Cheniere Energy, Inc.

Stand by. Good day and welcome to the Chenier Energy Inc. Q2 2022 earnings column webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Randy Batia. Please go ahead, sir.

Thanks, operator. Good morning, everyone, and welcome to Chenier's second quarter 2022 earnings conference column. The slide presentation and access to the webcast for today's call are available at Chenier.com. Joining me this morning are Jack Fusco, Chenier's President and CEO, Anatole Fagan, Executive Vice President and Chief Commercial Officer, and Zach Davis, Executive Vice President and CFO. Before we begin, I would like to remind all listeners that our remarks, including answers to your questions, may contain forward-looking statements, and actual results could differ materially from what is described in these statements. 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. Good morning, everyone. Thanks for joining us today, and thank you all for your continued support of Chenier. I'm pleased to be here this morning to review our second quarter 2022 achievements and discuss our 2022 positive outlook. The second quarter achievements were highlighted by the positive FID of Corpus Christi Stage 3 earlier this summer. In June, we issued a full notice to proceed to Bechtel, which had already commenced early construction under a limited notice to proceed earlier this year. The strategy of releasing Bechtel under limited notice to proceed ahead of a full FID continues to pay dividends as it locks in schedule and cost, which is especially important in today's inflationary environment. We're excited to move forward on this highly economic growth project, which will strengthen our market-leading LNG infrastructure platform and provide much-needed LNG to the global market. The FIDA Stage 3 is a milestone the entire Chenier workforce should be proud of, as it was made possible by everyone's dedicated and tireless efforts to bring this project to fruition. Over the last decade, Chenier has set the bar on safety and project execution, and we look forward to continuing those results with Stage 3. Please turn to Slide 5, where I will review some of the key operational, financial, and strategic highlights from what was a very busy and successful quarter, as well as introduce our upwardly revised financial guidance ranges for the full year. For the second quarter, we generated consolidated adjusted EBITDA of approximately $2.5 billion, and distributable cash flow of approximately $1.9 billion, as margins in the LNG market remained significantly above historical norms, and our focus on operational excellence continued to be rewarded. Our EBITDA and cash flow metrics for the second quarter both exceeded what we achieved in the first half of 2021, a powerful illustration of the impact of world-class execution and safe, reliable operations, which have become synonymous with the Chenier brand. The energy crisis in Europe continues to evolve, and it is at the center of a tragic and devastating war. The United States is blessed with an abundance of low-cost natural gas, and I am proud that our collective efforts at Chenier are having a direct and positive impact on the lives of so many people around the world. We produced, loaded, and exported 156 cargoes in the second quarter, as our operations benefited from the full quarter of operations of Train 6 at Sabine Pass. As of the end of the second quarter, nearly 225 cargoes of LNG which is over 70% of the cargoes produced at our facilities so far this year, have landed in Europe. By comparison, in the first half of last year, less than 40% of the cargoes produced by Chenier landed in Europe. Clearly, the benefits of the flexibility inherent in the commercial structures of our contracts are on display. That is enabling the LNG we produce to reach the markets with the greatest needs. For the third quarter in a row, our guidance ranges for 2022 are moving higher by over a billion dollars. We now forecast consolidated adjusted EBITDA of $9.8 to $10.3 billion and distributable cash flow of $6.9 to $7.4 billion, thanks to the expected lump sum payment by Chevron under the termination of the regasification TUA and marketing margins moving higher compared to our prior forecast. Zach will address guidance in more detail in his comments in a few minutes. On the marketing origination front, Anatole and his team have been racking up frequent flyer miles and bringing home more long-term contracts with customers around the world looking to secure long-term reliable supplies of LNG in support of energy security and energy transition. Just since the start of the second quarter and through July, We have entered into long-term contracts, aggregating approximately 140 million tons through 2050. Since our first quarter earnings call, we announced long-term SPAs with POSCO International, Equinor, Chevron, PetroChina, and PTT. All of these contracts extended beyond 2040, and the PetroChina SPA is our first LNG contract that extends into the second half of this century. Over the last 12 months, we have signed SPAs and IPM deals, aggregating up to approximately 15 million tons per annum and up to over 240 million tons in aggregate. The contracts with Equinor, Chevron, and PetroChina each contain a provision where the long-term contracted firm volume will double either once we make a positive FID on liquefaction capacity expansions at Corpus Christi beyond Stage 3, or we unilaterally commit to the volume. So after reaching FID on Stage 3 only weeks ago, we've already sold an incremental almost 3 million tons per annum of volume beyond Stage 3. Those contracts clearly demonstrate the demand in the market, and my leadership team and I are very focused on Cheniere's next phase of growth. The investments we made at Sabine Path and Corpus Christi over the last decade provide both of those sites with significant brownfield expansion opportunities. And you can be certain