetoric and geopolitical tensions.
And in place infrastructure, we built in order to enable the most efficient and cost effective incremental capacity possible.
Conflict in the Middle East, contributed to gas prices rising in Europe and Asia near the end of the quarter. Renewing concerns around infrastructure, damage flow disruptions and security of supply.
CCL stage four is being developed with four large scale conocophillips trains using the optimized cascade design to full containment LNG storage tanks, one new marine birth and other infrastructure. In addition in second quarter, we updated our FERC application on the SPL expansion project refer.
While these initial concerns have fortunately proved overstated with prices quickly, moderating these events and the subsequent Market reaction serve as a reminder of the delicately balanced LNG market today, as well as the critical role of destination flexible LNG in addressing Regional shortages and maintaining Global energy. Balances.
<unk> three large scale trains along with supporting and Debottlenecking infrastructure.
As I previously discussed we plan to pursue these projects in a phased approach with an initial phase at each site presenting a visible path for what we believe to be the most accretive brownfield growth at prevailing economics in the market today.
During the quarter, these conditions continue to support elevated prices with jkm and ttf each strengthening relative to last year, as a result of tighter Supply conditions in Europe, lower storage levels, and extended periods of low renewable output, all amidst, the backdrop of increased geopolitical tension, putting LG Flows at risk for disruption.
We are full speed ahead on all key facets of development on these projects.
monthly price settlements during the second quarter, average 12.53 cents, an amp for jkm and 11.70 cents for ttf,
31% and 22% higher year-on-year, respectively.
With that I'll now hand, it over to Anatol to discuss the LNG market. Thank you again for your continued support of Cheniere.
Thanks, Jack and good morning, everyone. Please turn to slide eight.
Throughout the second quarter, the LNG market continue to navigate global uncertainty and persistent volatility driven by various trade policy issues rhetoric and geopolitical tensions.
Conflict in the Middle East contributed to gas prices rising in Europe, and Asia near the end of the quarter renewing concerns around infrastructure damage flow disruptions and security of supply.
However, price is doing the second quarter moderated from the first reflecting, not only seasonal changes, marking the start of the shoulder season, of course, but also increased confidence in near-term LNG Supply growth for the first half of 2025 Global LNG Imports reached record levels, despite the aforementioned Market uncertainty, and looking ahead. We anticipate the forecast increase in global LNG demand to be met by growth in global liquefaction capacity with about 88 million tons of liquefaction capacity, projected to come online in 2025 and 26.
While these initial concerns have fortunately proved overstated with prices quickly moderating these events and the subsequent market reaction serve as a reminder of the delicately balanced LNG market today as well as the critical role of destination flexible LNG in addressing regional shortages in maintaining global energy balances.
North American LNG exports in particular continue to ramp up as our stage 3 project comes online, alongside other LNG projects in Canada and along the Gulf Coast.
During the quarter. These conditions continue to support elevated prices <unk> and DTF each strengthening relative to last year as a result of tighter supply conditions in Europe, lower storage levels and extended periods of low renewable output all amidst the backdrop of increased geopolitical tension putting LNG flows at risk for disruption.
Monthly price settlements during the second quarter averaged $12 53, and am for Jay Kim and $11 70 for TTM.
In addition to helping meet growing Global gas demand, we expect this new look of faction capacity will support improved availability and affordability of gas supply globally while helping to alleviate the impact of reductions in Russian, gas flows to Europe. And gradually moderating the current multi-year cycle of tight balances. We expect a significant portion of these near-term increases in global Equifax, and capacity to come from the US which highlights the importance of us LNG and maintaining Global gas balances. And its role in mitigating the the impact of Legacy resource depletion and project development, delays elsewhere,
31% and 22% higher year on year, respectively.
Let's turn to the next page to address regional dynamics in more detail.
However prices during the second quarter moderated from the first reflecting not only seasonal changes marking the start of the shoulder season of course, but also increased confidence in near term LNG supply growth for the first half of 2025 global LNG imports reached record levels. Despite the aforementioned market uncertainty and looking ahead, we anticipate the forecast.
Europe's LNG. Requirements in the first half of 25, significantly outpaced 2024 levels. Amid Colder Weather the sensation of Russian Pipeline, gas flows, via Ukraine, and lower Renewables output. In the first quarter driving injection demand in the second quarter.
<unk> and global LNG demand to be efficiently met by growth in global liquefaction capacity with about 88 million tons of liquefaction capacity projected to come online in 2025 and 26.
Europe's total LNG imports in the first half of 2025 increased 25% year-on-year, or 13.2 million tons, as availability of supply, especially from the U.S., coupled with the lack of competition for cargoes from Asia, helped gas prices moderate towards the end of the quarter, despite heightened risk of supply disruptions.
North American LNG exports in particular continued to ramp up as our stage III project comes online alongside other LNG projects in Canada, and along the Gulf Coast in.
This increase in European Imports year on year was driven by the continent's. Needs to replenish storage levels. Coupled with an increase in gas, powered power generation demand,
In addition to helping meet growing global gas demand. We expect this new liquefaction capacity will support improved availability and affordability of gas supply globally, while helping to alleviate the impact of reductions in Russian gas flows Europe and gradually moderating the current multi year cycle of type balances. We expect a significant portion of these near term <unk>.
In contrast to new record-high European underground storage levels reached in the second quarter of 2024, European inventories dropped to comparatively low levels in the second quarter of this year.
While the inventory level has improved recently, thanks to the steady stream of us LNG Imports. It remains at a 20 BCM or 700 BCF deficit compared to last year.
Increases in global liquefaction capacity to come from the U S, which highlights the importance of U S. LNG in maintaining global gas balances and its role in mitigating the impact of legacy of resource depletion and project development delays elsewhere.
To put that deficit into context, it's equivalent to approximately 200 LNG carcass.
Let's turn to next page to address regional dynamics in more detail.
We believe Europe's call on LNG and specifically on U.S. cargoes will remain high, especially if the EU's recent legislative proposal to ban gas imports from Russia by as early as 2026 has passed.
Europe's LNG requirements in the first half of 'twenty five significantly outpaced 2024 levels colder weather the cessation of Russian pipeline gas flows via Ukraine, and low renewables output in the first quarter driving injection demand in the second quarter.
By contrast, Asian LNG imports declined by 7% or 9.5 million tons year-on-year in the first half.
You have total LNG imports in the first half of 2025 increased 25% year on year or $13 2 million tonnes as availability of supply, especially from the U S. Coupled with a lack of competition for cargoes from Asia helped gas prices moderate towards the end of the quarter, despite heightened risk of supply disruptions.
Almost all of this decline came from China where total gas demand remained flat here on year for the first 5 months of 2025, while domestic production and pipeline Imports. Increased broadly in line with last year's growth.
This increase in European imports year on year was driven by the continent's needs to replenish storage levels, coupled with an increase in gas fired power generation demand.
This softened LNG demand During the period, was driven by a combination of macroeconomic, headwinds warmer weather, robust growth and Renewable, Power Generation all amid relatively high, gas and spot LNG prices with the elevated spot. Pricing incentivizing the diversion of destination flexible LG car goes to higher value markets, such as those in Europe.
Much akin to 2022.
In contrast to near record high European underground storage levels reached in the second quarter of 2024 European inventories dropped to comparatively low levels in the second quarter of this year.
We're witnessing the impact of China. Utilizing flexibility in the supply portfolio as a significant balancing force in the global LNG Market.
How these Trends develop throughout the balance of the year?
While the inventory level has improved recently, thanks to the steady stream of U S. LNG imports. It remains at a 20 bcm or 700 Bcf deficit compared to last year.
Meanwhile, LNG Imports into the jkt region increased by approximately 2%, as Korean Taiwan supported demand.
To put that deficit into context, that's equivalent to approximately 200 LNG cargoes.
We believe Europe call on LNG, and specifically on U S. Cargoes will remain high, especially if the eus recent legislative proposal to ban gas imports from Russia by as early as 2026 is passed by.
LNG Imports in Taiwan increased by 15% in the second quarter as the country decommissioned, its last nuclear reactor in May and continues to steadily phase out. Coal Fired power generation driving further demand for LNG.
By contrast, Asia, LNG imports declined 7% or $9 5 million tonnes year on year in the first half.
Almost all of this decline came from China, where total gas demand remained flat year on year for the first five months of 2025, while domestic production and pipeline imports increased broadly in line with last year's growth.
LNG Imports into South and Southeast Asia declined by 5.4% year on year in the first half of 20122 in the large part by elevated pricing combined with relatively moderate early. Summer weather in contrast to 24 when severe and protracted heat waves across the region. Drove a surge in Imports.
This softened LNG demand during the period was driven by a combination of macroeconomic headwinds warmer weather robust growth in renewable power generation, all amid relatively high gas in spot LNG prices with the elevated spot pricing incentivising the diversion of destination flexible LNG cargoes to higher value markets such as those in Europe.
Despite the seasonal variability, South and Southeast, Asia remain a key LG Market, roughly equivalent to China in terms of LG Market, size and remains a key pillar. A future LG demand growth in Asia.
Much akin to 2022, where.
We expect the recent softness in Asian LG demand to prove transitory and moderate as key fundamental demand drivers improve in additional liquefaction capacity comes online which will Aid in rebalancing the global gas market and support a more stable and affordable pricing environment over the long term.
We are witnessing the impact of China utilizing flexibility in our supply portfolio is a significant balancing force in the global LNG market.
