Cheniere Energy, Inc.

Good day, and welcome to the Chenier Energy First Quarter 2024 Earnings Call and Webcast. Today's call is being recorded. At this time, I'd like to turn the conference over to Frances Smith, Director of Investor Relations. Please go ahead.

Thanks, Operator. Good morning, everyone, and welcome to Chenier's First Quarter 2024 Earnings Conference Call. The slide presentation and access to the webcast for today's call are available at chenier.com. This is Frances Smith on for Randy, who unfortunately couldn't be here this morning. Joining me are Jack Fusco, Chenier's President and CEO, Anatole Fagan, Executive Vice President and Chief Commercial Officer, Zach Davis, Executive Vice President and CFO, and other members of Chenier'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 suggested 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 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, Frances, and good morning, everyone. Thanks for joining us today as we review our first quarter results highlighting a successful start to 2024 across the entire Chenier platform. The first quarter was marked by strong financial results and outstanding execution across Chenier, including all pillars of our capital allocation plan objectives. We made significant meaningful progress on the future development across both sites, all of which continues to be enabled by a relentless focus to be the leading producer of LNG to the world. Our focus and commitment to operational excellence has never been more important as we face significant and potentially exponential growth in power demand around the globe, which is projected to be met in part with natural gas fired generation. The global acceleration of power demand is driven by the penetration of electric vehicles, the electrification of heating, cooling, industrial production, and most topically lately, power-hungry data centers. As Anatole and I have discussed on previous earnings calls, this opportunity is a global one. It only helps to support our long-held conviction regarding a structural shift to natural gas around the world. We believe natural gas and LNG are critical to enabling this long-term electrification as one of the most reliable, flexible, cost-competitive, and dispatchable energy sources. And it underscores a critical need for further investment in LNG and natural gas infrastructure worldwide. Please turn to slide five, where I'll highlight our key accomplishments for the quarter. In the first quarter, we generated consolidated adjusted EBITDA of approximately $1.8 billion, distributable cash flow of approximately $1.2 billion, and net income of approximately $500 million. Zach will address the main drivers of our performance shortly, but I want to address some operational highlights from the quarter. In January, while the freeze event in Texas did not physically impact our Corpus Christi facility, as we have robust freeze protection protocols in place, we were affected as a result of the impact the freeze had on upstream infrastructure for natural gas production and processing located in the Permian. These impacts led to temporary composition changes in the quality of our feed gas. which did create some production challenges during the quarter. While we cannot control these external factors, I am proud of the performance of the Chenier's production professionals to adapt quickly to address the challenges in order to meet all of our commercial commitments and maintain our track record of reliability that our customers are accustomed to. Despite the indirect freeze-related production challenges, we still met all of our customer obligations The experience and knowledge gained from eight plus years of operating the second largest liquefaction platform in the world has prepared us to strategically and safely respond to volatility and disruptions throughout the LNG value chain, which has been evident repeatedly over the last several quarters. And the first quarter was no exception. Overall, production across our platform was largely flat year over year, thanks to the stellar operations lower maintenance and colder weather at Sabine Pass. As noted previously, based on lessons learned in our first major maintenance turnaround last year, we've been able to optimize the maintenance schedule this year and spread out some of the planned maintenance more strategically across the calendar. And year to date, we have already completed several smaller scale, more efficient turnaround programs with minimized impacts to our ongoing commercial operations. Those will continue throughout the year especially as we continue to the summer months, but we do not anticipate a long outage like we executed in June last year. Looking ahead to the balance of 2024, today we're reconfirming our full year guidance of $5.5 to $6 billion in consolidated adjusted EBITDA and $2.9 to $3.4 billion of distributable cash flow. Our production forecast is largely unchanged since the February call, and we have an immaterial amount of volume remaining unsold. We'll continue to update our annual outlook as we progress further into the year and get past some planned maintenance in upcoming hurricane season. During the first quarter, Zach and his team continue to make significant progress across our capital allocation priorities. In the first quarter, we repurchased over 7.5 million shares for approximately $1.2 billion. an all-time record quarterly amount for our company, which demonstrates our opportunistic approach to share buybacks. We continue to manage the balance sheet, opportunistically refinancing approximately $1.5 billion of debt maturing next year with an overall investment-grade bond at the Chenier Energy level, and we repaid $150 million of long-term debt at SPL during the quarter. We also paid a quarterly dividend of 43.5 cents and invested over $500 million in Stage 3, which continues to progress extremely well. Speaking of Stage 3, turn to slide 6. We'll update you on the status of our expansion projects, Corpus Christi Stage 3 and Mid-Scale Trades 8 and 9, and the SPL expansion project. Bechtel continues to progress construction on Stage 3 