LNG - NYSE

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

Thanks, operator. Good morning, everyone, and welcome to Cheniere's third quarter 2024 earnings conference call. The slide presentation and access to the webcast for today's call are available at cheniere.com. Joining me this morning are Jack Fusco, Cheniere's President and CEO; Anatol Feygin, Executive Vice President and Chief Commercial Officer; and

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 Cheniere platform. Before we get into the quarterly results and our full year guidance increase, I wanted to spend a brief moment addressing the U.S. 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 Cheniere colleagues in the U.S. 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 Cheniere, we look forward to working with the next President since, issues and policies impacting energy security and availability are so critical to economic interest worldwide. As I mentioned on our August call, we believe our business to be bipartisan. Across multiple administrations spanning the political spectrum, Cheniere has successfully permitted, commercialized, built and operated our platform, and 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 D.C. with the new administration, in order to ensure our voice is heard on important policy matters that can affect our business, both here and abroad. Cheniere'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 Cheniere'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, distributable 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 continued to execute on 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 that 1,000th LNG Cargo from Corpus Christi. I would like to recognize the operational and leadership team and everyone at Corpus Christi for the achievement of this major milestone, and for further reinforcing Cheniere'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 30th, 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 start-up 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 reduction 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 Sabine Pass 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.

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 continue 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 MMBtu, up from $11.48 last year and $10.84 in July. Similarly, JKM 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 Hub settled September at $1.93 nearly flat relative to August, but lower than July's settlement of $2.63, an MMBtu despite various price-driven production cuts. Strong demand in Asia kept JKM 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% year-on-year. The JKT and China market areas combined contributed nearly 70% of the region's total 6.3 million tons year-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% year-on-year as two new regas terminals started operations and new storage capacity further supported demand. Taiwan's demand increased by 12% year-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 cargoes, 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 cargoes 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% year-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 cargoes during the third quarter and another 20 cargoes 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 and 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 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, piped gas contracts, flows in 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 raised 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. Aligned with the establishment of our methane target, we must also highlight the clear environmental advantages of LNG and the critical role it is set to play in global de-carbonization. As developed and developing economies alike, look to increase LNG and natural gas as a component of primary energy supply, Cheniere'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

Thanks, Anatol, 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 3rd 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 5.63 TBtu of physical LNG, which included 5.60 TBtu from our projects and 3 TBtu 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 have 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 1-2 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 Q. At this point, we are over halfway to our mid-term goal of 200 million shares. A foundational strategy of the plan is to enable us to buyback more shares when the stock underperforms on an absolute and relative basis, and the year-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 principal of the SBL 2025 notes with cash on hand. We plan to repay the remaining $650 million outstanding principal of these notes with cash on hand ahead of its March 2025 maturity, as we focus our debt pay down within CQP in preparation for financing the SPL expansion project. After repaying the remaining SBL 2025s, we will not have any debt maturing anywhere in the Cheniere 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 BBB plus. The continued recognition from the rating agencies is a testament to our team's 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 Cheniere 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 distributable 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 cargoes 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 Trains 2 and 3 to achieve substantial completion in the second half of the year. With this assumption, we expect to produce approximately 47 million 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 in 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 million to 48 million tons of production, we forecast over 46 million 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 million 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 million 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 take-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. [Operator Instructions] And our first question is coming from Jeremy Tonet with JPMorgan.

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, or 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?

Hi, Jeremy. It's

Got it. Very helpful there hundred 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. 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?

Hi, Jeremy. It's Anatol. Good morning. So as you know, we've got order of magnitude 10,000,000 tons. There are 3 counterparties for Midscale eight, nine and then the balance for Train 7 and we started on Train 8 at SPL. We're taking our time now, as we kind of optimize and figure out what the best path is for our brownfield advantages and we're really pursuing these efforts with certain select counterparties and being very judicious at how we move that project forward, as we figure out the best way to get the right balance of economics returns and contractual support. But ultimately, it's not going to be very different from our kind of 90% plus contracted 7x CapEx-to-EBITDA target as we navigate that. As you've heard

Got it. Very helpful. Thank you for that.