Looking ahead, we continue to expect Asia to underpin long-term LG market growth, which we will discuss further on the next slide.
As China represents about a quarter or more of Asia's total LNG imports will continue to monitor how these trends develop throughout the balance of the year.
Let's move to the next slide.
Meanwhile, LNG imports into the <unk> region increased by approximately 2% as Korea, and Taiwan supported demand.
The long-term outlook for LG demand across Asia remains robust Asia continues to be the growth engine for all energy sources as the region is expected to account for. Over 60% of primary energy demand growth globally through 2050, according to the iea.
LNG imports in Taiwan increased by 15% in the second quarter as the country decommission. Its last nuclear reactor in May and continues to steadily phase out coal fired power generation driving further demand for LNG.
LNG imports into south and South East Asia declined by five 4% year on year in the first half of 2025% driven in large part by elevated pricing combined with relatively moderate early summer weather in contrast to 'twenty four when severe and protracted heat waves across the region drove a surge in imports.
In fact, Asia, expected to represent nearly 90% of worldwide growth, in LG demand, through 24/40 as its primary energy, needs expand to meet fast growing economies rapid urbanization declining, domestic gas production and increased power demand.
Despite the seasonal variability south and southeast Asia remain a key LNG market roughly equivalent to China in terms of LNG market size and remains a key pillar of our future LNG demand growth in Asia.
These expectations are clearly shared by key gas market, participants in the region as they demonstrate increased commitments to long-term, gas use through further investment in new natural, gas infrastructure, including additional LNG import capacity, as well as new multi-decade LNG Supply contracts.
The region continues to invest in regas capacity with about 280 million tons per Anam of re gas capacity proposed or currently under construction across Asia.
We expect the recent softness in Asian, LNG demand to prove transitory and moderate as key fundamental demand drivers improve and additional liquefaction capacity comes online, which will aid in rebalancing the global gas market and support a more stable and affordable pricing environment over the long term.
This is on top of approximately 115 million tons per atom of re gasification capacity, that has entered service since the end of 2020.
Looking ahead, we continue to expect Asia to underpin long term LNG market growth, which we will discuss further on the next slide.
This increased investment in LNG import infrastructure, not only signals expectations of further gas, demand growth ahead but also underscores the criticality of diversification, flexibility, and security of supply for the growing economies in the region.
Let's move to the next slide.
Our long term outlook for LNG demand across Asia remains robust Asia continues to be the growth engine for all energy sources as the region is expected to account for over 60% of primary energy demand growth globally through 2050, according to the IEA.
Similarly LNG, Contracting activity, among Asian counterparties is ramped up significantly in recent years. Averaging over 28 million tons of long-term LNG contracts executed PanAm. From 21 through 2025 more than double the annual average from 2016 through 2020.
In fact is expected to represent nearly 90% of worldwide growth in LNG demand through 2040 as its primary energy needs expand to meet fast growing economies rapid urbanization declining domestic gas production and increased power demand.
Within this surge of contracting activity.
These expectations are clearly shared by key gas market participants in the region as they demonstrate increased commitments to long term gas use through further investment in new natural gas infrastructure, including additional LNG import capacity as well as new multi decade LNG supply contracts.
Long-term contracts with us projects, represent approximately a quarter of these contracted Asian volumes from 21 through 25. 5 times, that of the trailing 5 years reflecting the growing importance of us LNG in meeting Rising Global gas demand.
Zach already highlighted. We announced our first long-term contract with the Japanese counterparty earlier this morning.
The region continues to invest in re gas capacity with about 280 million tons per annum of re gas capacity proposed or currently under construction across Asia.
We look forward to building Upon Our longtime successful commercial relationship with jera 1 of the largest end. Use buyers of LG globally, further supporting its energy portfolio, needs with our destination, flexible reliable, LG supply for decades to come.
This was on top of approximately 115 million tonnes per annum of Regasification capacity that has entered service since the end of 2020.
This increased investment in LNG import infrastructure, not only signals expectations of further gas demand growth ahead, but also underscores the criticality of diversification flexibility and security of supply for the growing economies in the region.
This new Spa marks our 10th contract signed with an Asian counterparty since 2021 as chenar represents over 9 million tons of the aggregate long-term contracted volumes signed with Asian counterparties from 2021 through 2025.
Similarly, LNG contracting activity among Asian, Counterparties has ramped up significantly in recent years, averaging over 28 million tons of long term LNG contracts executed per annum from 'twenty, one through 2025 more than double the annual average from 2016 through 2020.
Well, there's no doubt that the projected growth in LNG demand over the next several decades, will be largely driven by growth in the Asia region. We continue to prioritize diversity within our long-term commercial portfolio. Having signed agreements across a variety of counterparty and contract types from various geographic regions, which underscores the value of both our tailored Solutions which help companies and countries around the world meet their long-term energy needs as well as the resiliency of our long-term contracted book.
Within this surge of contracted activity.
With that, I'll turn the call over to Zack to review our financial results and guidance.
Long term contracts with U S projects represent approximately a quarter of these contracted Asian volumes from 'twenty, one through 25, five times that of the trailing five years, reflecting the growing importance of U S LNG and meeting rising global gas demand.
Thanks Anatole and good morning everyone.
I'm pleased to be here today to review our second quarter 2025 results and key financial accomplishments.
And to discuss our increased and tightened Financial guidance ranges for 2025.
As Jack already highlighted we announced our first long term contract with the Japanese counterparty earlier this morning.
Turn the slide 12.
We look forward to building upon our long time successful commercial relationship with <unk>, one of the largest and used buyers of LNG globally further supporting its energy portfolio needs with our destination flexible reliable LNG supply for decades to come.
Approximately 1.6 billion, Consolidated adjusted, ibida of approximately 1.4 billion. Distributable cash flow of approximately 920 million.
This new SBA marks our 10th contract signed with an Asian Counterparties since 2021 at Cheniere represents over 9 million tonnes of the aggregate long term contracted volumes signed with Asian Counterparties from 2021 through 2025.
While there is no doubt that the projected growth in LNG demand over the next several decades will be largely driven by growth in the Asia region. We continued to prioritize diversity within our long term commercial portfolio, having signed agreements across a variety of counterparty and contract types from various geographic regions, which underscores the value of both our tailored solutions.
Compared to the second quarter of 2024, our 2025 results reflect higher total margins as a result of higher gas prices and optimization downstream of our facilities. With third-party cargoes that freed up incremental SPL and CCL source cargos for CMI to sell in the spot market opportunistically.
This increase was partially offset by higher operating expenses due to a full quarter of operations of Stage 3, Train 1, and ADCC, as well as the planned major maintenance turnaround at Sabine Pass.
And the accelerated maintenance at Corpus Christi previously, forecast for 3Q.
Which helped companies and countries around the world meet their long term energy needs as well as the resiliency of our long term contracted book.
With that I'll turn the call over to Zach to review, our financial results and guidance.
Thanks, Anatol and good morning, everyone.
I'm pleased to be here today to review, our second quarter 2025 results and key financial accomplishments and to discuss our increased and tightened financial guidance ranges for 2025.
The successful planned maintenance activities across both of our sites during the second quarter resulted in a combined impact to LNG production which was in line with our forecasts along with the expectation of lower seasonal production in the warmer months of Q2. And Q3 making Q2 what we expect to be our lowest production quarter of 2025.
Turning to slide 12.
For the second quarter 2025, we generated net income of approximately $1 6 billion.
<unk> adjusted EBITDA of approximately $1 4 billion.
We have generated approximately 3.3 billion dollars of Consolidated, adjusted ibida, and approximately 2.2 billion dollars of the steerable cash flow in the first half of 2025, supporting our confidence, in our updated forecast, for the remainder of the year, which all addressed further on the next slide.
Distributable cash flow of approximately $920 million.
Compared to the second quarter of 2024 or 2025 results reflect higher total margins as a result of higher gas prices and optimization downstream of our facilities with third party cargos that freed up incremental SPL and CCL source cargos for CMI to sell in the spot market Opportunistically.
During the second quarter, we recognized in income 558 tbtu of physical LNG, which included, 550 tbtu, from our projects and 8 tbtu sourced from third parties.
Respectively.
The 55,050 TBtu exported from our projects was about 10% lower compared to the first quarter.
This increase was partially offset by higher operating expenses due to a full quarter of operations of stage III train, one and ADC the planned major maintenance turnaround at Sabine pass.
And in line with 2q, 2024 owing to the seasonal impact, we see on production and of course, the impact from planned maintenance activities into Q.
And the accelerated maintenance at Corpus Christi previously forecast for <unk>.
The successful planned maintenance activities across both of our sites during the second quarter resulted in a combined impact to LNG production, which was in line with our forecast along with the expectation of lower seasonal production in the warmer months of Q2, and Q3, making Q2, what we expect to be our lowest production.
Approximately 95% of our LNG volumes recognized, were sold in relation to term SBA or IPM agreements. Our strong financial results year to date enabled, our team to deploy and other approximately 1.3 billion dollars towards shareholder returns balance sheet management and disciplined accretive growth during the second quarter.
we've now deployed over 16 billion dollars of our initial Target of 20 billion through 2026
Quarter of 2025.
We have generated approximately $3 3 billion of consolidated adjusted EBITDA and approximately $2 2 billion of distributable cash flow in the first half of 2025 supporting our confidence in our updated forecast for the remainder of the year, which I'll address further on the next slide.
As we continue to reduce our share count and enhance our Capital returns while retaining the financial strength and flexibility to self-fund a creative growth across our platform as demonstrated, by how we have Equity funded stage 3 to date and took FID on midscale 8 and 9 without needing to raise any additional financing.
