Good day, and welcome to the Cheniere Energy Second Quarter 2024 Earnings Call and Webcast. Today's conference is being recorded. At this time, I'd like to turn the conference over to Randy Bhatia, Vice President of Investor Relations. Please go ahead, sir.

Thanks, operator. Good morning, everyone, and welcome to Cheniere's second quarter 2024 earnings conference call. The slide presentation and access to the webcast for today's call are available at cheniere.com. Joining me this morning are Jack Fusco, Cheniere's President and CEO; Anatol Feygin, Executive Vice President and Chief Commercial Officer; Zach Davis, Executive Vice President and CFO; and other members of Cheniere's senior management. 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 2 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 measure can be found in the appendix to the slide presentation. As part of our discussion of Cheniere's results, today's call may also include selected financial information and results for Cheniere Energy Partners LP, or CQP. We do not intend to cover CQP's results separately from those of Cheniere Energy, Inc. The call agenda is shown on Slide 3. 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 and increased 2024 guidance. After prepared remarks, we will open the call for Q&A. I will now turn the call over to Jack Fusco, Cheniere's President and CEO.

Thank you, Randy. Good morning, everyone. Thanks for joining us today as we review our second quarter results which exceeded our expectations, thanks to the success we have achieved across the entire Cheniere platform. Before I address the quarterly results and guidance increase, I hope you saw our contract announcement earlier this week. We have entered into a new long-term SPA with the Portuguese multinational integrated energy company, Galp, for approximately 0.5 million tons for 20 years. And the SPA is tied to the date of the second train of the SPL expansion project. This contract demonstrates not only further progress and continued momentum on the development of the SPL expansion project, but also the important role U.S. LNG fulfills in the European energy system for decades to come. The SPA represents our longest dated contract with the European counterparty as the deal is expected to extend beyond 2050. We continue to be very excited about the market's response to the SPL expansion project and are working diligently across multiple work streams to advance the project towards FID. We are focused on being the world's LNG supplier of choice from the U.S., differentiating ourselves with a safety-first culture, superior reliability and our customer focus that demonstrates our long-term commitment to excellence in LNG operations. Please turn to Slide 5, where I'll highlight our key accomplishments for the quarter and introduce our increased guidance for 2024. In the second quarter, we generated consolidated adjusted EBITDA of approximately $1.3 billion, distributable cash flow of approximately $700 million and net income of approximately $880 million. These actual financial results are once again the product of our maniacal focus on operational excellence. During the quarter, we produced and exported 155 LNG cargoes from our facilities. Total LNG production across our platform was up slightly…

Thanks, Jack, and good morning, everyone. Please turn to Slide 9. With the extreme volatility in prices of 2022 now well in the rearview mirror, JKM and TTF were down 24% and 16%, respectively, year-on-year in the second quarter. However, both benchmarks increased during the quarter due to a series of supply averages in LNG facilities in Australia and the U.S., as well as upstream facilities in Norway. These supply disruptions coupled with stronger demand pull from Asia due to a hot early summer and restocking efforts led to TTF and JKM each helping approximately 25% from April lows to June. In the U.S., month-end Henry Hub settlements averaged $1.89 in the second quarter, but prices strengthened with the June contract settling at $2.49 in MMBtu and July at $2.63 as the domestic market absorbs the impact of price-driven production cuts, along with strong early summer cooling demand and the return of Freeport LNG for maintenance. Throughout the quarter, the supply-demand balance remained delicate in the LNG market. Looking at the center charts, global LNG trade growth was constrained by minimal supply growth during the quarter, with Asia's increased demand met by attracting cargoes in the Atlantic Basin via higher prices. This demand pull from Asia is further evidenced by U.S. LNG export flows, which continue to shift from Europe to Asia during the quarter. The growth in global supply was partially offset as Egypt flips back to an LNG importer and other export facilities suffered protracted outages. The limited incremental supply, Aegis consumption growth was primarily dominated by China and India, leaving little volume for relatively new market areas such as Hong Kong, Vietnam, and the Philippines, which actually became our 40th delivery market last week. We expect this seemingly fragile market balance to continue until additional LNG export…

