Cheniere Energy, Inc.

Good day and welcome to the Chenier Energy Third Quarter 2024 earnings call and webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Randy Batia, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Chenier's Third Quarter 2024 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 Busco, Chenier's President and CEO, Anathal 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. Anathal will then provide an update on the LNG market, and Zach will review our financial results, increased 2024 guidance, and initial outlook for 2025. After prepared remarks, we will open the call for Q&A. I now turn the call over to Jack Busco, Chenier's President and CEO.

Thank you, Randy. Good morning, everyone. Thanks for joining us today as we review our outstanding third quarter results, which reflect excellent performance and success achieved across the entire Chenier platform. Before we get into the quarterly results and our full year guidance increase, I wanted to spend a brief moment addressing the US presidential election taking place next week. The election is an important time for our country as we are reminded of the freedom we are afforded as Americans to choose our president every four years. I encourage all of my Chenier colleagues in the US to exercise the right to vote in order to have their voices heard. As expected, emotions are running high given we are so proximate to Election Day. But no matter the outcome, in a few months' time, upon inauguration day, this country will have a new president and a new administration. At Chenier, we look forward to working with the next president since issues and policies impacting energy security and availability are so critical to economic interests worldwide. As I mentioned on our August call, we believe our business to be bipartisan. Across multiple administrations spanning the political spectrum, Chenier has successfully permitted commercialized, built and operated our platform. We fully expect that to remain the case for decades to come. We maintain a significant presence and have excellent bipartisan engagement in Washington as well as the state and local level with elected and appointed officials given our business is heavily regulated and is a major source of direct and indirect economic output. I look forward to furthering the engagement in DC with the new administration in order to ensure our voices heard on important policy matters that can affect our business both here and abroad. Chenier's assets and overall platform will last for many decades to come and our objective is to ensure not only our customers and stakeholders but our country and our allies can realize the full benefits of Chenier's business well beyond the outcome of any single election. Please turn to slide 5 where I'll highlight our key accomplishments for the quarter and introduce our increased guidance ranges for 2024.

In the

third quarter, we generated consolidated adjusted EBITDA of approximately $1.5 billion, distributed cash flow of approximately $820 million and net income of approximately $900 million. These excellent financial results are once again thanks to our company-wide commitment to operational excellence. During the third quarter, we continue to execute our comprehensive capital allocation plan which is designed to provide investors with cash flow visibility, disciplined capital management and long-term value creation. We repurchased another nearly $300 million of stock during the quarter bringing the year to date total to approximately $2 billion. During the quarter, we also paid down $150 million of debt at Sabine Pass and we funded approximately $500 million of CAPEX mainly related to stage 3. We also increased our third quarter dividend by 15% to $2 per share annualized. During the quarter, we produced and exported 158 LNG cargoes from our facilities which was highlighted by the production and export of the thousandth LNG cargo from Corpus Christi. I would like to recognize the operational leadership team and everyone at Corpus Christi for the achievement of this major milestone and for further reinforcing Cheneer's globally recognized reputation as a safe and reliable operator. Bechtel continues construction execution on Corpus Christi stage 3 on budget and on accelerated schedule. As of September 30, the stage 3 project had reached approximately 68% complete. Pre-commissioning activities continue on train 1 with nearly half the required systems turned over to commissioning and startup teams who are beginning to place those systems into service. We expect the introduction of first gas into train 1 to occur in the coming weeks. First gas is an important execution milestone and from a timing perspective, with that milestone occurring soon, it is consistent with the production of first LNG by the end of the year. We are fortunate this year to avoid any impact from hurricanes on operations or construction activities at both the main house and Corpus Christi. As a result, our target of achieving first LNG production from train 1 at stage 3 by the end of the year remains within reach and substantial completion in early 2025, well ahead of the guaranteed schedule. We continue to expect to have three trains from stage 3 achieve substantial completion during 2025. Zach will cover the numbers in detail, but we expect to have more open volumes in 2025 than we did in 2024, driven primarily by the substantial completion of those trains, and that reinforces our expectations that 2024 should be an inflection point for EBITDA and financial growth should resume in 2025 as those assets begin operations. Looking to the balance of 2024 today, we are raising and tightening the ranges of our full year guidance to $6 to $6.3 billion in consolidated adjusted EBITDA and $3.4 to $3.7 billion of distributable cash flow. The guidance increase is primarily driven by better than expected production and incremental margin along with portfolio optimization activities upstream and downstream of our facility. On the previous call, we discussed a slightly improved production forecast as a result of our maintenance execution during the second quarter, and we are seeing that forecast production materialize. Even accounting for the increased volume in the forecast, we continue to have an immaterial amount of unsold volume remaining for the balance of the year as the team has been opportunistically selling our open capacity this fall. Zach will have more to say on the guidance increases in his remarks in a few minutes. Please turn to slide 6. We'll update you on important development related to our environmental stewardship. I hope you saw that yesterday we announced the establishment of a voluntary Scope 1 methane emissions intensity target for our liquefaction assets. The target calls for Chenier to consistently maintain a Scope 1 annual measured methane emissions intensity of .03% per ton of LNG produced across Sabine Pass and Corpus Christi by 2027. The establishment of the methane target represents the latest milestone in Chenier's climate strategy which is built upon our principles of transparency, science, supply chain, and operational excellence. Our measurement informed methane target of .03% is about one-tenth of the hypothetical emissions intensity utilized in some recent publicized papers estimating life cycle LNG emissions. This rigorous target reflects our commitment to leverage our data driven efforts to improve emissions performance across our operations and is consistent with the requirements of standard certification within the UN Environmental Program Oil and Gas Methane Partnership 2.0 which Chenier joined in 2022. The methane target we have set is a culmination of significant work completed by our team and a series of technology providers in leading academic institutions. We are able to establish this target thanks to the collaborative work we've done through the programs I've spoken about on previous calls, especially our Quantification Monitoring Reporting and Verification or QMRV programs. The target builds upon and complements our QMRV program and other climate related outputs such as our cargo emission tags and our recently updated and peer reviewed life cycle assessment. The QMRV efforts which have been underway for nearly two years and remain ongoing involve multiscale measurement activities to develop a measurement informed inventory of emissions data and that data informs the process of establishing the methane target. Included in the data set for our methane target for example are readings from approximately 50 aerial emissions measurements of our operations at our facilities over a period of more than a year. Utilizing actual operational data and not simply emissions factors or outdated estimates provides a robust credible foundation that stakeholders can trust and against which our performance can be measured. Chenier's approach to environmental performance and stewardship has always been scientific, transparent and methodical, not reactionary or aspirational. And we are pleased to see our strategy and efforts be recognized by ratings providers. During the quarter MSCI upgraded Chenier's ESG rating to AAA, the highest score possible. With the upgrades specifically citing improvements in climate management reporting and greenhouse gas intensity performance. We'll continue to pursue our strategy guided by the same climate and sustainable principles that have helped lead us to the significant achievements we have accomplished to date. With that I'll now hand it over to Anatole to discuss the LNG market. Thank you all again for your continued support of Chenier.