During the second quarter, we recognized an income 558 btu of physical LNG, which included 550 <unk> from our projects and eight TVT EU sourced from third parties respectively.
This accelerated progress on our capital allocation plan prompted us to update our long-term company forecast.
Increasing and extending our capital allocation targets.
The 550 <unk> exported from our projects was about 10% lower compared to the first quarter.
In June in combination with the Positive FID of the midscale trains, 8 and 9 project we announced that we expect to deploy over 25 billion dollars of available cash towards the key pillars of our Capital allocation framework through 2030.
And in line with <unk> 2024, owing to the seasonal impact we see on production and of course, the impact from planned maintenance activities into Q.
During this enhanced plan, we now expect to reach over 25 dollars. Per share of run rate, destroyall Cash Flow by the early 2030s with room for upside from further Capital allocation
Approximately 95% of our LNG volumes recognized were sold in relation to term SBA or IPM agreements, our strong financial results year to date enabled our team to deploy another approximately $1 3 billion.
Towards shareholder returns balance sheet management, and disciplined accretive growth during the second quarter.
The successful debottlenecking of an additional million tons of liquefaction capacity from our original 9 trains along with our improved outlook for long-term LNG, margins enabled us to upwardly revised our run rate guidance ranges as well.
We have now deployed over $16 billion.
Of our initial target of $20 billion through 2026.
As we continue to reduce our share count and enhance our capital returns, while retaining the financial strength and flexibility to self fund accretive growth across our platform.
With the FID of midscale, 8 and 9 Andy bottlenecking. We now expect to achieve run rate, Consolidated, adjusted, ibida of 7.3 to 8 billion dollars at CMI margins of only $2.50 to $3 despite projected margins, well above that range throughout the curve in the coming years.
As demonstrated by how we have equity funded stage three to date and took our.
During the second quarter, we repurchased approximately 1.4 million shares for approximately $306 million.
Our mid scale 89 without needing to raise any additional financings.
This accelerated progress on our capital allocation plan prompted us to update our long term company forecast increasing.
As you can see in our 10q today, we were highly opportunistic in April around so-called Liberation day.
As we repurchased over $200 million in the month, despite the stock recovering quickly.
Increasing and extending our capital allocation target in.
In June in combination with the positive of the Midscale trains 89 project, we announced that we expect to deploy over 25 billion of available cash towards the key pillars of our capital allocation framework through 2030.
With now less than 220 million shares outstanding. As of last week, we are making meaningful and valuable creative progress towards our initial Target of 200 million shares outstanding.
During this enhanced plan, we now expect to reach over $25 per share of run rate distributable cash flow by the early 2000, <unk> with room for upside from further capital allocation.
The successful Debottlenecking of an additional million tons of liquefaction capacity from our original nine trains along with our improved outlook for long term LNG margins enabled us to upwardly revise our run rate guidance ranges as well.
But the plan has been relatively active opportunistically buying approximately dollars in shares since the start of July amid. Some of the recent volatility,
With the mid scale 89, and Debottlenecking, we now expect to achieve run rate consolidated adjusted EBITDA of $7 $3 billion to $8 billion at.
This leaves Less Than 3 billion. Remaining on our current buyback. Authorization through 2027 and already over 1 billion dollars deployed in Buybacks in the first 7 months of the year.
At CMI margins of only $2 50 to $3, despite projected margins well above that range throughout the curve in the coming years.
For the second quarter, we declared a dividend of $0.50 per common share. As part of our June update, we announced plans to increase our third quarter dividend by over 10% to $2.22 per common share annualized.
During the second quarter, we repurchased approximately one 4 million shares for approximately $306 million.
With this plan to increase, we will have grown our quarterly dividends by approximately 68% since initiation in the third quarter of 2021.
As you can see in our 10-Q today, we were highly opportunistic in April around so called Liberation day.
Looking ahead. We remain committed to our guidance of growing. Our dividend by approximately 10% annually, through the end of this decade.
As we repurchased over $200 million in the months despite the stock recovering quickly.
Targeting a payout ratio of approximately 20% over time.
With now less than 220 million shares outstanding as of last week, we are making meaningful and value accretive progress towards our initial target of 200 million shares outstanding.
Enabling the financial flexibility essential to our comprehensive and balanced long-term capital allocation plan, and our disciplined approach to self-funded and accurate growth.
With the idea of Midscale eight and nine.
As well as our increased run rate forecast now included in the framework that governs our repurchases you can see from this share count on the 10-Q cover that the plan has been relatively active opportunistically buying approximately $400 million and shares since the start of July.
In July, we repaid $1 billion of senior secured notes due 2026 at SPL with the net proceeds from the issuance of $1 billion of unsecured notes due 2035 at CQP.
Along with cash on hand.
Extending our maturity profile while further due securing and dies. Subordinating our balance sheet.
Some of the recent volatility.
This leaves less than $3 billion remaining on our current buyback authorization through 2027.
Concurrent with that issuance, SMP upgraded cqp is unsecured rating to Triple B.
reflecting our significant progress on that D, subordination
And already over $1 billion deployed in buybacks in the first seven months of the year.
For the second quarter, we declared a dividend of <unk> 50 per common share and as part of our June update we announced plans to increase our third quarter dividend by over 10% to $2 22 per common share annualized.
We expect to repay the remaining 500 million of principal on the 2026 notes with cash on hand over the next year. Reducing our interest expense strengthening our investment grade ratings. While continuing to prepare the cqp complex for financing. The sbl Expansion Project
With this plan to increase we will have grown our quarterly dividend by approximately 68% since initiation in the third quarter of 2021.
last week we also refinanced dei's, 1.25 billion revolver securing liquidity. For the next 5 years into 2030.
Looking ahead, we remain committed to our guidance of growing our dividend by approximately 10% annually through the end of this decade.
Targeting a payout ratio of approximately 20% over time.
Enabling the financial flexibility are central to our comprehensive and balanced long term capital allocation plan and our disciplined approach to self funded and accretive growth.
This facility, with improved terms, is reflective of the long-term support we enjoy from our bank group and our proactive approach to liquidity, in conjunction with the over $3 billion still available under the Corpus Christi Term Loan for Stage 3, which is now accessible for mid-scale trains 8 to 9 as well.
In July we repaid $1 billion of senior secured notes due 2026 at SPL with the net proceeds from the issuance of $1 billion of unsecured notes due 2035 at <unk>.
during the second quarter, we funded approximately dollars of capex on stage 3, bringing total spend on the project to approximately 5.2 billion unlevered
We also deployed approximately $400 million in the second quarter, towards the mid-scale trains 8, and 9 project, and debottlenecking.
Along with cash on hand.
Extending our maturity profile, while further securing and <unk> our balance sheet.
We continue to deploy tens of millions of dollars of development capital to progress the SPL expansion and CCL Stage 4 projects.
Concurrent with that issuance S&P upgraded <unk> unsecured rating to triple B.
Reflecting our significant progress on that the subordination.
We expect to repay the remaining $500 million of principal on the 2026 notes with cash on hand over the next year, reducing our interest expense strengthening our investment grade ratings, while continuing to prepare the <unk> complex for financing the SPL expansion project.
With a proximately 2 billion in Consolidated, cash and ample ondraw on Revolver and terminal liquidity throughout the complex. We are well, positioned to fund our growth objectives while retaining great financial flexibility for all of the pillars of our balanced Capital allocation program.
Turn now to slide 13, where I will discuss our updated 2025 guidance and outlook for the remainder of the year.
Last week, we also refinanced <unk> 125 billion revolver securing liquidity for the next five years into 2030.
This facility with improved terms is reflective of the long term support we enjoy from our bank group and our proactive approach to liquidity in conjunction with the over $3 billion still available under the Corpus Christi term loan for stage III and now accessible for Midscale trains eight to nine as well during the second quarter, we funded.
Today we are tightening our full year 2025 IBA guidance range from 6.5 to 7 billion to 6.6 to 7 billion dollars in raising and tightening. Our DCF guidance from 4.1 to 4.6 billion, to 4.4 to 4.8 billion.
We are reconfirming. Our guidance range of $3.25 to $3.35 per common unit of distributions from cqp.
At approximately $400 million of Capex on stage III.
The $50 million increase to the midpoint of our Eva. Guidance range is largely attributable to further de-risking of our production, forecasts for the year.
Bringing total spend on the project to approximately $5 2 billion Unlevered.
Following the successful completion of our planned maintenance program.
We also deployed approximately $400 million.
In the second quarter towards the mid scale trains 89 project and Debottlenecking.
Further forward selling of our limited remaining open capacity and the completion of train 2 at stage 3.
We continued to deploy tens of millions of dollars of development capital to progress the SPL expansion and CCL stage four projects.
Our production forecasts of 47 to 48 million, tons of LNG in 2025 is unchanged and continues to reflect our existing 9 train platform. Plus our outlook for production from the first 3 trains, at stage 3 this year,
With approximately $2 billion in consolidated cash and ample undrawn on our revolver and term loan liquidity throughout the Cheniere complex, we are well positioned to fund our growth objectives, while retaining great financial flexibility for all of the pillars of our balanced capital allocation program.
Given the successful startup of trains 1 and 2 at stage 3. And that the CMI team has sold. Another approximately 1 million. Tons of open volumes for the year since May, we are left with less than 25 TB remaining unsold for the balance of 2025.