Thanks, Anatol, and good morning, everyone. I'm pleased to be here today to review our second quarter 2024 results, key financial accomplishments and increased guidance for the year. Turning to Slide 13. For the second quarter of 2024, we generated net income of approximately $880 million, consolidated adjusted EBITDA of approximately $1.3 billion and distributable cash flow of approximately $700 million. With these second quarter results, we have now reported positive net income on a quarterly and cumulative trailing four-quarter basis, seven quarters in a row. Compared to last year, our second quarter 2024 results reflect a higher proportion of our LNG being sold under long-term contracts as well as further moderation of international gas prices relative to last year. Compared to the first quarter of this year, our production was lower in the second quarter due to the planned maintenance at both Sabine Pass and Corpus Christi, which Jack detailed, as well as warmer ambient temperatures at Sabine. During the second quarter, we recognized in income, 552 TBtu of physical LNG, all of which was produced by our facilities. Approximately 93% of these LNG volumes recognized in income were sold under long-term SPA or IPM agreements with initial terms greater than 10 years, which makes this past quarter our most contracted quarter to date. Thanks to the team's focus on execution and operational excellence, we have generated over $3 billion of consolidated adjusted EBITDA and nearly $2 billion of distributable cash flow in the first half of 2024, boosting our confidence in the increased forecast for the remainder of the year, which I'll address further on the next slide. The strong financial results enabled our team to deploy another approximately $1.2 billion under our comprehensive capital allocation plan towards shareholder returns, balance sheet management and accretive growth during the…

Thank you. [Operator Instructions] And our first question comes from Theresa Chen with Barclays. Please go ahead. Your line is open.

Good morning. With the progress we've made year-to-date, would you be able to provide any additional color on the drivers that underlie the low versus high end of the updated guidance range?

Sure. Thanks, Theresa. This is Zach. I'd say going into the last call, we are already tracking to the upper half of the range. So we were in a good position. And now we're able to not only raise it, but tied in it by $200 million on the low end. So at this point, we're comfortably in the middle of the range, if not better. And the reason for that is that there was probably another incremental $100 million added to the EBITDA, thanks to production going up post the major maintenance at Corpus, helping Corpus catch up from some of the feed gas quality issues that it had in Q1. And then just more optimization across the board from upstream and downstream and sub chartering. So to go from there, there's still a little variability. We won't account for most of the optimization that could happen in the second half of the year, in particular on the upstream side on basis differentials. And then Henry Hub is a variable just on lifing margin. Every $0.50 move in Henry Hub probably affects our lifting margin and EBITDA by about $30 million still for the rest of the year. And then we're still in a hurricane season. So weather permitting, if things go smoothly as they have gone to date, maybe there will be some incremental production. And if not, we could also lose some production if we have incremental downtime above and beyond what we normally budget or give ourselves coverage for. And then there's a little variability at the end of the year just on year-end timing of deliveries. We don't bake into the forecast late deliveries in the year. So that might add out a bit, but shouldn't materially affect us on the downside. So things are pretty big this year as it was already our most contracted year ever.

Thank you for that detailed answer. And maybe turning into the permitting side. I would love to get your updated view on the regulatory and permitting landscape. Specifically, what industry read-throughs, if any, are there to glean from the DC focus recent decision to vacate for permits that a couple of competitor projects amid environmental opposition? And what is your view on the permitting process for your own expansion projects?

Thanks, Theresa. This is Jack. I'll take a crack at that one. So first, a similar outcome can't happen with our permits at SPL on Trains 1 through 6 or CCL 1 through 3, including Stage 3 at CCL because all of our permits are no longer subject to appeal. On our expansion projects, which is CCL 8, 9 and SPL Stage 5. As you all know, we dedicated a significant amount of time and resources just developing our projects and associated permit applications in a manner that we feel satisfies the federal, state, local regulatory requirements. And we've done this over the course of more than a decade through multiple administrations, and we feel very confident in our ability to continue to perform that way. There's a significant amount of work that we do with the regulators to ensure that we have a robust record underpinning all of our permits, and we're thoughtful and accurately responding to their information request as well as comments from affected stakeholders. And that's what you see happening right now for 8 and 9 with all of our public hearings that we listened to the neighborhood. We listened to their concerns with EJ or air quality, and we respond appropriately to those concerns. So I feel very good about our position versus what we saw transpire with some of the other folks in the LNG industry.

Thank you very much.

And we'll take our next question from Jerry Tonet with JPMorgan. Please go ahead.

Hi. It's Jeremy Tonet from JPMorgan. Good morning all.

Hey, Jeremy.

Hey, Jeremy.

Just wanted to touch on commercial discussions. Great to see the Galp contract earlier. And just wanted to see, I guess, how the state of commercial discussions are going with customers right now, given changes in the LNG market and especially the impact of competitor delays out there? The pause, election uncertainty. Just wondering how these things all come together to impact, I guess, commercial discussions for SPL expansion at this point?