Thanks Jack and good morning everyone. Please turn to slide 8. Over the last year we've seen very limited LNG supply growth year over year with September being an exception. Global LNG imports increased 33.6 million tons in the month, up more than 9% versus 23. This was largely due to lower levels of planned and unplanned supply outages this year compared to last rather than true capacity driven supply growth. And the impact on the market was muted. The perceived underlying market tightness continued to support spot price levels which continued to climb during the quarter despite healthy storage inventories and relatively soft near-term market dynamics in Europe. September TTF contract settled at $12.54 in MMVTU, up from $11.48 last year and $10.84 in July. Similarly, J-CAM settled September at $12.78, up from $11.21 last year and $12.14 in July. The run-up in month ahead prices was supported by escalating geopolitical risks, various supply outages, strong demand outside of Europe, as well as some cooler weather forecasts within Europe. In the U.S., Henry Hubbs settled September at $1.93 an M, nearly flat relative to August, but lower than July's settlement of $2.63 in MMVTU despite various price-driven production cuts. Strong demand in Asia kept J-CAM at a premium TTF during the quarter and throughout most of the year. As shown on the top right, this spread led to an over 18 million ton shift in LNG flows from Europe to Asia for the first nine months of the year. However, this premium has narrowed substantially since the end of September due to cooler weather in Europe, residual Norwegian maintenance, and an increasing geopolitical risk premium. I'll address the regional dynamics in more detail in the next slide. As noted, LNG imports into Asia continued to grow in nearly all markets, with third-quarter receipts increasing 10% -on-year. The JKT and China market areas combined contributed nearly 70% of the region's total 6.3 million tons -on-year increase during the quarter. Long stretches of heat in Japan, South Korea, and parts of China, coupled with the need to fill storage ahead of the upcoming winter season, continued to lift gas demand. Notably, China's imports in September surpassed 7 million tons, an increase of 32% -on-year as two new regassed terminals started operations and new storage capacity further supported demand. Taiwan's demand increased by 12% -on-year during the quarter as the country shut down one reactor at a 950 megawatt nuclear plant in July. The country's last reactor is scheduled to be shut down in May next year, which we expect will continue to expand the country's gas-fired power demand. During the quarter, Thailand registered a slight decline in imports, primarily due to a boost in domestic gas production. While this renewed production should temporarily offset some of the broader declines in domestic gas production, we expect little to no impact on the country's call for LNG longer term. As mentioned earlier, Asia's growing imports came at the expense of Europe, where imports were generally flat during the quarter and are down over 20% on the year. European gas fundamentals have remained steady in recent months with lower power demand and improving but still tepid industrial consumption. However, after a series of mild winters resulting in some demand destruction in the heating sector, some cooler temperatures in September across the region tightened the market, which has been amplified by increased geopolitical risks. European storage levels remained healthy at 95% as of mid-October, but price risk is skewed to the upside. All eyes are now focused on anticipated storage levels exiting winter in early 25, especially with limited support from Ukraine storage, which remains about 30% below last year's levels. Further reductions are expected in Russian flows, potential LNG supply disruptions from further outages or geopolitical escalations, along with continued LNG pull from Egypt, could lead to sustained higher European premiums in order to attract flexible cargos, particularly if we revert to normal weather temperatures in the region this year. Additionally, it's important to also acknowledge the increased competition for LNG cargos from rising demand in regions outside of Europe and Asia. Low hydropower output in Brazil, along with a strong pull from the MENA region, supported Atlantic demand and tightened the JKM-TTF spread during the quarter. LNG imports into the MENA region rose 57% -on-year during the quarter largely due to Egypt, which relied on the spot market to help alleviate rapidly declining domestic production. In addition to imports via Jordan's Aqaba terminal, Egypt imported approximately 20 cargos during the third quarter and another 20 cargos are expected to be delivered by year end. In the absence of any immediate relief from new LNG supply, these dynamics should continue to highlight the delicate balance of the global gas market, further supporting the upside price risk I mentioned earlier. Let's move to the next slide to further develop this point. We've noted for several quarters now how the LNG market remains precariously balanced, sensitive to any signs of potential disruption in supply or demand. From geopolitical tensions to rapid shifts in market balances driven by extraneous elements such as weather, domestic gas production levels, or the changes in the price or availability of competing fuels all underscore the criticality of adequate, reliable, and flexible LNG supplies in the global energy mix. In recent weeks, escalating geopolitical tensions have triggered renewed concerns about supply reliability and adequacy amidst that precarious balance. These events have already affected the European gas and LNG markets, playing a critical role in elevating prices and market uncertainty. Over the past three years, we've witnessed how geopolitics continue to have a significant impact on commodities, specifically impacting European gas infrastructure, pipe gas contracts, flows and transit routes, which has driven higher absolute price levels, as well as prolonged elevated market volatility. Today, Europe's winter gas balances remain vulnerable as further cuts in Russian pipeline gas flows seem likely if the transit agreement through Ukraine is not renewed. The developments in the Middle East raise concerns about upstream and midstream gas infrastructure that could impact Egypt's gas supply security, potentially constraining global LNG market balances. Meanwhile, continued delays from projects under development prevent immediate material relief in the prompt. Global liquefaction utilization has been pushed beyond seasonal norms to produce incremental volumes, but there is limited additional running room and demand continues to be rationed. The lack of spare capacity means that the system remains particularly vulnerable to any unplanned outages and risks to flow interruptions, be they operational, geopolitical, or otherwise. To mitigate against these adverse impacts, we see long-term contracting and the related supply growth underpinned by these agreements as two key pillars for a more resilient, robust, and stable market. In the past few years, we've seen an increase in longer-term contracts, some in excess of 20 years, which support the development of much-needed new capacity. Global supply growth and flexibility, as well as affordable, stable long-term contracts, are key to enable energy security and affordability and to help insulate consumers worldwide from future energy crises like we saw in 2022. And aligned with the establishment of our methane target, we must also highlight the clear environmental advantages of LNG and the critical role it has set to play in global decarbonization. As developed and developing economies alike look to increase LNG and natural gas as a component of primary energy supply, Chenier's leadership role in environmental stewardship will only further separate us from the competition and enable us to continue developing and executing projects which deliver significant value to our shareholders. With that, I'll now turn the call over to Zach to review our financial results and guidance.

