Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cheniere Energy Inc (LNG, Financial) reported strong financial results for Q1 2024, with consolidated adjusted EBITDA of approximately $1.8 billion and distributable cash flow of approximately $1.2 billion.
- Despite challenges from a freeze event in Texas, Cheniere Energy Inc (LNG) successfully met all customer obligations, demonstrating robust operational resilience and reliability.
- The company made significant progress on its capital allocation plan, including a record quarterly share repurchase of over 7.5 million shares for approximately $1.2 billion.
- Cheniere Energy Inc (LNG) is advancing well with the construction of Corpus Christi Stage 3, reporting over 55% completion and expecting to achieve first LNG by the end of 2024.
- The company reaffirmed its full-year guidance for 2024, projecting $5.5 billion to $6 billion in consolidated adjusted EBITDA and $2.9 billion to $3.4 billion in distributable cash flow.
Negative Points
- The freeze event in Texas indirectly impacted Cheniere Energy Inc (LNG) by affecting the quality of feed gas, which posed production challenges during the quarter.
- Operational highlights included flat year-over-year production, partly due to the indirect effects of the freeze event and challenges in natural gas production and processing.
- Cheniere Energy Inc (LNG) faces ongoing maintenance and potential disruptions, which could impact production levels and financial performance in upcoming quarters.
- Global LNG market conditions and pricing dynamics remain uncertain, potentially affecting future demand and pricing strategies for Cheniere Energy Inc (LNG).
- The company must navigate regulatory and environmental challenges, particularly with upcoming projects and expansions that require careful management and compliance.
Q & A Highlights
Q: Anatol, I think you had some interesting commentary there with regards to the demand response to prices. And I was just wondering if you might be able to elaborate a little bit more on that, how deep that could be or what that could mean in the coming years given some of the supply dynamics as you laid out there or maybe just examples of what you're seeing?
A: Anatol Feygin, Executive VP & Chief Commercial Officer: Yes. Sure, Jeremy. Thanks. Well, first of all, it's an infrastructure question both Jack and I touched on this, hundreds and hundreds of millions of tons of regas capacity pipe storage capacity are being added globally. That includes Europe. Germany just received its fifth FSRU. Greece is coming online now as well. Of course, is Asia, where you have China that will roughly double its regas capacity. So -- you're not going to see -- we don't see a market where you will see significant bottlenecks like you saw in Europe over the last couple of years, and that will enable these markets to absorb these marginal volumes. We estimate today that it's order of magnitude, 50 million to 100 million tonnes. You saw a dramatic pickup in tendering activity in China, in India in the first quarter. And we think that with this additional infrastructure and all of the investment, as we've mentioned, in gas that will help balance the market at moderate prices of high single, low double digits.
Q: High single, low double. Okay. And also, I was just curious, I guess, Corpus continues, I guess, to make great progress there. And just wondering -- at this point, any thoughts you could share with what that could mean for 2025 in the business overall? And I guess how that could impact pace of buybacks going forward or amount of buyback.
A: Jack A. Fusco, President, CEO & Director: All right. So Jeremy, I'll start. This is Jack. Yes, I'm very, very pleased with the progress that's being made at Corpus. If you look at the pictures, you can really see Train 1, 2 and 3 and their progress to date, we're well ahead of plan, and I am congratulatory to Bechtel, but we're not popping champagne yet, but we're very optimistic of our ability to start producing LNG this year on Train 1. But with that, I'll turn it to Zack.
Q: Just following up on the buyback question. and realize you have to go through a board process on the authorization. Just to order of magnitude, I mean, thinking about the cash position, even after that April debt repayment, I think you have $3 billion of cash. Big picture, how much excess cash do you see the company having at this point aside from just ongoing cash generation?
A: Zach Davis, Executive VP & CFO: There's definitely plenty of liquidity for everything to continue to be meaningful as we continue to fund Stage 3. As we grow the dividend later this year and pay down some debt as we ramp down that variable DPU at CQP in anticipation of Sabine's expansion. But in terms of liquidity, we have over $3 billion of cash on the balance sheet. We're going to make over $3 billion of DCF based on the forecast for the year. And we still have over $3 billion of availability on the term loan at Corpus. So liquidity is not the problem. We will be methodically buying back stock over time and being as opportunistic as we can in times like this. because it's only like times like this that we're going to be able to get down to 200 million shares by the middle of the decade. So everything is in good shape and well placed where we'll focus on debt pay down inside the CQP and we'll focus on buybacks up at LNG.
Q: Great. And then second question just on the year. So you talked about Q1 EBITDA. Obviously, it was strong with some of the just better in the winter, you have more volumes, more of your sort of high-priced above-market hedges, I guess, I guess how do you think about kind of where the year is tracking overall? You also called out some of the gas quality issues with the weather. And then just optimization wise, have you seen anything you'd call out year-to-date as optimization benefits and market-based opportunities, is Permian Gas helping you? And anything like that, that you would call out?
A: Zach Davis, Executive VP & CFO: Just to keep in mind, especially compared to '22 and '23, when you think about Henry Hub shipping day rates, or just overall commodity prices on an absolute basis, they're all much lower. So it's much more difficult to see those arbitrages and make as much on the optimization side. But optimization is coming in quite well, but the numbers aren't in the hundreds of millions. We probably made 50 plus so far this year. And with some SPL outperformance so far this year, too, that's why we're already tracking above the midpoint of the EBITDA guidance despite we'll need some tick up in production at CCL for the rest of the year. So optimization is coming together and with a little more outperformance on production and the upstream and downstream optimization that we've seen, yes, we have a good chance of trying to get to the higher end of the range.
Q: I think this is one for Anatol. You guys have been clear on the positive outlook for global gas demand growth for a while now. But I guess I'd just be curious to drill in a little bit more on maybe how your forecast has changed over the last couple of quarters? And if you want to take a shot at the global data center demand growth number, I'm sure we're all ears.
A: Anatol Feygin, Executive VP & Chief Commercial Officer: Sure. Thanks, John. Go back 5, even 7 years maybe, and our ultimate forecast really hasn't changed much. We've been in the 700-ish million tonnes in 2040 and kind of a relatively somewhat constrained up into the right forecast. What, of course, has changed dramatically, as we've commented on before, is the supply side of the equation and how those things have shifted with Arctic Russia primarily being taken out of that supply stack. We think that the demand side, as we touched on earlier with Jeremy, is really constrained by having that affordable, secure, reliable LNG stream that we hope to continue to supply. Your -- the second part of your question, as Jack mentioned and I mentioned briefly like the electrification aspect of the world is a key driver, right? That's why things like GE Renova are doing quite well, and we are very happy to be part of that equation. And in conversations, unquestionably, that is a component. As I'm sure you know that the data center
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