And next question is coming from the line of Theresa Chen with Barclays.

Good 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 U.S. Gulf Coast have seemingly continued to face delays and other challenges, while Phase 3 remains on time, on budget. How has this influenced or impacted your commercial discussions for the upcoming projects?

Teresa, thank you for the question. I can tell you, we have a very strong relationship with Bechtel that 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 guaranteed. Our reliability, the 1,000 cargoes at Corpus Christi, the 2,700 cargoes that we've produced at Sabine have made Anatol's job a little bit easier, because we're finally being recognized as a very reliable safe provider of LNG. And I'll let Anatol cover how those conversations have been going.

Thanks, Theresa. Thanks, Jack. Anatol's job keeps getting easier and easier. What we announced earlier, I guess last night about the methane target, 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 and Jack mentioned the EMC, EPC execution, the reliability of our product and delivering projects on time, on budget and serving our customers with an ever cleaner product. So, yes, lots of tailwinds for Anatol's efforts.

Great. Thank you. And not trying to make Anatol'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, where do you think we go from here? 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?

The expansion has been so rapid that, just algorithmically I would not be shocked if the pace of growth slowed, but China is going to be a 250 million ton regas capacity market. We expect it to get to about 140 million, 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, ''India''. 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. 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 re-enter and to avail themselves of more gas. Unfortunately, they don't have the credit and the scale to have the long-term contracts that afford them 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 5% as a CAGR over the last decade and I think that will continue.

Thank you.

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

Thanks. Good morning, everyone. Wanted to ask about the beaten rates 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. 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 sub-charter more of our length ahead of Stage 3 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 $100 million plus 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 $8, $9 margins for the rest of this year added another $100 million plus. 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 3 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 start-up mode. And I tend to be a glass is half full kind of guy, but I think our guiding you to three trains 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 accomplish as a team. And I'm just being totally transparent and honest with you. But I'll turn it over to

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 Trains 1, 2 and 3 reach substantial completion by the end of Q1, Q2 and Q3 respectively. And then on the lower end where we're closer to 47 million, we have decent visibility on Train 1. 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 2 and 3 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 1.

Very clear. Thank you.

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

Hi, good morning.

Good morning.

Good 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 3 trains starting to come online?

This is

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

Yes. Thanks, Keith. The one big issue that will play out is how the last BCF a day or so of pipe flows through Ukraine from Gazprom play out. Our expectation, market expectation is that, that does not get renewed. 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 has a couple of million ton impact on the overall demand. But, structurally, the thing that has changed is that, we don't see infrastructure being a constraint anymore, not just on the regas side, but also on pipeline and the ability to move gas intra Europe. We think that natural gas demand and hence LNG demand for Europe is going to remain fairly stable through the middle of next decade. Then, it's more of a question mark and we expect it to decline modestly. But, we expect it to stay in this kind of 120 million, 130 million ton market range for a number of years.

Thank you.

The next question is coming from Ben Nolan with Stifel.

Hi, appreciate it. Good morning, guys. So I wanted to ask, maybe Anatol, if we could -- you talk about much higher prices in LNG and all of the potential disruptions in the Middle East, Ukraine and elsewhere and people sort of hedging their bets and that leading to potentially more long-term contracting. Although certainly for U.S. operators and just generally globally, it doesn't seem like, there's been a terrible amount of actual activity on the long-term side. Do you think -- maybe particularly to the U.S., do you think your customers are maybe just waiting until after the election, 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-'22, '23 fog of war period where 75 million tons were executed and the market is figuring out that, it's not that easy to execute these things, from a timing standpoint, from a regulatory, from an economic standpoint, commercial as well. So the market is thinking through how to react to that. You're absolutely right. There were only a handful of long-term transactions. Ours with Galp being one of three, I think, 20 year deals in the quarter. But that is -- I would say that's not a reflection of kind of market appetite for more and I think you'll continue to see a very healthy market for projects that can be advanced economically and reliably. So you're right, we're going through a period of re-evaluation by customers. As Teresa said, against that backdrop my job is very easy.