Thanks, Anatole, and good morning, everyone. I'm pleased to be here today to review our third quarter 2024 results, key financial accomplishments, our increased and tightened 2024 guidance, and our current outlook for 2025. Turn to slide 12. For the third quarter 2024, we generated net income of approximately $900 million, consolidated adjusted EBITDA of approximately $1.5 billion, and distributable cash flow of approximately $820 million. With these third quarter results, we have now reported positive net income on a quarterly and cumulative trailing four quarter basis, eight quarters in a row. Compared to last year, our third quarter 2024 results reflect a higher proportion of our LNG being sold under long-term contracts, as well as the continued moderation of international gas prices. These impacts were partially offset by higher volumes of LNG delivered from our two sites during the quarter. Similarly, compared to the second quarter of this year, our production was higher due to most of the planned maintenance at both sites occurring in June. During the third quarter, we recognized in income 563 TBTU of physical LNG, which included 560 TBTU from our projects, and three TBTUs sourced from third parties. Approximately 97% of our LNG volumes recognized in the quarter were sold in relation to term SBA or IPM agreements. Our strong financial results continue to support meaningful progress on our 2020 vision, capital allocation plan, with another $1 billion deployed in the third quarter towards shareholder returns, accretive growth, and balance sheet management. As of the third quarter, we've allocated over $12 billion of our $20 billion plus target as we continue to reduce our share count and enhance our capital returns, while retaining financial flexibility to fund accretive growth across our platform, all of which should position us to generate over $20 per share of run rate distributable cash flow for our shareholders later this decade. During the third quarter, we repurchased approximately 1.6 million shares for approximately $282 million. Through the first nine months of the year, we've deployed approximately $2 billion into our shares and reduced our share count by over 12 million shares. We have now repurchased approximately 10% of our outstanding shares since announcing our 2020 vision plan in September 2022, reducing our shares outstanding from approximately $250 million to under $225 million today in the queue. At this point, we are over halfway to our midterm goal of $200 million shares. A foundational strategy of the plan is to enable us to buy back more shares when the stock underperforms on an absolute and relative basis, and the -to-date results demonstrate the power of the plan's design. We are committed to further reducing our total shares outstanding as we completed the previous $4 billion share repurchase authorization this month and are currently starting to work through our additional $4 billion share repurchase authorization through 2027. As previously announced with our June capital allocation update, we increased our third quarter dividend by approximately 15% to $2 annualized and intend to follow through with our guidance of growing our dividend by approximately 10% annually through the end of this decade. This goal should trend us closer to a payout ratio of approximately 20% over time, which will enable us to retain the financial flexibility essential to our comprehensive and balanced long-term capital allocation plan and disciplined growth objectives. Moving to the balance sheet, during the quarter, we repaid $150 million of outstanding principle of the SPL 2025 notes with cash on hand. We plan to repay the remaining $650 million outstanding principle of these notes with cash on hand ahead of its March 2025 maturity as we focus our debt paydown within CQP in preparation for financing the SPL expansion project. After repaying the remaining SPL 2025s, we will not have any debt maturing anywhere in the Schneer complex until the middle of 2026. The rating agencies continue to recognize our progress on the balance sheet. Last week, S&P upwardly revised the ratings outlook at Corpus Christi Holdings, or CCH, to positive. And as noted on our last call, we received our 22nd credit rating upgrade in the third quarter when Fitch upgraded CCH to Triple D+. The continued recognition from the rating agencies is a testament to our team strategically managing our balance sheet, and with regard to these rating agency actions in particular reflects the progress achieved on our Stage 3 projects. Speaking of Stage 3, during the quarter, we funded approximately $400 million of capex on Stage 3, bringing total spend on the project to over $4.3 billion. With approximately $3 billion in consolidated cash and over $10 billion of overall liquidity throughout the Schneer complex, we expect to continue equity funding the Stage 3 capex while also remaining active on our buyback program as we continue to manage down our cash balances before utilizing the undrawn $3 billion CCH term loan, which we expect to eventually draw in 2025. Turn now to slide 13, where I will discuss our updated 2024 guidance and initial outlook for 2025. Today, we are raising and tightening our full