Turning now to slide 13, where I will discuss our updated 2025 guidance and outlook for the remainder of the year.
Today, we are tightening our full year 2025, EBITDA guidance range from six 5% to $7 billion.
To six 6% to $7 billion.
We are raising and tightening our DCF guidance from $4, 1% to $4 6 billion to.
Now, that 2025 spot capacity has mostly been sold. The team is starting to opportunistically lock in some of our open capacity for 2026.
To four four to $4 8 billion.
We are reconfirming, our guidance range of $3 25 to $3 35 per common unit of distributions from <unk>.
The $50 million increase to the midpoint of our EBITDA guidance range is largely attributable to further derisking of our production forecast for the year.
Following the successful completion of our planned maintenance program.
We plan to provide an update on our 2026 production, profile and spot capacity on our next call. Consistent with our Cadence previously. And with a better understanding of stage, 3's progress going into 2026. The incremental 200 million increase to the midpoint of our DCF guidance. Compared to Eva, largely reflects an improved Outlook of our cash tax burden in this year, under the new tax law passed last month.
Further forward selling of our limited remaining open capacity and the completion of train two at stage III.
Our production forecast of 47 to 48 million tons of LNG in 2025 is unchanged and continues to reflect our existing nine train platform plus our outlook for production from the first three trains at stage III This year.
Particularly, as it relates to the bonus depreciation for this year, changing from 60%, to 100%, which we expect to benefit the first 3 midscale trains this year.
And is expected to result in nominal cash. Taxes for 2025.
Given the successful startup of trains one and two and stage three and that the CMI team has sold another approximately 1 million tons of open volumes for the year. Since may we are left with less than 25, TVT remaining unsold for the balance of 2025.
Longer term, we forecast benefits to our cash flows through 2040 due to changes related to both bonus depreciation, as well as the foreign export deductions.
Given this exposure, we forecast that a $1 change in market margin would impact EBITDA by less than $25 million for the full year.
Today we have further updated our run rate DCF, guidance by 1 to 200 million dollars for reflect the revised tax rules, as we currently estimate and Improvement to our effective tax rate on pre-tax, distributable, cash flow under the new law, from the 15th to 20% range, to the 10. To 15% range upon reaching run rate through the 2030s
Now that 2025 spot capacity has mostly been sold the team is starting to Opportunistically lock in some of our open capacity for 2026.
We plan to provide an update on our 2026 production profile and spot capacity on our next call consistent with our cadence previously and with a better understanding of stage III progress going into 2026, the incremental $200 million increase to the midpoint of our DCF guidance compared to EBITDA largely.
With further near-term benefits from 100% bonus depreciation expected to bring down our effective tax rate for the rest of this decade to under 10% on average as stage 3 and mid-skill 8 and 9 come online.
As always, our full year results could be impacted by the timing of certain cargoes around year end.
As well as the timing of incremental trains on stage 3, reaching substantial completion.
It reflects an improved outlook of our cash tax burden this year under the new tax law passed last month.
Particularly as it relates to bonus depreciation for this year changing from 60% to 100%, which we expect to benefit first three midscale trains this year and.
And is expected to result in nominal cash taxes for 2025.
Longer term, we forecast benefits to our cash flows through 2040 due to changes related to both bonus depreciation as well as the foreign export deduction.
Today, we have further updated our run rate DCF guidance by 1% to $200 million.
To reflect the revised tax rules as we currently estimate an improvement to our effective tax rate on pretax distributable cash flow under the new law from the 15% to 20% range to the 10% to 15% range upon reaching run rate through the 2000 <unk>.
While we have tightened the guidance ranges today. This variability in uncertainty necessitates maintaining a range of 400 million dollars for Ava and DCF with a substantial completion of trains. 1 and 2 achieved and the progress Jack highlighted earlier on trans 3 and 4. We are confident, we can achieve our goal of completing the first 3 trains at stage 3 this year and deliver Financial results within the upwardly revised ranges beyond the next few years. Our line of sight to Growing our platform to approximately 75 million tons by early in the next decade and 9 billion dollars of run rate ibida with potential for up to 100 million tons longer terms. Only reinforces our conviction Engineers role has not only a leader in the growing Global LNG Market but also as a premier contracted infrastructure platform with Decades of cash flow visibility and a risk of trusted return profile that is second to none in this industry.
With further near term benefits from 100% bonus depreciation expected to bring down our effective tax rate for the rest of this decade to under 10% on average and stage III and Midscale eight nine come online as always our full year results to be impacted by the timing of certain cargos around year end.
as we embark on this next chapter of growth, we remain committed to creating sustainable long-term value for our stakeholders, while safely operating our platform in order to supply our Global customer base, with our secure reliable and flexible, LG, for decades to come
That concludes our prepared remarks.
Thank you for your time and your interest in Cheniere.
Operator, we are ready to open the line for questions.
As well as the timing of incremental trains on stage three reaching substantial completion.
While we have tightened the guidance ranges today, this variability and uncertainty necessitates maintaining a range of $400 million for EBITDA and DCF with the substantial completion of trains one and two achieved and the progress Jack highlighted earlier on trains three and four we are confident we can achieve our goal of completing the first three trains.
Thank you. If you would like to ask a question, please signal by pressing *1 on your telephone keypad to allow for more questions from more participants. We ask you limit to 1 question and 1 follow-up.
If you're using a speaker-phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star 1 for questions,
Stage, three this year and deliver financial results within the upwardly revised ranges beyond the next few years, our line of sight to growing our platform to approximately 75 million tons by early in the next decade and $9 billion of run rate EBITDA with potential for up to a 100 million tons longer term only reinforces our conviction.
we'll go first to Spiro doing us with City.
<unk> engineers role is not only a leader in the growing global LNG market, but also as a premier contracted infrastructure platform with decades of cash flow visibility and our risk adjusted return profile that is second to none in this industry.
As we embark on this next chapter of growth, we remain committed to creating sustainable long term value for our stakeholders, while safely operating our platform in order to supply our global customer base with our secure reliable and flexible LNG for decades to come.
Thank you, operator. Good morning everybody. Uh first question just want to maybe start with commercializing new Spas from here and it's 2 bar questions. So you know 1 seeing a lot of trade deals work. Now now and and LG seems to be at the center of of some of these. And so I'm curious. Do you see the pace of Spas accelerating from here on that backdrop and then 2 there also be a view that Spa liquefaction fees will need to come down to be competitive. I I don't believe you're doing that. Just based on prior comments. And so, I'm curious. What is it about the market structure in place? Now, that allows you and a lot of your peers to sign Spa
And what seems to be very different price points.
That concludes our prepared remarks.
The sparrow. Thanks. This is Jack. I'll start and then I'll turn it over to Anna to. So, first off. Yeah, it's it, it makes a huge difference. When you go from a pause,
You for your time and your interest in Cheniere.
Operator, we are ready to open the line for questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad to allow for more questions for for more participants. We ask you limit yourself to one question and one follow up.
If youre using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment once again star one for questions.
Um from the US. Um and it is nice to have an Administration that actually appreciates.
We'll go first to Spiro <unk> with Citi.
Thank you operator, good morning, everybody.
First question, just maybe start with commercializing new SBA is from here and it's two part question. So.
<unk> seen a lot of trade deals working out now in LNG seems to be at the center of some of these and so I'm curious do you see the pace of SBA is accelerating from here on that backdrop and then there also seems to be a view that SBA liquefaction CES need to come down to be competitive I don't believe youre doing that just based on prior comments.
I'm curious what is it about the market structure in place now that allows you and a lot of your peers sign spa's at what seem to be very different price points.
So spiro. Thanks. This is Jack I'll start then I'll turn it over to Anatol, So first off yes.
It makes a huge difference.
When you go from a pause.
So where you have an administration that is very very supportive of.
That we helped with trade, we help with energy security, we also help with the energy transition. So we're very, very grateful to have those, uh, Tailwind behind us and our conversations with, with customers. And then I'll see if Anatole is anything to add. Yeah, thanks beer. Thanks Jack. Um, you know, we have a decade track record now of of performance and, uh, you know, that's not lost on the industry as we've mentioned in previous discussions and calls, uh, the 20 year. Um, cped fob product is now roughly 15 years old. It's, uh, it's very competitive, the us as, you know, as well, under a way to have 250 million tons of of exports and we just don't compete in that market. We, we work with long-term partners that value our our performance, as Jack mentioned, the government here, um, EU many, uh, Asian countries really value and appreciate the Rel
LNG in regards to customer conversation. So as you all know we're the single largest LNG supplier.
To Europe, we're working very closely with both sides of the pond to make sure that they have certainty of supply.
Liability. And the, the consistent product that we have supplied. And uh, and that's really what differentiates us. And we engage with counterparties, that that value that and uh, and uh, deliver the economics, that makes all of these pieces fit together and deliver the superior risk, adjusted returns that Zach and Jack mentioned
From the U S.
And it is nice to have an administration that actually appreciates.
That we help with trade we help with energy security. We also help with the energy transition. So we're very very grateful to have those tailwind behind us in our conversations with customers and then.
Great, that's a full color. Um, second question, just moving to optimization, Zach realized that it's not big in the guidance and maybe a little bit difficult to predict, which is curious. You know, maybe what have been the drivers year-to-date so far that you've been able to capitalize on, and just how you're thinking about the durability of some of those moving forward here.
<unk> anything to add yes, thanks fair Thanks Jack.
We have a decade track record now of performance and.