on an accelerated schedule. The project stood at over 55% completion at the end of March. All coal boxes for Trains 1 through 3 have been set in place. Over 90% of the piling have been installed. All mechanical equipment for Train 1 has been delivered to the site. Concrete work for Trains 2 and 3 is over 70% complete. And the compressors for Trains 2 and 3 have been set. I remain optimistic that together with Bechtel, we will achieve first LNG by the end of 2024 and bring all seven trains online before the end of 2026. During the quarter, we continue to work closely with FERC to progress the permitting approval process for trains eight and nine at Corpus Christi. We expect to receive our environmental assessment soon and remain confident that we will receive all necessary regulatory approvals to be able to sanction the project in 2025. And for our major growth project at Sabine Pass, the SPL expansion project, we submitted the full applications to FERC and DOE in February. Anatole and team continued to work towards commercializing the project, while Zach and the team managed the balance sheet and CQP's funding plan in advance of sanctioning the project, which remains targeted for 2026. In February, I highlighted my confidence in the critical role of US LNG in the global energy market, and the need for significant investment in and permitting of additional liquefaction capacity today to meet the expected growth in global demand over the coming decades. The United States has an unprecedented opportunity to play a vital role in helping provide real, long-term energy solutions the world over that will improve the everyday lives of millions or billions of people while meaningfully lowering global emissions. My conviction in this is as strong as ever, and I believe the over $40 billion brownfield infrastructure platform we have developed best positions Chenier to meaningfully participate in that future growth while continuing to supply the world with our cleaner burning LNG. Let's further address the vast benefits and critical role of LNG on the next slide. Recently, some reports have challenged the environmental benefits of LNG relative to coal. When compared to coal, natural gas is a more efficient energy source for power generation that results in demonstrable lower greenhouse gas emissions and traditional air pollutants, which improves air quality and public health. In fact, peer-reviewed studies examining US LNG delivered to China for power generation estimate that coal-to-gas switching results in approximately 50% lower greenhouse gas emissions on a full lifecycle basis. These findings are based on an extensive body of research, including our own peer-reviewed lifecycle assessment, utilizing data specific to our supply chain, including operational data. We strongly disagree with recent research, which claims the opposite, while utilizing cherry-picked assumptions, and that has not gone through peer review. We expect natural gas and LNG to serve as one of the most powerful drivers a global decarbonization like it has in the U.S., where the IEA estimates that coal-to-gas switching has resulted in a reduction of over a half a billion metric tons of CO2 emissions since 2005. We continue to focus on full lifecycle environmental performance and are working on improving our Scope 1 methane and CO2 intensity while engaging with our supply chain partners to help deploy detection and quantification technologies to improve the lifecycle emissions of our LNG, further demonstrating its sustainability as a fuel source. Beyond the environmental advantages, the reliability, dispatchability, and relative affordability of natural gas is unmatched, and developing economies understandably prioritize energy security, reliability, and affordability ahead of climate considerations. In fact, global coal consumption reached 8.5 gigatons in 2023, surpassing 2022's total and setting a new all-time global consumption record, with the greatest increases coming from the rapidly emerging economies of China and India. Coal-to-gas switching in emerging markets like these represent the most powerful and executable long-term energy solution that enables energy security and reliability, while significantly improving the emissions profiles of these countries. Simply put, natural gas and LNG are currently actionable and common-sense solutions to powering emerging economies around the world while lowering global emissions to meet their climate policies. The global call for energy security in recent years, particularly in Europe, underscores the long-term role of natural gas in both developed and developing economies which is further evidenced by the trillions of dollars being invested in natural gas infrastructure worldwide, and the fact that there are 400 million tons per annum of LNG facilities today, but over 1,200 million tons per annum of regasification capacity and operations are under construction. Our long-term tailored LNG solutions provide customers the ability to secure long-term reliable energy supply while maintaining flexibility with regard to evolving energy transition plans and pathways. At home, the LNG industry is stimulating the economy and creating thousands of jobs, all while supporting domestic production and stabilizing domestic energy prices and cash flows with our long-term predictable demand for the decades of economic resource we're fortunate to be sitting on here in the U.S. It was only a few years ago the market began highlighting the energy trilemma based on its pillars of energy security, energy equity, and environmental sustainability. The case for LNG growth for decades to come remains clear to us, as does the investment thesis for Chenier. Looking ahead, we will continue to focus on safely and reliably operating our two facilities on the Gulf Coast while generating meaningful value. to stakeholders by delivering on our promises to our customers, investors, employees, regulators, and communities, supporting the energy needs of hundreds of millions of people worldwide. With that, I'll hand it over to Anatole to discuss the LNG market. Thank you all again for your continued support of Chenier.