Cheniere Energy, Inc.

Good day and welcome to the Chenier Energy Inc. Second Quarter 2021 Earnings Call and Webcast. Today's conference is being recorded. At this time, I will turn the conference over to Randy Battaglia, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Chenier's Second Quarter 2021 Earnings Conference Call. The slide presentation and access to the webcast for today's call are available at chenier.com. Joining me this morning are Jack Fusco, Cheniere's President and CEO, Anatole Fagan, Executive Vice President and Chief Commercial Officer, and Zach Davis, Senior 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 measure can be found in the appendix to the slide presentation. As part of our discussion of Chenier's results, today's call may also include selected financial information and results for Chenier Energy Partners LP or CQP. We do not intend to cover CQP's results separately from those of Chenier Energy, Inc. The call agenda is shown on slide three. Jack will begin with operating and financial highlights. Anatole will then provide an update on the LNG market, and Zach will review our financial results and guidance. After prepared remarks, we will open the call for Q&A. I will now turn the call over to Jack Fusco, Chenier's president and CEO.

Thank you, Randy, and good morning, everyone. Thanks for joining us today, and thank you for your continued support of Chenier. I'm pleased to be here this morning to review our results from the second quarter and our increased financial guidance for the full year of 2021. Please turn to slide five, where I will review some key operational financial highlights from the second quarter. The second quarter was an extremely productive one for us as we achieved milestones across the enterprise in origination, marketing, operations, and engineering and construction, just to name a few. Global LNG market fundamentals continue to be extremely constructive, and we have begun to see the return of long-term LNG contracts in support of the construction of new liquefaction capacity. For the second quarter, we generated consolidated adjusted EBITDA of 1.023 billion and distributable cash flow of approximately 340 million on revenue of over $3 billion. We generated a net loss of approximately 329 million due primarily to the unrealized derivative accounting treatment required on our hedges and on our integrated production marketing, or IPM transactions, which Zach will discuss in more detail in a few minutes. For the third consecutive quarter, we're raising our full-year 2021 financial guidance. We now forecast 2021 consolidated adjusted EBITDA of $4.6 to $4.9 billion. and distributable cash flow of $1.8 to $2.1 billion. This increase in guidance is being driven by a number of factors. First, the continued strengthening of the LNG market is yielding higher netbacks on open volumes. For context, since our first quarter earnings call in May, spot margins for 2021 doubled, and our portfolio optimization team has been able to capitalize on that with our open volumes. In addition, we've been able to further unlock some additional production for the second half of the year, primarily through maintenance optimization, which has contributed to an upwardly revised production forecast. And lastly, with Henry Hub moving higher over the past quarter, we make some additional lifting margin. So our outlook for the balance of 2021 has improved again based on a very strong LNG market and our very strong operational performance. The fundamentals present in the LNG market are as good or better than at any time since I've been at Chenier. Anatol will cover the market in more detail in a few minutes, but market dynamics on both the supply side and demand side continue to move in our favor and support our conviction in the long-term growth prospects for natural gas worldwide. Just after the quarter ended, We signed our third IPM agreement in support of Corpus Christi Stage 3, this time with Tourmaline, the largest natural gas producer in Canada. This transaction progresses our commercialization efforts on a shovel-ready Stage 3 expansion project and helps validate our view of a constructive macro backdrop for long-term contracts. In addition, it reinforces Chenier's record of executing collaborative, innovative solutions to meet the needs of our customers. We will continue to leverage our infrastructure platform and commercial advantages to further progress Stage 3 towards FID. During the second quarter, we continue to have meaningful success under our mid-term strategy, placing portfolio volumes into the market under various commercial agreements and increasing the percentage of our total volume that is contracted So far in 2021, we've entered into fixed-fee sales agreements for portfolio volumes with multiple counterparties, aggregating approximately 12 million tons of LNG volume between this year and 2032, in addition to the IPM deal with Tourmaline. The success of this midterm strategy underscores the strength in the LNG market today and the strategic competitive advantage of our portfolio volumes. We'll continue to place these flexible volumes in the market, tailoring solutions to meet the growing