Hey, hey Sparrow. It's Zach. I go back to February. So in February, when we made initial guidance, I'd say margins were in the 8 to 9 range.
Now that's not lost on the industry as we've mentioned in previous discussions and calls.
20 year.
Uh those dropped down to, let's say, 5 dollars in the middle of the year and coming back to over 6 dollars at this point.
<unk> <unk> product is now roughly 15 years old.
Very competitive the U S. As you know is well under way to have 250 million tonnes of exports and we just don't compete in that market. We work with long term partners that value our our performance as Jack mentioned the government here.
And uh on the May call, basically our guidance stayed intact and and and the main driver of that despite having let's say, around 2 million tons, still open uh upon the initial guidance. It was the optimization.
EU, many Asian countries really value and appreciate the reliability and the the consistent product that we have supplied and and that's really what differentiates us and we engage with counterparties that value that and.
Um, all all all 3 pillars of it from from Downstream. And you could see some of the activity that we're doing by sourcing from third parties, uh, to sub chartering our, our our shipping, and then uh, on the listing margin as well and Upstream of the facilities.
And deliver the economics that makes all of these pieces fit together and deliver the superior risk adjusted returns that Zach and Jack mentioned.
Great that's helpful color.
It. They, they've all pretty much come through mind. You, some chartering is probably less of a driver, at, than last year, as as just overall, shipping rates are lower. Uh, but that allowed to allowed us to offset some of the, let's say, 2 dollars or so of margin. Decrease, uh, so far this year,
Question, just moving to optimization.
Zach realize that not baked into guidance and maybe a little bit difficult to predict but just curious maybe what have been the drivers year to date, so far that <unk> been able to capitalize on and just how youre thinking about the durability of some of those moving forward here.
Spirit Zac.
I'd go back to February.
In February when we made initial guidance I'd say margins were in the eight to $9 range.
Those drops down to let's say $5 to middle of the year and coming back to over $6 at this point.
And on the May call basically our guidance stayed intact and the main driver of that despite having let's say around 2 million tons is still open.
Upon the initial guidance it was the optimization.
All three pillars of it.
Downstream and you could see some of the activity that we're doing by sourcing from third parties.
Going forward from may, we basically just started de-risking, uh, the whole platform from having now less than 25 TB, uh, open meaning that they that, that the team sold like another million tons and, and, and likely locked in our our our CMI average margin for the year uh closer to 8 dollars, um, to getting, through the major turnaround on trains 3 and 4 at Sabine. Uh and and and now being able to announce substantial completion of train 2 at at midscale, a to not at midscale 1 through 7 or stage 3. Um, but those things allowed us to, to Really lock in where we see guidance going this year and, and, and increase that, that that downside, uh, from here, we'll see maybe a bit more optimization, uh, progress on trains 3 and 4 at, at at stage 3 and those 2 things alone, uh, could maybe help us get to the higher end of the range.
Sub chartering our shipping and then.
Got it, hope it was always I'll leave it there. Thank you gentlemen.
On the lifting margin as well and upstream of the facilities.
We'll take our next question from Jeremy, tan with JPMorgan.
They are all pretty much come through mind, you are chartering is probably less of a driver than last year.
Hi, good morning.
good morning, Jeremy
Overall shipping rates are lower.
But that allowed us allowed us to offset some of them, let's say $2 or so of margin decrease so far this year.
Going forward for May we basically just started derisking.
Whole platform from having now less than 25 <unk>.
Just wanted to uh follow up on Commercial discussions. Thank you for the color this morning. Uh the EU agreed to energy purchases as part of the Tariff negotiations there and I was just wondering how this impacts um, you know, your your conversations customer demand at this point in any interactions. Uh, this Dynamic might have with uh uh Apac customer conversations.
Meaning that.
The team felt like another million tons and likely locked in our CMI average margin for the year closer to $8.
To getting through the major turnaround on trains three and four at Sabine.
You know Jeremy in regards to the EU. As you know we've provided over 2/3 of all of our volumes since 2022. I've went to the EU.
And now being able to announce substantial completion of train two at <unk>.
Mid scale, one through seven our stage three.
With their needs for, you know, whatever duration that they feel is appropriate.
Those things allowed us to really lock in where we see guidance going this year and increased at that downside from here, we'll see maybe a bit more optimization.
<unk> on train three and four at stage three and those two things alone, but maybe help us get to the higher end of the range.
Got it helpful as always I'll leave it there thank you gentlemen.
We will take our next question from Jeremy Tonet with Jpmorgan.
Hi, good morning.
Good morning, Jeremy.
Just wanted to follow up on commercial discussions. Thank you for the color. This morning.
<unk> agreed to energy purchases as part of the tariff negotiations there I was just wondering how this impacts.
Your conversations customer demand at this point in any interactions this dynamic might have with APAC.
APAC customer conversation.
Um, but Anatole. Do you want to? Yes, thanks. Jeremy kind of following up on, uh, on the the spirit Dynamic, you know, all of this creates an environment where our product with large is appreciated and desired, but in, uh, in all of these Arrangements, whether it's, uh, our transactions with with jera that, uh, that, that backdrop helps, um, jera, uh, Jers backdrop also includes metis revised energy plan that shows a growth in electricity demand as opposed to a decline, same Dynamics playing out in Europe. And and the EU is uh, is very quick to point out that while yes, this agreement has been reached, it is up to the commercial counterparties to come up with, uh, the, the products that will that will fill those buckets. So, as Jack said, we've, we've got a great great track record. Our product has been, uh, keeping the lights on, um, certainly since the Ukraine war broke out in in early 20.
Yes.
Jeremy in regards to the EU as you know we've provided over two thirds of all of our volume since 2022 I went to the EU.
<unk>.
We're very close with.
Governments and regulators, they're on helping them with their needs for.
And, uh, of course, that's not lost on anybody, but ultimately, it is the, the commercial agreement that, uh, that is, uh, key to us and that commercial agreement needs to meet our, uh, very strict parameters. So, all of it is a is a good backdrop and, and a very healthy environment, um, and uh, and the Tailwind to those commercial terms.
Whatever duration that they feel is appropriate.
And I would say Jeremy, I'll just pair it with Anatole said uh um previously.
Anatol you want to yes, thanks, Jeremy kind of following up on.
Spirit dynamic he does all of this creates an environment, where our product writ large is appreciated and desired.
Is that our reliability has been Second To None, we haven't missed a foundation customer cargo.
And all of these arrangements, whether it's our transaction with <unk>.
That backdrop helps.
Jarrod as backdrop also includes Metis revised energy plan that shows a growth in electricity demand as opposed to decline same dynamics playing out in Europe and the EU is is very quick to point out that while yes. This agreement has been reached it is up to the commercial counterparties to.
Um, and that, that were, you know, for over 4,200 tankers into this journey, and it's being recognized, uh, worldwide. We deal with over 45 different, uh, countries and regions, uh, of the world, uh, today. So, um, I think that size and scale is unmatched and U and appreciated and I think that's why we're able to, uh, negotiate some more favorable, uh, transactions.
Got it. Thank you for that. Um,
Come up with the.
The products that will that will fill those buckets. So as Jack said, we've got a great great track record our products has been keeping the lights on.
Certainly since the Ukraine War broke out in early 'twenty, two and of course, that's not lost on anybody but ultimately it is the the commercial agreements that that is key to us and that commercial agreement needs to meet our very strict parameters. So all of it is a good backdrop and <unk>.
And then looking at Future growth in general, both at Sabine and Corpus. Uh you've talked a bit about that here. Um you already have a number of contracts in place in kind of an excess of uh uh current capacity and so a lot of progress there just wondering what we should be looking for for Milestones to further a commercialized towards reaching FID. Uh at this point, how should we be thinking about that?
Very healthy environment.
And the tailwind to those commercial terms.
And I would say Jeremy I'll, just parrot, what Anatol said.
I mean, first off, we filed with the, uh, FERC and the federal government for an accelerated permitting process. Um, so I, um, when you talk about milestones, seeing how that progresses I think will be very, very important. Um, we're working.
Previously.
Is that our reliability has been second to none we haven't missed a foundation customer cargo.
And that debt were for over 4200 tankers into this journey and it's being recognized worldwide, we deal with over 45 different countries and regions of the world today.
True Value engineering, as we speak. And then, um, um, we'll continue to, uh, look for ways to commercialize and meet all of our financial objectives.
<unk>.
I think that size and scale is unmatched and Anna.
And appreciate it and I think Thats why were able to.
Negotiate some more favorable transactions.
Got it thank you for that.
And then looking at future growth in general both at Sabine and Corpus you've talked a bit about that here.
You already have a number of contracts in place and kind of in excess of current capacity and so a lot of progress. There I was just wondering what we should be looking for for milestones to further commercialize towards reaching.
At this point, how should we be thinking about that.
I mean first off we filed with the FERC.
FERC and the federal government for an accelerated permitting process.
The the Jeremy is really all all about permitting. As you can see, we fiddle 8 and 9, and then pre-filed, uh, the next month for stage 4. And I, I believe just in the last day or so, we were accepted into free filing for for stage 4. So, so that's progressing. Well, and we, we should have more updates, especially, uh, going into next year, as we have a little bit more clarity on how the park process is going and to be in a position to FID something. Let's say a late 26 or or early 27, uh, at at Sovine first most likely and and then Corpus uh as you can tell from our filings. We're we're we're we're permitting a lot. We're permitting basically 20 or so million tons at each at each site. Uh you add that all up we get to over 100 million tons but you're not going to hear from this company that that's that's the ultimate goal. The ultimate goal is to to find these projects that we can meet all of the investment parameters.