Hey, Jeremy. It's Anatol. Thanks for the question. No great fireworks, a very similar answer to last few quarters. Obviously, after 2022, 2023, there's a period of reassessing, digesting, thinking through portfolios. But in your question and partially in Jack and Zack's answers, we have continued to differentiate ourselves from a reliability standpoint, from a commercial behavior standpoint. And as we've said, we expect the engagement to bear fruit that very much rhymes with what you've seen in the past. I cannot tell you, even with TTF rallying back into the €40 range, kind of highest levels year-to-date. I still don't expect a rush of European long-term counterparties. We've always said that there will be opportunities, 5 million tons that we've done to date, including Galp, but the drivers will continue to be Asian demand growth and North American production growth, and those discussions are healthy. They appreciate the differentiation. They appreciate the – Theresa's question on how we navigate various uncertainties. And I think all of those are tailwinds for the commercial team.

Got it. That's very helpful there. And was wondering if we could turn to capital allocation for a minute. And it's good to see the dividend increase there. I was just wondering if you could talk a bit more, I guess, on the size of the step-up at that point versus more versus less? And how that influences your thought process going forward?

Sure. This is Zach. And obviously, everything we do needs to go through and be approved by the Board before we announce it. But let's put it this way, $4 billion isn't going to be it. And 200 million shares outstanding isn’t our final target. So we're going to just continue to work it down. And we needed this right now follow through on the 2020 vision. And getting to that point, we're on a run rate sustainable basis even at $2 margins, not like the $7, $8 margins we're seeing on the screen for the next 1.5 years. We're comfortably in the 20s on DCF per share. But how we look at it? That $4 billion should get us pretty close to 200 million shares really just depends on share price. And then we look at our cash flow forecast and ensure that we can meet those commitments of finishing a $4 billion incremental buyback program by 2027 or sooner with on top of that, being balanced on our capital allocation and achieving all the other goals we want to achieve, which is not just finishing up Stage 3 in 2025 and 2026, but FID and the expansion there and getting Sabine ready, having the balance sheet get to BBB across the board by being proactive on that. And obviously, we increased the dividend by 15% and committed to a 10% growth rate for the rest of the decade. So a balance of all of that is how we got to $4 billion, but I wouldn't think too much about that because we've been known to increase it over time.

Got it. That's helpful. Thank you for that.

And our next question comes from John Mackay with Goldman Sachs. Please go ahead. Your line is open.

Hey. Thanks for the time. This is probably one for Anatol. You guys have been pretty positive on the demand picture for a while now. I'd just be curious to hear a little more from you on if we're looking at your outlook for Asia demand, how sensitive this could be to kind of like the broader macro cycle, we've seen China a little slower recently. Maybe just a little sensitivity there versus, I think, your argument on a lot of this is kind of baked in growth at this point? Thanks.

Thanks, John. Again, very boring really hasn't changed much. We see the dedication to gas writ large being very sustained and durable across Asia. And across Europe, in fact, right, the investments that are being made, the – we're going to approach something like 1,500 million tons of re-gas capacity by the time all is said and done. And, yes, there is some price sensitivity in some markets, but actually, we've been pleasantly surprised at, A) at what levels and B), how much seemingly price inelastic demand in the short-term is manifesting itself. So we see these emerging markets in South and Southeast Asia as being very hungry for gas. It still is going to be a very small piece of their primary energy mix and will perform a lot of grid reliability and balancing functions that modern grids expect. So continue to be just as constructive. In fact, what we're seeing now, as we touched on, is a supply-constrained market, and everything we've seen play out in North America and the rest of the world, again, just like in previous cycles, continues to move that supply constraint further and further out. And you're seeing kind of 2026, 2027 now being the period of that supply entering the market as opposed to a year ago when most were penciling it in 12 to 18 months earlier. So we think as that supply comes in, you'll see some very dramatic growth numbers as various economies avail themselves of this moderately priced and reliable resource.

That's great. Appreciate that. Maybe just for my second one, with the Galp deal announced and you guys kind of continuing to make progress on some of the expansion projects. Can you just remind us kind of what you're thinking about in terms of what you have now and targets you'd like to get to for the 2 incremental Corpus trains and then the broader Sabine expansion?

Yes. Maybe I'll start and tag team with Zach. But in terms of quantum of commercial support, we're right around 10 million tons. We've got about just under 3 million tons with three customers that are [indiscernible] to the mid-scale expansion. And with Galp, about seven kind of beyond that. So as always, we're navigating all of the levers, commercial, of course, being one of them to think about what the right way to get to the appropriate project is.