year 2024 guidance ranges to $6 billion to $6.3 billion in consolidated adjusted EBITDA and $3.4 billion to $3.7 billion in distributional cash flow, a $250 million increase to the midpoint, as well as tightening of the ranges from $400 million to $300 million, or less than 5% of the midpoint of guidance. Our increased guidance is close to equally attributable to optimization activities completed upstream and downstream of our facilities since the last call, as well as slightly higher production and margins than previously forecast during the quarter and into 4Q. We were also able to tighten the ranges another $100 million as we are effectively sold out for the balance of this year, reducing the amount of variability in our forecast in our most contracted year to date. That being said, our guidance continues to reflect only contributions from completed or locked in portfolio optimization activities, as we do not forecast potential contributions from future optimization opportunities, albeit likely more limited this late in the year. And of course, our results could be impacted by the timing of certain cargos around year end. As noted on prior calls, our DCF could be affected by changes in the tax code, particularly as it relates to the alternative minimum tax and the treatment of certain tax positions related to our unrealized derivatives. These changes could impact the timing and amount of our cash tax payments this year and going forward, but should be immaterial on an NPV basis and not impact our ability to generate over $20 billion of available cash through 2026. And while we do not forecast any contribution to revenues or EBITDA from Stage 3 volumes this year, we continue to target first LNG from Train 1 by year end. Based on the progress achieved to date, we forecast Train 1 to achieve substantial completion at the end of Q1 or early Q2 next year, and Train 2 and 3 to achieve substantial completion in the second half of the year. With this assumption, we expect to produce approximately 47 to 48 million tons of LNG in total across our two sites next year, inclusive of forecast Stage 3 volumes and a major maintenance plan at Sabine Pass next year. Though a step change from our 45 million ton run rate across our existing nine trains and operations, the variability is based on uncertainty around specific Stage 3 commissioning and ramp-up schedules, as well as year end timing. Of that 47 to 48 million tons of production, we forecast over 46 to over 47 million tons of volume after commissioning, supporting 2025 EBITDA. After accounting for the approximately 43 million tons of long-term contracts already in place, we expect to have over 3 to over 4 million tons of spot volume available for CMI. The team has been active opportunistically selling some of that 2025 spot volume since our last call, and we currently forecast approximately 2 to 3 million tons, or approximately 100 to 150 TBTU of unsold open capacity in 2025. We therefore also forecast that a $1 change in market margin would impact EBITDA by approximately $100 million to $150 million for the full year. Consistent with previous practice, we intend to provide official 2025 financial guidance on our February call. Looking at curves today, netbacks are averaging around $7 to $8 in 2025, so the timing of our Stage 3 trains coming online and the resulting incremental marketing volumes could drive significant variability in our expected earnings for 2025 as we grow beyond our nine-train platform. As a reminder, the Stage 3 trains are being built with a design and technology that is new to us, so the length and extent of the commissioning process is somewhat uncertain. As the initial trains start commissioning, we will gain a better sense on the specific timing of these new volumes and their contribution to our financial results next year. As with the commissioning of our first nine trains, we hope to improve the commissioning process for each subsequent train by deploying lessons learned. We expect the remaining four mid-scale trains to reach substantial completion in 2026, at which point we have several million tons of new long-term contracts starting in 2026 and 2027, keeping our platform over 90% contracted with investment grade counterparties and -or-pay style cash flows and averaging approximately 95% contracted through the mid-2030s. Earlier this year, I described 2024 as likely a trough year for EBITDA, as all of our long-term contracts supporting the nine-train platform had commenced and international gas prices began to moderate, despite spot margins remaining very healthy this year, averaging $8. As Jack mentioned, we still expect this to be the case as Stage 3 volumes start to hit our P&L in 2025. We remain proud of our team's unrelenting efforts to unlock additional value to support financial metrics well above our nine-train run rate guidance this year. Looking ahead to 2025 and beyond, we will continue to leverage the vast competitive advantages afforded by our leading brownfield infrastructure platform in order to enhance the long-term value delivered to shareholders and to continue to supply our customers flexible, reliable, and cleaner-burning LNG. 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.