So.
When you when you're talking about milestones seeing how that progresses I think we'll be very very important.
More working through value engineering as we speak.
truly a creative at the same standard which held every other project to at the same standard that makes it demonstrated to just buying back the stock and when you all own more more of Sabine and Corpus uh through through through less shares at at LNG,
And then.
We'll continue to.
To look for ways to commercialize and meet all of our financial objectives.
With that said, we see a path to do a phased approach, at both, uh, where we basically FID initially one train.
Yes.
So Jeremy it's really all about permitting you could see we did eight.
Eight and nine and then pre filed.
Next month for stage four.
And I believe just in the last day or so we were accepted into pre filing for stage four so.
So that's progressing well and we should have more updates, especially going into next year as we have a little bit more clarity on how the FERC process is going to be in a position to FIV something let's say late 'twenty six or early 'twenty seven.
So, that's the first Exchange.
Being first most likely and then corpus.
As you can tell from our filings.
We are permitting a lot or permitting basically 20 or so million tonnes at each at each site you add.
That all up we get to over 100 million tonnes.
Youre not going to hear from this company that that's that's the ultimate goal of the ultimate goal.
And these projects that we can meet all of the investment parameters and be truly accretive at the same standard which held every other project too at the same standard that makes it demonstrably accretive to just buying back the stock when you are alone.
More and more of Sabine and corpus through through less shares at LNG.
With that said, we see a path to do a phased approach at both.
And basically, ditto for stage 4, in the first train at, at, at at Corpus, uh, though we're permitting another birth tank and and pipeline. There's, there's likely 1 Train there that could be done, uh, without that extra equipment to make it as Brownfield as it gets commercially. What Anatole and the team are doing like we're already basically covered for at least 1 Train uh with with with how many contracts that we have in place. Uh so so there will be incremental deals to be done. It's nice to see the cnrl deal done in Q2 and the recent deal with jira, they align very well with the Run rate guidance that we updated to uh in June with CMI ranges of 250 to 3 dollars. Um, and from there, I the last thing I'd like to say is, as you think about the capex outlay, that that goes into all of this just to get to 75 million tons, basically increase the the platform by like over 25%. Um, we we have less than 2 billion to
Where we basically at initially one train.
go at stage 3.
Those one trains will be as brownfield as they get.
We have less than $3 billion to go on mid-skill 8 to 9, and then deep bottlenecking.
Probably globally.
At Sabine, though we are permitting things like.
And if you think about the first 2, the first train at both Sabine and Corpus, um, that that's like 1112 million tons.
Interstate pipeline into Texas, there is a path to do one train there without the Interstate pipeline.
Let's just say for round numbers, it's around 10 billion.
Without a tank or a R.
The all in, it's less than 15 billion dollars through 2030 or so.
And put it right next to the first six trains.
Uh, which is over the next 6 years 2 and a half billion a year.
And basically ditto for stage four and the first train at Corpus.
Though we're permitting another berth tank and pipeline Theres likely one train there that could be done.
And we fund things. 50/50, we're not even talking about a third of our, our run rate, distributable cash flow.
Without that extra equipment to make it as brownfield as it gets commercially what anatol and the team are doing.
Just shows you the flexibility the ability to have like meaningful Capital allocation, specially on shareholder returns.
We're already basically covered for at least one train.
and and potentially do more if if if it aligns with the standards uh that that that we hold ourselves to
With how many contracts that we have in place.
Got it. That's helpful. I'll leave it there. Thanks.
So there will be incremental deals to be done it's nice to see the Cnrs deal done in Q2, and the recent deal at Euro they align very well with the run rate guidance that we updated too.
Thank you. As a reminder star 1, if you would like to ask a question, we'll go next to Teresa Chen with Barclays.
In June with CMI ranges of $2 50 to $3.
And from there the last thing I'd like to say is as you think about the Capex outlay that goes into all of this just to get to 75 million tons basically increased the platform by over 25%.
We have less than $2 billion to go at stage three.
We have less than $3 billion ago mitigated 900 debottlenecking.
Hi, on the topic of growth, beyond the first phases of the Corpus Christi Stage 4 and SPL Stage 5, which brings capacity to 75 mtpa, can you walk us through the path to get to that next leg? The 100 mtpa mark – when we think about key inflection points for that long-term growth, in addition to permitting, is it primarily a matter of upstream infrastructure, bottlenecks to solve, and commercialization? How should we view this, and over what time frame could that likely take place?
And if you think about the first two the first train at both Sabine and Corpus.
It's it's just the standard the chenar standard.
That's like 11 to 12 million tons.
Let's just say for round numbers is around $10 billion.
Uh, what we see today and with the guidance that we all got that we gave you in June.
All in it's less than $15 billion through 2030 or so.
Which is over the next six years $2 5 billion a year and.
Uh, we see a path with the deals that we're signing in our, let's say, $250 to $3 range.
And we funding 50 50, we're not even talking about a third of our run rate distributable cash flow.
It shows you the flexibility the ability to have meaningful capital allocation, especially on shareholder returns.
That we can still hit those 6 to 7 times capex. The IBA levels uh for for for those first trains as you start adding incremental equipment or incremental pipelines and Interstate pipelines for that matter. Um
And potentially do more.
It aligns with our standards.
That we hold ourselves to.
Okay got it that's helpful I'll leave it there thanks.
Thank you as a reminder, star one if you would like to ask a question well go next to Theresa Chen with Barclays.
Hi.
Topic of growth.
Beyond the first phases.
We're we're not here today to tell you that. We're absolutely 100%. FID, in those projects in the near term. Uh, we'll, we'll see where SBA levels get to, and we'll see where costs shake out with with that tell over time and those 2 things together. Uh, ideally, we'll, we'll align 1 day to help us March methodically up to 100 million tons. But that, that's not the game here, that that, like, we're, we're focused on the stock, not just trying to get to 100 million tons.
Corpus Christi stage, four and SPL stage five that brings capacity to 75 and Tpa can you walk us through the path to get to that next leg. The 100 and Tpa when we think about key inflection points for that long term growth. In addition to permitting is it primarily in matter of upstream infrastructure.
Extra solve in commercialization and how should we view this and over what timeframe could that likely take place.
It's just the standard the Cheniere standard.
Got it. Um, and I want to go back to Anatol's slides 9 and 10 on the supply and demand outlook. Um, as this wave of new LNG capacity enters the market over the next few years, increasing liquidity and supply, um, when would you expect to see more evidence of demand elasticity consistent with the visible structural need for additional gas from developing countries? And what would you...
What we see today and with the guidance that we all that we gave you in June.
Us signals to observe in the market on that front.
We see a path with the deals that we're signing in our let's say $2 50 to $3 range.
We can still hit those six to seven times capex to EBITDA levels.
For for those first trains as you start adding incremental equipment or incremental pipelines.
Interstate pipelines for that matter.
We're not here today to tell you that we're absolutely 100% <unk> those projects in the near term.
We'll see where SBA levels get too and we'll see where cost shake out with <unk> over time and those two things together ideally will align one data help us March methodically up to 100 million tons, but that's not the game here.
We're focused on the stock not just China and get to a 100 million tonnes.
Okay.
Got it.
And I wanted to go back Q on animal slides nine and 10 on the supply demand outlook.
This wave of new LNG capacity entering the market over the next few years increasing liquidity in supply.
When would you expect to see more evidence of demand elasticity are consistent with the visible structural needs for additional gas from developing countries, but would you U S. T signal chips in the market on that front.
Yes, Thanks, Theresa well, you'll see it kind of on a quarterly basis as all of this infrastructure, which in many cases as pre investment for these various business models plays out.
We were a little over 400 million tons last year as we've discussed. We're about, uh, 3% of primary energy so it does not take a lot of the, uh, 150 gigawatts of Chinese gas power generation running at slightly better utilization to absorb tens and tens of millions of tons of additional LG. So, um, a lot of price elastic markets and and you'll see that play out. Uh, we think that now in the kind of very low double digits High single digits, uh, markets, like India, uh, will become much more active, but you'll see more and more of that, uh, again unrestricted by infrastructure, which was a constraint in the second, uh, LNG Supply cycle of, uh, 5 6 years ago.
Thank you.
We'll see it a little bit before you as the tender activity and diversion start to take place but.
Thank you, we'll go next to Burke's. S. S Rio with Wolfe research.
It's a little harder to observe outside of the day to day industry, but youre seeing not only again this investment in infrastructure, but also the contractual commitments and yes, while the contractual commitments are for flexible supply. There is a tremendous amount of again infrastructure being developed the advantage.
Hi. Good morning. Just one for me today. Um, what level of capital costs do you foresee for expansions at Sabine Corpus for the next round of growth?
<unk> for us and our industry.
8 and 9 in the deep bottlenecking look closer to $600 a ton than 1 of your peers' sites at all, and cost closer to $1,100 per ton. Zach, you mentioned before, um, as Brownfield as it gets for another train at Sabine. So, just curious on where you think a fresh APC contract will shake out.
We're a little over 400 million tons last year as we've discussed we're about 3% of primary energy. So it does not take a lot of the 150 gigawatts of Chinese gas power generation running at slightly better utilization to absorb tens and tens of millions of tons of additional.
A little too soon to say especially on an earnings call. Um, where we think it'll work out uh, by by the time, we FID a project in late 26 or early 27.
<unk> LNG so or.