we're pursuing growth at both facilities. At Corpus Christi, we see a number of potential ways to leverage the infrastructure we've built or are building to add economically advantaged LNG capacity from a smaller scale addition that could conceivably be done faster. all the way to a very large expansion on the land adjacent to Stage 3 we've shown you in the past. At Sabine Pass, with our third berth nearing completion, infrastructure hurdles to expanding SPL are being cleared, and we are currently developing plans for a potentially significant expansion of that facility as well. Later this year, I look forward to providing more detail on our growth plans at both Sabine Pass and Corpus Christi as we move into the regulatory process and communicating our enhanced capital allocation plans for the coming years. Turn now to slide six. On these calls, you've heard me talk about our operational excellence program. That program establishes the key operating philosophy of Cheniere, of which safety, reliability, and efficiency form the foundation. That program ensures safe operations and maintenance of our facilities while maximizing production and efficiency. While always one of my key priorities, operational reliability has become a key focus of those outside Chenier as well, especially with high LNG market prices in Europe in the midst of an energy crisis. First and foremost, with respect to safety, we have a safety first culture at Chenier and I'm extremely proud that our safety record demonstrates that. On the bottom of slide six, the graph shows our total recordable incident rate, the preeminent safety metric of an operating facility, and a metric that is part of the compensation calculation for each and every Chenier employee. You can see that not only have we exhibited consistent improvement over the course of last year, during which we commissioned and started commercial operations of train six, but also that Chenier's performance in this metric is comfortably within our industry's top quartile. Safety and reliability go hand in hand. It signifies an employee's ownership in the facility. A strong safety metric in operations typically leads to reliable operations of a facility. The middle of this slide shows our facility utilization since 2021, which is yielding production consistent with our run rate range of 4.9 to 5.1 million tons per annum per train. Our utilization is consistently above 90%, compares favorably to the 2021 global average of about 80%, and demonstrates the value of our operational excellence program. I tell our operations leadership team that safety is an investment, not an expense, and the return on that safety investment is clearly in the results we reported this morning. Turn now to slide seven. We'll highlight two significant milestones we recently achieved with respect to our ESG and climate and sustainability initiatives that demonstrate Cheniere's leadership position in these areas. First, during the second quarter, we commenced providing our cargo emission tags or CE tags to our long-term customers. These tags are the first of its kind innovation in our industry. and provide our customers with the estimated greenhouse gas emission profile of each LNG cargo, from the wellhead to the cargo delivery point. The data on the tags is calculated utilizing our proprietary lifecycle analysis, improving the accuracy of the emissions data relative to industry estimates. Cheniere CE tags are a tangible result of our prioritization of data-driven environmental transparency. We expect the tags will help identify opportunities to quantify and improve environmental performance throughout the LNG supply chain. In addition, in June, we published our third annual corporate responsibility report entitled Acting Today, Securing Tomorrow. I'm proud of the continued progress we are able to detail in these annual reports as Cheniere is emerging as a leader in ESG for natural gas companies with a focus on being actionable, not aspirational. On that note, I want to take a moment to address some of the recent news and speculation regarding Chenier, the EPA, and the National Emission Standards for Hazardous Air Pollutants, or NESHAP rule. The EPA recently lifted a near two-decade stay of that rule covering the types of turbines which we utilize above Sabine Pass and Corpus Christi. At Chenier, regulatory compliance is a strategic priority consistent with our ESG focus on being actionable, our company values, and our commitment as a responsible operator. We work constructively with federal, state, and local regulatory authorities to ensure prudent operations in compliance with current regulatory requirements. We value the fact that we operate under a regulatory regime in this country that seeks and values input from industry, and we have been in touch with the EPA regarding our concerns with respect to the rule. Currently, we are working diligently at our facilities to perform the initial testing required by the NESHAP. While we don't believe our turbine should be subject to the rule, as the use in LNG operations was not contemplated by EPA in the original 2003 rulemaking, we will work with the EPA and the relevant state agencies to develop an acceptable path forward to compliance, if applicable. At this time, it is too early to discuss what, if any, specific changes would be needed. However, we are confident that, if necessary, we'd be able to develop a solution that would enable compliance without a material, financial, or production impact. My conviction in Cheniere's LNG platform has never been stronger. We look forward to continuing to lead the LNG industry in terms of safety, operational excellence, and environmental transparency. in order to provide the world with a cleaner, more secure, and reliable energy solution. Thank you all again for your continued support of Chenier. I will now turn the call over to Anatole, who will provide an update on the LNG market.