Thank you. And if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you can press star 1 to ask a question. And we do ask that you limit your question to one question and one follow-up. And if you have additional questions, then you may re-enter the queue. We will pause for a brief moment to allow everyone an opportunity to signal for questions. And our first question is coming from Jeremy Tone with JP Morgan.

Hi, good morning. Good morning, Jeremy.

Thanks

for

all the color today. Very helpful. I was just wondering a bit on the commissioning process right now. As it stands right now, if you froze where the futures are, where the spread is for LNG, those commissioning cargoes, what would be the potential scale of reduction in cost for the project? Could you help us kind of think through that?

Hey, Jeremy, it's Zach. I'd start first with the guidance of 47 to 48 million tons of total production, including commissioning. And then we then I mentioned that we're over 46 to over 47 million tons of basically P&L production in 25. So it's around a million tons, a little less than that in the guidance right now that is commissioning that's not supporting EBITDA and will offset CAPEX. Because stage three is combined with trains one through three, those volumes in terms of the margins on those commissioning volumes will be a mix of spot volumes and contracted volumes. And that's accounted for when we talk about spot volumes in the P&L for CMI to sell of over three to over four million tons. But as you think about around one million tons or 50 CBT, we're talking about hundreds of millions of dollars that that will help offset CAPEX and just be another funding source for us in the coming year.

Got it. Very helpful there. Hundreds of millions of dollars. Thank you. And then just want to, I guess, come back to the SPL expansion and kind of commercialization efforts at this point, you know, with the FTA authorization. How does that, I guess, impact discussions that you're having with customers right now? And I guess what's your outlook for that project and how contracted are you looking for at this point?

Hey, Jeremy, it's Stanislaus. Good morning. So as you know, we've got order magnitude 10 million tons. There are three counterparties for mid-scale eight, nine, and then the balance for train seven. And we've started on train eight at SPL. We're taking our time now, you know, as we kind of optimize and figure out what the best path is for our brownfield advantages. And we're really pursuing our these efforts with certain select counterparties and being very judicious at how we how we move that project forward as we figure out the best way to get the. The right balance of economics returns and and contractual support. But ultimately, it's not going to be very different from our kind of 90% plus contracted seven times cap XT, but target as we as we navigate that. And as you've heard Zach mentioned on previous calls, it'll probably be a phased approach. So we're we're in very good shape. We've got great engagement. Obviously, as the world thinks through all of these challenges and as as we continue to deliver now over 3700 cargos from our two facilities without missing a beat, we're in a very good position on our on our commercial engagements.

Got it. Very helpful. Thank you for that.

And next question is coming from the line of Teresa Chen with Barclays. Morning,

thank you for taking my questions. Maybe first on the commercial front as a follow up to Jeremy's question. Just as your competing projects in the US Gulf Coast have seemingly continue to face delays and other challenges while stage three reminds remains on time on budget. How is this influenced or impacted your commercial discussions for the upcoming projects?

Teresa Teresa, thank you for the question. And I can tell you, you know, we have a very strong relationship with Bechtel that we've we've built over the last decade. That has allowed us to work very closely as a team to be sure that we deliver our projects on budget ahead of schedule and that the performance is is guaranteed that our reliability the thousand cargos at Corpus Christi. The 2700 cargos that we've produced at Sabine have made an at all's job a little bit easier because we're finally being recognized as a very reliable, safe provider of LNG. And I'll let I'll let Anatole cover how those conversations have been going.

Yeah, thanks. Thanks, Jack. The job keeps getting easier and easier. You know, what we announced earlier, well, I guess last night about the methane target, you know, we've been going down the path of these scientific kind of very process driven assessments of our own emissions profile and all of our QMRV efforts. We've talked to you guys about how that's been recognized by our counterparties for the last couple of years, but things as transparent as establishing a methane target are another key component. So we've got the reliability. We've got, as you pointed out, Jack mentioned the ENC, BC execution, the reliability of our products and and delivering projects on time on budget and serving our customers with an ever cleaner product. So, yeah, lots of lots of tailwinds for Anatole's efforts.

Great. Thank you. And not trying to make Anatole's job harder, but I do have a follow up on your comments related to the regas outlook in Asia. So related to your views on China's regas capacity coming online or Asia in general, you know, where do you think we go from here? And do you think that any sort of cyclical softness over the near medium term could potentially decelerate this pace of expansion? Is there any elasticity in that timeline?