A lot of price elastic markets and you'll see that play out we think that now in the kind of very low double digits high single digits.
<unk> like India will become much more active but youll see more and more of that.
<unk> unrestricted by infrastructure, which was a constraint in the second LNG supply cycle of.
What I focus on clearly the most is that 6 to 7 times capex to EVA working with the ENC team, as well as our commercial team to align that to get to the right place. But as you can imagine, like laws of gravity and laws of Brownfield growth, when you're only building a train and the rest of the infrastructure and pipeline connectivity and tanks and birds are all set up, it's going to be the cheapest.
Five six years ago.
Thank you.
So we we feel confident that it'll be closer to the numbers that that that we're able to achieve so far uh than to some of those other numbers out there.
Thank you we will go next to Brooks <unk> with Wolfe research.
Thank you.
Thank you. We'll take our next question from John, my with Goldman Sachs.
Hi, Good morning, just one for me today.
What level of capital costs, Steve foresee expansions at Sabine and Corpus for the next round of growth.
Eight nine in the Debottlenecking looks closer to 600, a ton one of your peers cited all in cost closer to 1100 per ton and Jack you mentioned before is.
As brownfield as it gets for another train at Sabine. So just curious on where you think fresh EPC contract will shakeout.
Hey all, thank you for the time. I wanted to go to the, um, cash tax savings. Zach, I know you talked through a lot of it, but maybe if you could kind of just pull it to the June capital allocation update. You know, how much incremental cash do you think we could see, kind of on average, the next couple of years to work out? Once you've...
Worked through this, and where do we think that cash is going relative to how you, uh,
Little too soon to say, especially on an earnings call.
Laid it out a couple, uh, months or 2 ago.
Where we think it will work out.
The time, we saidi.
Project in late 'twenty early 'twenty seven.
What I focus on clearly the most is that 6% to seven times capex to EBITDA working with E&C team as well as our commercial team to align that.
To get to the right place.
But as you can imagine like lots of gravity laws of brownfields growth when you're only building a train in rest of the infrastructure and pipeline connectivity and tanks and birth is all set up.
It's going to be the cheapest.
So we feel confident that it'll be closer to the numbers that that we're able to achieve so far then.
And then to some of those other numbers out there.
Thank you.
Thank you we will take our next question from John Mackay with Goldman Sachs.
Hey, al. Thank you for the time I wanted to go to the.
Sure. So there there's quite a few, uh, moving Parts here. But like, just for this year alone, uh, as you can see, we raised the midpoint of IBA guidance by 50 million. And that's really just following through, with, with what was expected this year. Um, we raised DCF guidance by 250 million, the incremental 200 million is, is is solely related to taxes. Uh, originally the plan was that these trains would come online this year and received 60% bonus depreciation, dropping down to 40% bonus to the appreciation. Next year going forward, including this year. It's 100% bonus, uh, that, that benefit alone allowed us to to reduce reduce taxes this year by 200 million. It'll also help. Uh, reduce taxes next year, as the rest of stage 3 comes online, uh, mind you with 100% bonus, we won't have much depreciation in in 2027. However, based on the 8 of
Cash tax savings Zach I know I know you talked through a lot of it but maybe if you could kind of just pull it to the June capital allocation update how much incremental cash do you think we could see kind of on average for the next couple of years to work out once you.
8 and 9 at least guaranteed completion dates that are in 2028. We'll get a big benefit from that as well. So, with the 100% bonus, we're talking about comfortably under a 10% tax rate on average between 2025 to 2030.
Worked through this in and where do we think about cash is going relative to how you.
<unk> laid out a couple a month or two ago.
Sure. So there's quite a few moving parts here.
Just for this year alone as you can see we raised the midpoint of EBITDA guidance by $50 million and Thats really just following through with what was expected this year.
Going forward. Uh inclusive of say the the the bonus depreciation benefits, the foreign export deduction that we have by producing a product in in in American exporting it to the rest of the world. Um, also is quite beneficial
We raised DCF guidance by $250 million, the incremental 200 million is solely related to taxes.
And you can see in at least the Run rate guidance that we gave in, in, in the back of this earnings, uh, uh, presentation, it went up by 100 to 200 million dollars, uh, versus even what we showed everybody in in, in June, so up a dollar per share or so.
Originally the plan was that these trains would come online this year and received 60% bonus depreciation dropping down to 40% bonus depreciation depreciation next year going forward, including this year, it's 100% bonus.
That benefit alone allowed us to.
To reduce.
<unk> this year by $200 million. It will also help reduce taxes next year as the rest of the stage III comes online.
Mind, you with 100% bonus we won't have much depreciation.
In 2027.
However, based on the eight to nine at least guaranteed completion dates that are in 2028, we will get a big benefit from that as well so.
That that that we're able to take advantage of of just being a an export export product. Um in terms of where the cash would go more cash in in in on on the balance sheet is is basically more cash to uh execute on on Capital allocation um, more more more wind in our sails to, to load up the buyback quarter after quarter, uh, keep on funding these projects, with a little less leverage to have the balance sheet, as strong as possible, uh, Etc.
100% bonus.
Looking about comfortably under 10% tax rate on average between 2025% to 2030.
Going forward.
Inclusive.
Say the bonus depreciation benefits the foreign exports deduction that we have by producing a product and an American exporting it to the rest of the world.
Also is quite beneficial.
And you can see in at least the run rate guidance that we gave in the back of this earnings presentation. It went up by $100 million to $200 million.
That's helpful. I appreciate that. And second 1 for me, um, you talked about being comfortable with kind of, where Spa prices are for the first big trains on each side, but talked about them, effectively needing to move higher, to maybe to get to that 100 million tons eventually. I guess I'd be curious to hear your view on on kind of what pushes those spa prices higher from here. Is it is it just demand growth? Is it, you know, cost overruns at other facilities. Um but what's kind of the the the moving pieces of that that we could watch from our side?
Versus even what we showed everybody in June so up one dollar per share so.
So that clearly is also quite beneficial.
Yes.
At that we're able to.
Take advantage of just being.
Yeah, thanks John. This is Anatole. Um, you know, we have gone through a number of Cycles in Spa, pricing just in this last, you know, post Ukraine, war build. Um, the es and flows are hard to predict, but as you said, uh, as as projects that are, let's say very aggressive in, uh, in trying to get to the finish line and that's
And export export products.
In terms of where the cash will go more cash.
On the balance sheet is basically more cash to.
Execute on capital allocation.
More wind in our sales to the.
Load up the buyback quarter after quarter.
Keep on funding these projects with a little less leverage to have the balance sheet.
As strong as possible et cetera.
Okay.
Okay. That's helpful. I appreciate that and then second one for me.
You talked about being comfortable with kind of where SBA prices are for the first big trains on each side, but talked about them effectively needing to move higher to maybe to get to that 100 million tonnes. Eventually I guess I'd be curious to hear your view on kind of what pushes those SBA prices higher from.
Finish Line may be determined by, uh, validity of, um, of the EPC contract or something similar if that doesn't work out. Um, from the start of 22, there's order of magnitude, 50 million tons of binding agreements that have yet to reach FID, right? So as those Dynamics, play out, as the PC market continues to firm potentially as the 2050 million tons of of exports are executed 1 way or another, um, and you see projects uh, not move forward beyond that, uh, I think you can see another period of firming and Zach said it is for us. It is all about the ratio, not about the absolute level of, uh, the numerator or the denominator.
That's helpful. I appreciate the time. Thank you.
We'll take our next question from Alexander Bidwell with Weber Research and Advisory.
Here is it is it just demand growth is it cost overruns at other facilities.
But what's kind of the moving pieces of that that we could watch from our side.
Yes, Thanks, John the Zen at all.
We have gone through a number of cycles and SBA pricing just in this last.
Most ukraine or build the.
The ebbs and flows are hard to predict but as you said.
Projects that are let's say very aggressive in.
In trying to get to the finish line and that finish line may be determined by a validity of of the EPC contract or something similar if that doesn't work out.
Good morning, I appreciate the time. Uh, can you talk through some of the OPEX differences between uh mid-scale larger scale, uh stick-built and modular facilities uh with some of the newer public comps? We've seen particularly uh widespread when it comes to operating costs, with Cheniere sitting on the lower end. We're just trying to get a sense of where the natural differences would be in terms of uh OPEX and maintenance and how technology and site layout come into play.
From the start of 'twenty. Two there is order of magnitude 50 million tons of binding agreements that have yet to reach RFID right. So as those dynamics play out as the PC market continues to firm potentially as the 250 million tonnes of exports are executed one way or another and <unk>.
I can't speak for the other projects here, but what I can say is that it doesn't hurt being a 45 million ton.
Program going to 55 and a half going to 60 plus million tons in the scale that we get from that. And and and the fact that especially on the first 9 trains, um, they're all the same,
C projects not move forward beyond that I think you can see another period of firming and Zach said it is for US. It is all about the ratio not about the absolute level of <unk>.
The numerator or the denominator.
Um, what I can get to is we even have nuances quarter to quarter. As you can see, this is our lowest LNG producing quarter that we'll have all year because of the major maintenance. But because of the major maintenance, it's also going to be the highest O&M quarter that we have all year.
Its helpful. I appreciate the time thank you.
We'll take our next question from Alexandra <unk> with Weber Research and advisory.
So I I I think there's, uh, more that you'll have to see on an annual basis to, to appreciate some some of these differences. But, um,
Good morning, I appreciate the time or can.
Can you talk through some of the Opex differences between mid scale larger scale stick built and modular facilities.