requirements of LNG customers worldwide. On the production side, the record we set in the first quarter for LNG exports didn't stand very long as we broke that record in the second quarter with 139 cargoes of LNG exported from our two facilities. Year-to-date, Asia is the top destination of Chenier cargoes, with approximately 45% of our cargoes exported having landed in Asia, followed by Europe with roughly 35% and Latin America with about 20%. South Korea and China are the top two countries importing our LNG so far this year, and those two alone account for over a quarter of all cargo deliveries. Our operations and maintenance teams at both Sabine Pass and Corpus Christi have done an exceptional job thus far in 2021 managing our operating plans to maximize asset availability and LNG production at our facilities, enabling us to increase our production forecast for the year, all while ramping Corpus Christi Train 3 to full rates and stable operations quickly and safely. We look forward to the same performance with the addition of Sabine Pass Train 6 early next year. Speaking of Train 6, a significant milestone was met last month with the introduction of fuel gas into the train, signaling the start of early commissioning activities. At the site, 17 systems were turned over to the startup team in June, another 12 in July. With the project approximately 90% complete, Bechtel continues to progress this project against an accelerated schedule. Turn now to slide six, where I provide a brief review of stage three in the Corpus Christi site overall as the Stage 3 project comes into focus with our recent commercial momentum and the constructive market we are in. As a reminder, our Stage 3 project at Corpus Christi is fully permitted and, if fully constructed, would have over 10 million tons of LNG capacity per year. Stage 3 enjoys brownfield project economics as it will utilize a significant amount of shared infrastructure constructed as part of Trains 1 through 3, which we believe makes Stage 3 very cost-competitive LNG capacity addition. As for the path to FID, we have said this before, we will maintain our discipline to help ensure that the risk and return profile of Stage 3 is consistent with that of the first nine trains we've built. To that end, our origination team that's focused on commercializing additional capacity from the project, and we are working closely with Bechtel on finalizing the EPC contract. We remain committed to our growth capital investment parameters, which help ensure discipline in our capital investment decisions and the sanctioning of projects only when they meet the high standard we have set for all FIDs to date. Our excitement around the potential investment opportunities at the Corpus Christi site doesn't end with stage three. As you may recall, we have acquired approximately 500 acres adjacent to our existing site, which provides us with a platform for major future development potential. Any future capacity developed at this site may be designed to leverage the infrastructure already in place to provide substantial cost advantages. As you can see from the aerial view of the land position at Corpus Christi, the site possesses substantial running room for growth well beyond Stage 3, and we may develop additional infrastructure there over time, especially as Stage 3 moves closer to FID. Turn now to Slide 7. Last month, we were proud to publish our second annual corporate responsibility report entitled Built for the Challenge. This report, the product of a deep cross-functional effort across the entire company, provides insight into key actions taken by Cheniere to ensure business resiliency in 2020 and beyond and is the latest example of our transparency on ESG-related issues and how we are building sustainability into our business model. Built for the challenge is the latest milestone in our ESG journey, which has seen tremendous progress in 2021. Highlights of achievements reached thus far through 2021 include the announcement of our cargo emission tags, the climate scenario analysis we published, our first carbon neutral LNG cargo we announced last quarter, our participation in the first ever study to measure methane emissions on an LNG carrier, and our collaboration with leading academic institutions and several of our upstream natural gas suppliers to implement QMRV of greenhouse gas emissions performance. at natural gas production sites across several basins. And finally, earlier today we announced the publication of our peer-reviewed Greenhouse Gas Life Cycle Assessment, or LCA, which utilizes greenhouse gas emissions data specific to our LNG supply and will be the foundational analytical tool to estimate greenhouse gas emissions to be included in our CE tags that we provide our customers. The items highlighted on the slide are all steps on a continuous path, and we look forward to leading our industry forward in this area, helping to ensure the long-term sustainability of natural gas and helping all participants along the LNG value chain realize the full environmental benefits of our LNG. With that, I'll turn the call over to Anatole, who will provide some more details on recent LNG market developments.