Well, the expansion has been so rapid that, you know, just algorithmically, I would not be shocked if the pace of growth slowed, but China is going to be a 250 plus million ton regas capacity market. We expect it to get to about 140, 140, 150 million tons of imports over the next five to seven years, and the rest of Asia is going to continue to grow. I'm not a fan of summarizing kind of the environment as quote, chindia, end quote. But if you look at Asia's growth overall, those two economies are responsible. Everything else is kind of rounds up and down to very little change, and we expect them to continue to grow at very robust rates. And one of the things that we talk about that I think would be very beneficial to the market over the medium term is to the extent the prices moderate as this new supply enters the market over the next three to five years. A number of gassy economies that have been really starved of product at these elevated price levels, we expect to reenter and to avail themselves of more gas. Unfortunately, they don't have the credit and the scale to have the kind of long term contracts that afford them the stability, the stable and reliable supply that we're touting here. But I think I don't see any cyclical slowdown or a moderation of growth rate for gas, which has grown. LNG actually has grown over five percent as a cake or over the last decade, and

I think that will continue. Thank you.

The next question is coming from Michael Bloom with Wells Fargo.

Thanks. Good morning, everyone. I wanted to ask about the beaten race from this quarter. Are these portfolio optimization initiatives and the higher production that drove the guidance increase in 2024? Is that sustainable as we look to 2025?

We would hope so, but we won't know until we see it show up in the actuals. We have a budget that we rigorously go through with the operations team, and then we go through with the board and we'll be in a position to give you a good range for next year in February in terms of financial guidance. But when it comes to optimization, we're the second largest operator of LNG in the world, and we have a lot of ships that we charter and we buy a lot of gas in this country. So there should be opportunities. But to say what the quantum is, that would be hard to define ahead of time. But in terms of the guidance increase this time, I'd say I'd split it three ways on the optimization side. Upstream of the plants, there were better basis differentials that we just couldn't have forecasted earlier on that were able to be captured. Then we were able to opportunity subcharter more of our length ahead of stage three coming online for the rest of the year. And then with some of the positions we have all over the world and a few third party sourcing, we were able to optimize the portfolio downstream. And together that was around a hundred plus million dollars added to the guidance. On the production side, honestly, that would be hard to forecast ahead of time considering we had a relatively smooth hurricane season for Cheniere. The ambient temperatures were also lower. And they were able to just outperform at both sites and honestly pick up from earlier in the year where production was slightly down. So that alone with eight, nine dollar margins for the rest of this year added another hundred plus million dollars. So hard to say we can bake that in. And I would assume in a February guidance we wouldn't be baking that in initially.

Okay, great. Now that's good color. Appreciate it. And then I was wondering if you can give us a sense of your assumptions on the timeline for the three stage three trains that you expect to complete in 2025. And given your track record and Bechtel's track record, I mean, I realize this is a new technology, but do you think a fourth train could possibly be achieved in 2025?

Thanks. Michael, this is Jack. As you know, I'm pushing the organization pretty hard right now on our construction efforts. We have today over 70 operators, seconded to Bechtel that are commissioning and in startup mode. And I tend to be a glass is half full kind of guy, but but I think our guiding you to three trains is would be enough for me to pop a bottle of champagne and celebrate four trains. I think would be a little much for us to for us to accomplish as a team. I'm just being totally transparent and honest with you, but I'll turn over to Zach and he can tell you what his assumptions are in his production model.

Sure, just for a little more clarity on the high end, if we're going to make it to 48 million tons of production next year, you'd have to assume that that trains one, two and three reach substantial completion by the end of Q1 Q2 and Q3 respectively. And then on the lower end, where we're closer to 47, we have decent visibility on train one, so we're hopeful that can still come online in late Q1 or early Q2. But then it would be a little bit later in the second half of the year for trains two and three to end up at the 47 million ton level. So ideally we'll have a bit more of an understanding of how things are going by the next call, but even by the next call, we don't expect to have substantial completion of even train one.

Very clear. Thank you.

The next question is coming from Keith Stanley with Wolf Research.

Hi, good morning. First, just morning. First, just curious on the 100 to 150 TBTU of open exposure. How comfortable would you be trying to hedge more of that ahead of the winter or do you prefer to keep that open just operationally until you have the stage three trains starting to come online?

So this is Zach. I saw a few notes from folks this morning and I just want to make it clear as you think about 2025, first and foremost, it's about the CMI spot capacity. CMI spot capacity that we guided to is over three to over four million tons. Since the call, we were able to be opportunistic and sell some of our 2025 length and we sold over a million tons in a market that was trading around eight dollars at the time for next year. So that's locking in nicely around a half a billion dollars for the company. That was mainly locking in production from the existing nine trains just because we have more clarity, more understanding of how those produce over time. Whereas it would be very difficult for us to sell physically or even to sell hedge financially volumes that are not as certain. So some of those will have to be closer to the date of loading than to be as proactive as we have been. With all that said, Q1 and Q4 will still be our biggest production quarters just with lower ambient temperatures and the fact that our major maintenance will happen in the summer. And then as you can imagine with the cadence of the trains coming online, at best there'll be one train operating in Q2 and then ideally in second half of the year two more come online. So Q2 is probably our lowest level of production for the year. So we might have more confidence going into next year or early next year to start selling at the latter part of the year as we have more production. But assume we sold quite a bit already considering it's only October still.