And I'll just add with all the success that the team that the origination team has had in the last year or two, if we wanted to be – we could be 100% contracted even with the mid-scale expansion of 8 to 9 and debottlenecking. That's how many contracts we have. So we're in a really good spot where – now with the EA at Corpus for midscale 8 and 9 targeting FID next year once we have the permits and we can make that fully contracted. And with the contract at Galp and everything else that we've signed tied to Train 7 or Train 8, we have more than enough to even FID in a couple of years or so, a first phase of a Sabine expansion. So that's in mind too, as we continue to do value engineering there and work on it with Bechtel.

All right. Appreciate the time. Thank you.

And we'll move to our next caller, Ben Nolan with Stifel. Please go ahead, sir. Your line is open.

Yes. I appreciate it. Thanks. I wanted to maybe start with the cost side. We saw I guess, earlier this week, Bechtel come out with a new EPC contract and appreciating that it's – there's probably some differences. But I was curious if that sort of came in line with how you're thinking about the expansions that you're working on and contemplated with the pricing of the gas that you've sold?

I'll answer that. And we can't speak for what's going on at these other projects, obviously. And it doesn't really matter because if we're not going to hit our financial standard, why are we going to take undue risk and dilute the returns that we're already providing to all our shareholders. That we can easily get by just buying back more stock and letting investors own more Sabine and Corpus already in place. So that's their brownfield like best, I guess, and that's for them to figure out. Whereas for us, we think we can do even better. And that will allow us to achieve 7x CapEx to EBITDA, 10% unlevered returns. And that's just contracted nothing more than 225 on CMI and a fully wrapped EPC. Anything beyond that in terms of early completion, higher CMI levels, optimization, that's just upside to us all, but never baked in when we FID these projects.

Okay. Maybe another way to ask that is, to the extent that you got similar pricing, the math still works fine. Like is that maybe in a different way to get to the same place?

Working with Bechtel, clearly now thinking about limited notices to proceed even later this year and then to be in a position to have full notice to proceed next year. We have a decent sense of where pricing is shaking out, especially for 9, and it's all looking good.

Perfect. And then sort of a follow-up or a second question. I appreciate your comments on the FERC thing is going on. But as you're getting closer to Corpus Christi, any updated thoughts on the DOE non-FDA? Any sense as to if we're getting closer to an unpause there?

No. I think you, Ben, you probably have seen that they filed an appeal on the ban – of the ban. I think, again, this is probably is not going to get settled until after November. But it's not going to impact what we do here at Cheniere.

Got it. All right, I appreciate it. Thank you.

And we'll move to our next question from Keith Stanley with Wolfe Research. Go ahead, sir.

Hi. Good morning. Just one question. Can you touch on potential plans to add gas power plant capacity with your old friends at Calpine under the Texas loan program? Just strategic rationale for that cost and what you're hoping to achieve?

Thanks, Keith. So as you know, with our Stage 3 increase at Corpus. Our demand for electricity increases dramatically. Because those are electric compression, not gas compressors. So we wanted to manage that risk. We were able to do that very efficiently and effectively and cheaply by buying an existing power plant that was on the outskirts of our site. That's the old GPP plant. And we have partnered with Calpine to make that a reliable combined cycle power plant, which they've done a very good job at to date. The plant has run almost every day since we bought it last year, very efficiently and reliably, but it's our intent to grow that facility to match our demand profile. And in that way, it will be a financial hedge to our power exposure at Corpus Christi. So that's the intent of the relationship with Calpine and our ownership in that power plant. And as you also know, we own our own power plant at Sabine Pass that's not connected to the grid, but we have power generating facilities there already. So we're perfectly comfortable with owning and operating those facilities.

That make sense. Thank you.

And our next question comes from Craig Shere with Tuohy Brothers. Please go ahead. Your line is open.

Hi. Thanks for taking the question. Just one for me. Sounds like your debottlenecking is making a lot more progress. It's obviously been going on for years. Barring a hurricane risk, is it fair to say that your average multiyear legacy train output is already notably and systemically over 5 mtpa at this point? And what would it take for you to guide to something higher in the coming quarters?

I guess we should have expected that question from you. But I'll just say – we've been at around 5 million tons per train on the first 9 trains for a while, and now we're still at 5 million tons per train. And we're doing major maintenance every year. So for the next few years, hard to see that moving materially up. But we are making investments. We've mentioned before, things like fin fans that should eventually help us get closer to the higher end of that range. But not yet. We're not in the business of overpromising on this.

Craig, I was going to say as soon as we get comfortable that we can reliably meet the production numbers over a 20-year period, we will let you know.