Some of the newer public comps, we're seeing a particularly widespread when it comes to operating costs, which are sitting on the lower end. We're just trying to get a sense of where the natural differences would be in terms of.
Who who knows? Uh, we we'd like to say that we're exclusively focused on Sabine and Corpus with our 1700 people and and that's all we do. So, uh, maybe that's why our, our costs are pretty good and Alexander, we spend an awful lot of time. Uh, benchmarking, our operations against other worldwide, uh, LNG producers. I haven't actually looked at the data.
Opex and maintenance and how technology and site layout come into play.
I can't speak for the other projects here, what I can say it doesn't hurt being.
A 45 million ton.
Program going to 55, five going to 60 plus million tons and the scale that we get from that.
And the fact that especially on the first nine trains.
From the different Technologies, uh, um, but, uh, because we've only had the midscale technology now for for a few months. Um, but you, you, you bring up a valid, uh, a valid question on how they all, how they all compare. So more more to come, let us, um, have a little more time. Um, but I can assure you that we're, we're totally focused on being best-in-class.
They're all the same.
What I can get to as we even have nuances quarter to quarter. As you can see this is our lowest LNG producing quarter.
That will have all year because of the major maintenance, but because of the major maintenance. It's also going to be the highest O&M quarter that we have all year.
So I think there is more.
More that youll have to see on an annual basis to appreciate some of these differences.
Everything is contingency. It's the development capital that we put in ahead of the project. F, FID, etc. Uh, we also show up uh, each and every quarter with that lifting margin as well, uh, which probably varies quite a bit project to project as we're.
We're most likely the most interconnected uh, all the projects in in North America.
Who knows.
Wed like to say that we're exclusively focused on Sabine and corpus with our 700 people and that's all we do.
Maybe that's why.
Our costs are pretty good.
And Alexander we spent an awful lot of time bench.
Benchmarking our operations against other worldwide.
All right. Thank uh, thank you for the color. And if I could just squeeze, uh, 1 more in, um, we noticed you switched back to the, uh, the conico Phillips technology for some of these future expansions. Um, can you give a a little bit of insight into what, uh, what drove that decision?
LNG producers I haven't actually looked at the data.
From the different technologies.
Yeah.
But because we've only had the mid scale technology now for for a few months.
But.
You bring up a valid a valid question on how they all are they all compare so.
<unk> to come let us.
Have a little more time, but I can assure you that we are totally focused on being best in class.
In the Conocophillips optimized platform.
And then I would just say when we talk about Capex to EBITDA for these projects. It's everything contingency. It's the development capital that we put in ahead of the project.
Yeah, you know, I think um I this is Jack, so when we switched to midscale for us, it we thought at the time and now this is way, back 208, 17. We thought the market was going to be smaller and and shorter term. And it would take longer to commercialize a large train, it didn't work out that way, as you know, and there's just a lot more economies of scale, right? We've learned that, uh, in power generation and Spades, um, um, which is why facilities got bigger, not smaller and, uh, and we're learning it here with with LNG facilities.
Et cetera.
We also show up each and every quarter with that lifting margin as well, which probably varies quite a bit projects or projects.
As we are.
We are most likely the most interconnected.
That there's, there's, it's, uh, it's overall cheaper to build and operate, uh, larger trains, um, than it is, the smaller smaller facilities, and that's why we pivoted back to trains that we know, um, very, very well.
All the projects in North America.
I'm Robert Muska with missou host securities.
Alright, Thanks, guys. Thank you for the color and if I could just screen. So one more in we noticed you switched back to the dark to Conocophillips technology for some of these future expansions.
Can you give a little bit of insight into what drove that decision.
Hey morning everyone. Uh thanks for taking my question. Um so you know could you or have you delineated the EPC cost for Transit and 9 on a standalone basis? I guess how much of that 2.9 billion is specifically related to trains 8 and 9
Yes, I think.
This is Jack so when we switch to mid scale for us.
Thought at the time and now this is way back 2018.
17, we thought the market was going to be smaller and shorter term and it would take longer to commercialize a large train it didn't work out that way.
As you know and Theres, just a lot more economies of scale right we've learned that in.
In power generation in spades.
Which is why facilities got bigger not smaller.
And we're learning it here with with LNG facilities.
It's.
Overall cheaper to build and operate.
The vast majority of it is um well over uh, 2 2 billion, but it, it comes down to what what it takes for us to continue, to hold to the standard of the 6 to 7 times capacity ibida. With the lump sum TurnKey contract, uh, get to 10 plus unlevered contracted returns Etc and uh, in in, in in a competitive environment. And with a lot of folks building projects it took some of this debt bottlenecking which actually needed hundreds of millions of dollars of equipment. Um, to unlock those types of returns that are are basically Second To None uh, around the world. Uh, so I I'd say 8 8 and 9 still a vast majority of it. But for the first time there was real equipment in,
Larger trains.
And then it is the smaller smaller facilities than that.
That's why we've pivoted back to trains that we know very very well.
Hundreds of millions of dollars range, um, that that we're invested in that's incorporated into the construction plan, uh, to, to get the most out of not just 8 and 9. But, uh, trains 1 through 7 of stage 3,
Thank you we will take our last question from Robert Moskow with Mizuho Securities.
Got it, that's helpful and I'm interpreting it correctly. That obb isn't in your TCF Outlook provided in June.
Hey, good morning, everyone. Thanks for taking my question.
So could you or have you delineated the EPC cost for trains eight nine on a standalone basis, I guess, how much of that $2 9 billion specifically related to <unk> nine.
It, it wasn't. And if you look in the appendix, we give you, uh, the Run rate guidance, and it's up another 100 to 200 million dollars.
Basically, what that shows with now having less than 220 million shares outstanding at the midpoint, we're already at $20 per share of CCS.
The vast majority of it is.
Um, so, okay. So that's why I just moved on to...
Well over two.
2 billion, but it comes down to what it takes for us to continue to hold to the standard of the six to seven times Capex to EBITDA with a lump sum turnkey contracts.
$25 per share as as we can continue to develop the platform.
Get to 10, plus unlevered contracted returns et cetera.
<unk>.
In a competitive environment and with a lot of folks building projects. It took some of this debottlenecking, which actually needed hundreds of millions of dollars of equipment.
To unlock those types of returns.
Got it so. So it seems like that 15 billion dollar excess cash. Target might even screen conservative when you take into account the remaining FID capex tax savings. Phase 1 expansions uh assuming 50% leverage. So how do you think about deploying that excess cash? If you come in materially above that, 15 billion bokeh and I I understand you just issued this a month and a half ago but you know, wanted to get your thoughts there.
<unk> are basically second to none.
Around the world.
So I'd say eight to nine still a vast majority of it but for the first time, there was real equipment in the hundreds of millions of dollars range.
That we're invested in Thats incorporated into the construction plan.
Well, I'd say that even in June we said it was over 15, so we're we're pretty confident. There's a lot of money here uh to to deploy across across across the platform and into Capital allocation and it goes back to what I said to even get to 75 million tons
To get the most out of not just a benign but trains one through seven of stage III.
We're not even talking about using, uh, for equity funding a third of our distributable cash flow per year.
Got it that's helpful and am I interpreting it correctly that Obi BV isn't in your DCF outlook provided in June.
It wasn't and if you look in the appendix, we give you the run rate guidance and it's up another $100 million to $200 million.
Basically what that shows with now having less than 220 million shares outstanding.
Just did in July.
At the midpoint, we're already at $20 per share of DCF.
So okay. So that's why we just moved onto <unk>.
Um and and just more of the same, ideally there will be uh bigger projects that's being in Corpus to to to take care of. But if they're not demonstrated
$95 per share as we continue to develop the platform.
Got it so it seems like that $15 billion excess cash target might even screen conservative when you take into account the remaining capex tax savings phase one expansions, assuming 50% leverage so how do you think about deploying that excess cash if you come in materially above that $15 billion bogey.
You get to see a lot more buybacks, a growing dividend, and a pretty pristine balance sheet, ready to go for eventually more growth.
Got it. Appreciate it, Jack. Thanks for the time, everyone.
Thank you. That will conclude our question-and-answer session. At this time, I'd like to turn the call back over to our speaker for any additional or closing remarks.
I understand you just issued this month and a half ago, but.
I just want to thank all of you for your continued support of Cher. Be safe.
I wanted to get your thoughts there.
Well I'd say that even in June we said it was over 15.
Thank you that will conclude today's call. We appreciate your participation
We're pretty confident there's a lot of money here to deploy across our cost across the platform and into the capital allocation and it goes back to what I said to even get to 75 million tons.
We're not even talking about using <unk>.
For equity funding, a third of our distributable cash flow per year.
So what you can see from US is we're growing the dividend by over 10% in the next quarter.
We're going to have to at some point as the board for a reauthorization to upsize the buyback program in the next year or two.
As we continue and it will be even quicker if we go at the pace. We just did in July.
And just more of the same ideally there'll be bigger projects at Sabine and corpus to take.
Take care of but if theyre not demonstrably accretive.
You'll see a lot more buybacks a growing dividend.
Pretty pristine balance sheet ready to go for eventually more growth.
Got it I appreciate it Jack Thanks for the time everyone.
Thank you that will conclude our question and answer session. At this time I would like to turn the call back over to our speakers for any additional or closing remarks.
I just wanted to thank all of you for your continued support of Cheniere be safe.
Thank you that will conclude today's call. We appreciate your participation.
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Sure.
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Yes.
Okay.