That all makes sense. Second question on just on Markets question. What are your expectations for European demand into next year and over the medium term after after a big drop in power driven demand in this year? I think you said you're seeing some stabilization in European demand.

Yeah, thanks, Keith. So, you know, the one big issue that will play out is how the last BCF a day or so of pipe flows through Ukraine from gas from play out the expectation, our expectation, market expectation is that that does not get renewed. So the delta in European gas demand is much smaller than that. We're seeing good stabilization in the larger economies in terms of industrial power, as you pointed out, is a big swing factor. If it is a robust wind period that that has a couple million ton impact on the overall demand. But structurally, you know, the thing that has changed is that we don't see infrastructure being a constraint anymore, not just on the gas side, but also on on pipeline and the ability to move gas intro Europe. And we think that that natural gas demand and hence LNG demand for Europe is going to remain fairly stable through the middle of next decade. Then then it's more of a question mark and we expect it to decline modestly, but we expected to stay in this kind of hundred twenty hundred thirty million ton market range for

for a number of years.

Thank you. The next question is coming from Ben Nolan with default.

I appreciate it. Morning, guys. So I wanted to ask maybe if we could be. You talk about much higher prices and LNG and all of the potential disruptions and the police, Ukraine and elsewhere and people sort of hedging their bets and that leading to potentially more long term contracting. Although certainly for US operators and just generally globally, it doesn't seem like there's been a terrible amount of actual activity on the long term side. You think maybe particularly to the US, you think your customers are maybe just waiting until after the election or or I guess I would have thought a little bit more activity given all the noise out there.

Thanks, Ben. I think as we've discussed in previous quarters, what we're going through now is a kind of post twenty two twenty three fog of war period where seventy five million tons were executed and the market is figuring out that it's not that easy to execute these things. Right from a timing standpoint, from regulatory, from an economic standpoint commercial as well. So the market is thinking through how to react to that. You're absolutely right. We're only a handful of long term transactions. You know, ours with gout being one of three, I think, twenty year deals in the quarter. So, but that is, I would say that's not a reflection of kind of market appetite for for more. And I think you'll continue to see a very healthy market for for projects that can be advanced economically and reliably. So you're right. We're going through a period of reevaluation by customers. And as Teresa said, against that backdrop, my job is very easy.

Gotcha. OK. And then and then secondly for me is on the shipping side. Actually, there's been a pretty sharp decline and shipping spot rates. And I know you guys are primarily long term contracted and use that as an opportunity to use your net long position as an opportunity to re contract when you have open availability. But just curious if there's any way strategically for you to maybe take advantage of an especially soft shipping market at the moment.

Even I guess the number one drivers, as Zach has alluded to, is our management of that fleet and the fact that we have shipping lined up and committed for our for our own volumes. And in many cases like that, the producer transactions that we that we partner with as well. And the team has done a great job and one of the big drivers of optimization opportunities has been charting out that length as as these optimization opportunities presented themselves. We are, I think, today the second largest charter of LNG vessels. We have been for a number of years by far the largest, the most dynamic player in chartering vessels in and out. So you're absolutely right. There are opportunities to to optimize a portfolio. We are. We are, of course, on the eve of commissioning stage three and these lower lower day rates provide some some other opportunities on that front as we as we await the production from trade one. So, you know, that's one of the reasons why we don't bake into our guidance things that we have not locked in on that front, because you never know what what pitch is going to come your way, whether it'll be a three hundred thousand day rate, one winter or twenty thousand in the prompt as we're seeing today.

Okay, I appreciate it. Thank you.

Our next question is coming from Bob Brackett with Bernstein Research.

Good morning. I am looking at the twenty five guide and thinking about a guide that looks like flat Sabine pass year on year, but you commented about planned major maintenance there. Can I infer that it's about the same scale of major maintenance as last year or is there something more I should be thinking about?

Thanks Bob. So the major maintenance at Sabine's train three and four is going to be longer this coming year than it was this this past year. However, what's offsetting that is some of the smaller de-ballinecking efforts that we've already pursued. Like the Finpans, like we've mentioned on previous calls that's helped us get to a point where we can do such a major maintenance on two trains and still be around forty five million tons on the existing nine.

Very good. Thank you.

Our next question is coming from Jean Ann Salisbury with Bank of America.

Hi, good morning. Assuming the current path remains for the DOE to lift their permit pause after the environmental assessment. Have you heard anything from them about how future permit requirements could change or what extra environmental requirements they would be looking forward to to grant permits? And how is Chenier positioned for that on on Corpus eight and nine and the Sabine pass expansion?

Hi, Jean Ann. We have, we've, as you know, we work really closely with the Department of Energy. There's a lot of speculation around which way the, the, the, the. Pause may, may head. It's clear to it's clear to us that nothing's going to happen until after after next week. And then, and then from that point, it could be. It's pretty broad bookends on on on which way the band could could go. So. I would wait until next week, but before I give you anything concrete, but I would say that we are in very, very good shape with eight nine. And actually, with the Sabine expansion, that it's clear that brown filled expansions are going to be treated a lot differently than than great filled expansions going forward. And I think we're in a really good position to maximize the, the benefits of our existing platform.