Great. Thank you.

And our next question comes from Zack Van Everen with TPH. Please go ahead. Your line is open.

Hey, guys. Thanks for taking my question. Maybe just to start on the global demand outlook. I know you talked about it on the last call around data centers internationally. We've seen some positive developments here in the U.S. on the midstream side. Has anything come up or anything changed there as far as conversations with potential customers or just increased demand from the global kind of AI data center demand ramp?

Yes. Thanks, Zach. It's Anatol. There are – we're, let's say, roughly two steps away from that. But clearly, this is a very nice tailwind for that Asian story as well. We see a dedicated kind of hyperscaler commitments to Singapore, Malaysia, Japan, other markets where we are working with our counterparts who will ultimately be supplying into that demand. So it is another component of the electrification and the reliability that the grids need that will be driven by this additional gas supply, and it is a component in the global story. But again, we are not the load serving entity, right? So we're a step or two removed from that.

Got it. That makes sense. And then maybe one on the U.S. kind of gas macro side. You mentioned that Stage 3 will start taking feed gas in the next few months. Can you give an idea of the volumes there? Is it a couple of 100 MMcf a day or a little bit less than that as you start to commission that first train?

Yes. Zach, the way that works is it will be small first as we dry out the internal piping and the compression, and we continue to test things. And then it will grow – should grow significantly after that. And our – the pipeline that provides the gas from AGUA DOCE into Stage 3 is already in operations.

Got it. That makes sense. I appreciate the time, guys. Thanks.

And our next question comes from Michael Blum with Wells Fargo. Please go ahead. Your line is open.

Thanks for squeezing me in here. I just had one question left here. Just in terms of the operational enhancements you talked about, which led to your increased 2024 guidance. I just wanted to confirm that these carry forward to future years? Or is there anything kind of onetime in nature to the second half boost in production? Thanks.

I would say no commitment yet for the future years. If we go back to the May call, we basically said that production was a little light compared to forecast because after the freeze, we had some feed gas quality issues at Corpus, but we more than made up with it, with the optimization, we were able to do upstream and downstream in the plan. We have more upstream and downstream optimization and subchartering added to the forecast this time around. But on top of that, we're catching back up to where we thought we would be and closer to target for the full year. So hard to say that this is going to be a benefit for the future, but maybe more – allow us to be more solid on the forecast going forward.

Thank you.

And we'll move to our next question from Manav Gupta with UBS. Please go ahead. Your line is open.

Thank you for squeezing me in. I have one quick question. CCL Stage 3 is about 62.4% complete, was about, I think, 55.9% last quarter. Is that a good run rate? That's how we should think it comes online? Or it can get very lumpy because of the construction phase kicking in? Thank you.

Yes. So there's really – that's an overall construction completion date or percentage. And what I like to look at is Trains 1 and 2 and 3. And those numbers are significantly different, as you could see from the photos that we've provided you. But there's really three things that I look at. One is supply chain, do we have all the parts that we need, at least for the initial 3 to 5 trains. And yes. And so we don't – I'm not worried about supply chain messing the up. The next thing is we look at worker availability. And if are we adding the workforce that we need with the right skills that we need to hit the critical path of the schedule, and we are. And then thirdly, I look at commissioning activities. Are we turning over systems from E&C construction to commissioning and getting those systems started up? And how many employees, operations employees have been seconded to Bechtel. And we have – at this point, we have about 50 operators that are seconded that are doing commissioning activities. Those are all really positive signs to me that Stage 3 Trains 1, 2 and 3 are really moving along very well.

Thank you so much.

And our last question comes from Alexander Bidwell from Webber Research. Please go ahead. Your line is open.

Good morning. This is Alex Bidwell on for Greg this quarter. Thanks for taking my question. Looking at CCL Stage 3. So first LNG on Q1 is coming or is expected at the end of the year. Can you guys define first LNG? Are we talking a substantial volume or a small volume, say, a few cubic meters?

We're not in as to play games. We're in it to run a real business. And when we tell you we've achieved first LNG, hopefully, after a decade of doing this in 3700 tankers under my belt that you all believe us that where they're making LNG. So I'm not going to try to define it. I hope that I've earned some credibility with all of you over at least my last eight years in Cheniere's last 10.

All right. Thank you.

And ladies and gentlemen, this concludes our Q&A session on today's call. I will now turn the call back to the Cheniere team.

Thank you all very much for your support and please be safe out there.

And this concludes today's call. Thank you for your participation. You may now disconnect. And have a great day.