Got you. Okay. And then secondly, for me is, on the shipping side actually. There has been a pretty sharp decline in 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 LNG shipping market at the moment?

Hi, Ben. I guess the number one driver, as

Got it. Okay. I appreciate it. Thank you.

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

Good morning. I am looking at the '25 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. The major maintenance at Sabine Train 3, 4 is going to be longer this coming year than it was this past year. However, what's offsetting that is some of the smaller debottlenecking efforts that we've already pursued like the fin fans, like we 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 45 million tons on the existing nine.

Very clear. 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 grant permits? And how is Cheniere positioned for that on Corpus 8 and 9 and the Sabine Pass expansion?

Hi, Jean. As you know, we work really closely with the Department of Energy. There's a lot of speculation around which way the pause may head. It's clear to us that, nothing's going to happen until after next week. And then, from that point, it could be -- it's pretty broad bookends, on which way the band 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 8 and 9. And actually with the Sabine expansion, it's clear that brownfield expansions are going to be treated a lot differently than greenfield expansions going forward. And I think, we're in a really good position to maximize the benefits of our existing platform.

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

Hi, Jean, it's Anatol. 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 improved the credit quality and capital discipline has improved the credit quality of that cohort. You've seen a number of transactions that are variations on that theme, shorter tenure, some deals with intermediaries that reflect the quantum of appetite for those deals. As you know, we've said that, while we have very good engagement, we don't expect this to be a kind of double-digits number of counterparties, again being very selective in terms of scale, credit and ability to physically deliver volumes into our infrastructure. There are lots of things we like about those IPM transactions, 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.

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 $2 to $2.50 kind of baked-in marketing range for the outer year EBITDA guidance. Even though, we've seen kind of EPC costs go up pretty dramatically for new projects, et cetera, through there. 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 push you guys to kind of think about moving that number?

I'll go first on the guidance. On the $2 to $2.5, I think we're just trying to make it as clear as possible for you folks, what we see in the run rate and everyone can make their own assumptions considering the balance of this year is at $9 netbacks, next year is $8 year after $6 and even in '27 we're talking about $4 netbacks today. So the fact that with every dollar turn even in the run rate, we're spreading what like $300 million of EBITDA. So we try to give that guidance that way. In terms of SPAs, I'm going to hand it over to Anatol. But basically, we're pushing the limits of 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 midscale eight to nine, Sabine expansion and everything else we want to do at Corpus and Sabine, we're in a great spot that we can do that still at around 7x CapEx to EBITDA. But, Anatol?

Yes. Thanks, John. I think your kind of fundamental premise is right as you heard from

All right. That's clear. Thanks for your time.

And our final question is coming from Craig Shere with Tuohy Brothers.

Thanks for fitting me in. Congratulations on the quarter.

Hi, Craig. Thanks for the question. I mean, yes, the cash balance on 9/30 is around $3 billion on a consolidated basis. That was around $4.5 billion going into this year. Considering we've already deployed, I think around $4.2 billion across the four pillars of capital allocation, but year to date DCF is around $2.7 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 cash to obviously continue the buyback at a pretty good pace, as well as continue to equity fund Stage 3, which we've done 100% life to date. At some point we'll have that $3 billion of liquidity from that term loan that we can use as just general liquidity for the company and still stay comfortably IG 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 $1 billion plus at some point next year.

Great. And last one, hopefully pretty quick. I want to pick up on Jean Ann's question about DoE authorizations. 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 CCS projects that maybe some peers would have to do since they can't prove what they got?

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 guesstimates of what emissions are. We continue to make some very good progress, not only here in the U.S, but also in Europe and worldwide abroad. I would expect that the clean energy transition that the Biden Administration has been so focused on will continue under a Harris administration. So, yes, 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 go from there.

Understood. Thank you.

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

Yes. Hi. This is Jack. I just want to say thank you again for all of your support and please be safe on this Halloween night.