That's helpful. Thank you. And as a follow up, there was a rush by us to sign up for LNG deals the last few years, which under some of Cheneur's IPM contracts. Can you speak to whether that demand is still strong, given just that the US TTFR has kind of come in and it's expected to come in a bit from here?

Is your name in Sanital? I, you know, that that appetite that we, in some sense, launched now five plus years ago remains very robust. One of the dynamics that, of course, has played out in the interim is the consolidation has has improved the credit quality and capital discipline has improved the credit quality of of that that cohort. You've seen a number of a number of transactions that are variations on that theme, shorter tenor, some some deals with intermediaries that that reflect the quantum of appetite for for those deals. As you know, we've we've said that while we have very, very good engagement, we don't expect this to be a kind of double digit number of counterparties again, being very selective in terms of scale credit and ability to to physically deliver volumes into our infrastructure. There are lots of things we like about those IPM transactions, but but like with everything else, we're being very methodical. The appetite to do them is multiples of what you're seeing from us.

That makes sense. Thanks. I'll leave it there.

Our next question is coming from John Mackay with Goldman Sachs.

Well, thanks for the time. This might be a longer question than top of the hour, but I'll take it anyway. You guys have kept your two to two dollars and fifty cent kind of baked in marketing range for the outer year EBITDA guidance, even though we've seen kind of, you know, EPC costs go up pretty dramatically for new projects, etc. I guess could you spend a second just walking us through again your kind of thought process on that, whether that implied cost of new capacity in the market could be changing and what would what would push you guys to kind of think about moving that number?

I'll go first on the guidance. I'm not too too 50. I think we're just trying to make it as clear as possible for you folks. What what we see in the run rate and everyone can make their own assumptions considering the balance of this year is that nine dollar net back next year's eight dollars. You're after six dollars and even in twenty seven we're talking about four dollar net back today. So and the fact that with every dollar turn, even in the run rate, we're writing what like three hundred million dollars of EBITDA. So so we try to give that guidance that way in terms of SBAs. I'm going to hand it over to Anatole. But basically we're pushing the limits of that that range right now. And that range still works for us specifically on these brownfield expansions. Thanks to all the equipment and infrastructure we already have in place. It's a good question for some others that are trying to do Greenfield, but for mid scale to nine to be an expansion and everything else we want to do a corpus and Sabine. We're in a great spot that we can do that still at around seven times capex EBITDA. But Anatole.

Yeah, thanks, John. I think your kind of fundamental premise is is right. As you heard from Zach that a things are not getting cheaper or easier and execution risks are becoming more and more apparent to to the counterparties. That said, while while the market for kind of US Gulf Coast projects has reached the high end of that range, I wouldn't say that today the competitive landscape allows for reaching that meaningfully. So we're still we're still in or around that range, but at the high end, we'll see what what the future brings.

All right, that's clear. Thanks for time.

And our final question is coming from Craig here with two brothers.

Thanks for

putting me in. Congratulations on the quarter. Zach, you know, if I'm doing the math right, even after dividend share buybacks and your stage three funding, I think you ended three quarter with more C Corp cash than you did in two Q. And and of course, your construction revolver remains on tap. How do you think about growth capex funding into modular train eight nine FID? If your corporate cash balances remain well above the one billion mark, that's kind of the long term target.

Hey, Craig, thanks for the question. I mean, yes, yes, the cash balance on nine thirty is around three billion dollars on a consolidated basis. That was around four and a half billion dollars going into this year. And considering we've already deployed, I think around four point two billion dollars and across the four pillars of capital allocation. But year to date, DCF is around two point seven billion. That makes about the right sense. You can assume that we'll be continually deploying probably more than our DCF to work that cash balance down over time. But as we have this cash balance, as margins are more elevated, we're going to use that that cash to obviously continue to buy back at a pretty good pace as well as continue to equity fund stage three, which we've done one hundred percent life to date. At some point, we'll have that three billion dollars of liquidity from that term loan that we can use as just general liquidity for the company and still stay comfortably I.G. at all the entities. But in the meantime, it's pretty efficient for us to use this excess cash, work it down, get closer to a billion plus at some point next year.

Right. And last one, hopefully pretty quick. I want to pick up on Jeananne's question about the authorizations. If if we had a Harris administration and there was more of a emission mandate, do you see your kind of industry leading methane intensity targets and emission tags? Kind of mitigating the need for projects that maybe some peers would have to do since they can't prove what they got.

You know, I, I don't know how to call it, Craig, but I can tell you that we continue to focus on our program and using science and real measurement data rather than hypothetical. You know, guesstimates of what of what emissions are and and we continue to make some very good progress, not only here in the U.S., but also in in Europe and worldwide abroad. I would expect that that the clean energy transition that the Biden administration has been so focused on will continue under a Harris administration. So, yes, I would I would expect it to be more of a focus for that administration than under a Trump administration. But we'll have to see what happens next week

and then and then go from there. Understood. Thank you.

And I will now turn the call back to the company, Chenier, for any closing remarks.

Yeah, hi, this is Jack. I just want to say thank you again for all of your support and and please be

safe on this Halloween night.

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