Good day and welcome to the Cheniere Energy Inc. Q1 2021 Earnings Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Randy Bhatia, VP of IR. Please, go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to Cheniere's first quarter 2021 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 Zach Davis, Senior 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 financial measure can be found in the appendix to the slide presentation. As part of our discussion of Cheniere's results, today's call may also include selected financial information and results for Cheniere Energy Partners LP or CQP. We do not intend to cover CQP's results separately from those of Cheniere Energy Inc. The call agenda is shown on slide three. Jack will begin with operating and financial highlights, Anatol will then provide an update on the LNG market and Zach will review our financial results and guidance. After prepared remarks, we will open the call for Q&A. I'll now turn the call over to Jack Fusco, Cheniere's President and CEO.

Thank you, Randy, and good morning, everyone. Thanks for joining us today and thank you for your continued support of Cheniere. I'm pleased to be here this morning to review our outstanding results from the first quarter. Before covering our results and outlook, I want to spend a minute addressing winter storm Uri and its impact on Cheniere. As we described back in February, we were impacted by the widespread power outages in Texas, which resulted in our Corpus Christi facility being down for a few days. I'm extremely proud of our operating personnel at both Sabine Pass and Corpus Christi for rising to yet another weather challenge and working so diligently to manage our operations smoothly throughout the freeze event. From hurricanes to fog, to now historic freezes, the Cheniere platform has withstood whatever Mother Nature throws our way and our focus on safe and reliable operations continues to benefit our customers, shareholders, and other stakeholders. As a result of the winter storm, there was no material impact on our assets or operations and we were able to fill some cargoes at Sabine Pass and restore Corpus Christi to normal operating levels quickly, to mitigate impacts on our delivery obligations. We did recognize a financial benefit as a result of some optimization activity in the period leading up to the storm. But the magnitude of that benefit is not material to our expected full year 2021 financial results. More importantly, the global LNG market has recovered significantly for 2021 and beyond, as demand has outstripped supply, resulting in higher prices, even during the shoulder and summer months. I continue to believe in the long-term viability and sustainability of LNG as an essential fuel source in the low-carbon future. Please turn to slide five, where I will review some key operational and financial highlights from the first quarter, including our upwardly revised 2021 guidance. After delivering on our 2020 guidance, despite a myriad of challenges, we continued our momentum into the first quarter and are off to a fast start. Now, full year 2021, is looking even better for us, than it did on our last call in February. For the first quarter, we generated approximately $1.5 billion of consolidated adjusted EBITDA, approximately $750 million of distributable cash flow and almost $400 million in net income on revenue of approximately $3.1 billion. We've often described 2021 as Cheniere's cash flow inflection point and you can see progress on that early in the year in our first quarter financial results. Zach will cover these numbers in more detail in a few minutes. During the first quarter, we exported a quarterly record of 133 cargoes of LNG from our two facilities, with production incentivized by strong global LNG margins during the quarter and we had the benefit of Corpus Christi Train 3 commissioning volumes. This record production is also despite Corpus being down a few days, as a result of the winter storm in February. A sustained stronger LNG margin environment, together with our results for the first quarter, contribute to our ability to raise our full year 2021 financial guidance for the second consecutive quarter. Our outlook for the balance of the year has improved since our last call in February, with a slightly higher production forecast, augmenting the impact of the improved LNG margins we see throughout the balance of the year. We now forecast consolidated adjusted EBITDA of $4.3 billion to $4.6 billion and distributable cash flow of $1.6 billion to $1.9 billion for the full year 2021. Near the end of the quarter, Train 3 at Corpus Christi achieved substantial completion within budget and in line with the accelerated timeline we've previously communicated. With the completion of Train 3, the Cheniere and Bechtel relationship has now delivered eight LNG trains ahead of schedule and within project budgets, which is truly world-class execution. And that execution excellence continues with our ninth train. As construction on Train 6 at Sabine Pass continues to progress against accelerated schedules. The estimated substantial completion timeline has accelerated once again. Substantial completion is now projected to be achieved in the first half of next year. As I hope you all saw this morning; we issued a press release announcing we supplied a carbon-neutral LNG cargo to Shell, whereby Cheniere and Shell jointly offset the full life cycle emissions of a cargo. The carbon offsets covered full life cycle emissions from the wellhead through consumption, with Cheniere delivering the cargo to Shell FOB at Sabine Pass and Shell delivering the cargo to a European regasification facility. This first carbon-neutral cargo is another step in Cheniere's environmental efforts I've discussed over the past several months. Our efforts emphasize enhanced transparency, as a critical step towards improving environmental performance and maximizing the benefits of our LNG, for Cheniere, our customers, and our value chain partners. Today's carbon-neutral cargo announcement follows our February announcement of cargo emissions tags development. The response to our CE tags from current and prospective customers has been extremely positive and has spurred further engagement. Our focus is to ensure the long-term benefits of natural gas as an affordable, reliable, and clean energy source for the world. Turn now to slide 6, where I'll discuss what I'm seeing in the market today and why I'm so optimistic about Cheniere's future prospects. In the short-term market, we're beginning to see the impact of the structural shift to natural gas as a primary energy source for the world as evidenced by the global LNG demand growth we saw in 2020 despite the pandemic. There was constructive LNG demand tension between Europe and Asia earlier this year that left some countries short of natural gas. In addition, South America is entering its winter demand month and is contributing to the tightness in the global LNG market. With natural gas storage below normal levels in Europe and precious little new supply entering the market this year, we also have a constructive backdrop in the LNG market for the balance of this year and into next year in 2023. With Corpus Christi Train 3 completed very early and the completion timeline for Sabine Pass Train 6 recently accelerated again to the first half of next year. We are ideally positioned to benefit from these near-term market dynamics. In the longer term, the supply and demand fundamentals in the global LNG market are even stronger and reinforce our confidence in the value of our existing platform and in our ability to commercialize our Corpus Christi Stage III expansion project. In the four-year period from 2017 to 2020, the global LNG market added almost 120 million tons of capacity, an average of almost 30 million tons per year. In the subsequent four-year period that average is expected to drop to approximately 11 million tons a year, a significant slowdown in supply growth, which will be amplified by output declines from older legacy projects. On the demand side, the structural shift to gas on a global basis is evidenced by the near-term doubling of LNG importing nations in the last 10 years and hundreds of billions of dollars of natural gas-oriented infrastructure being built around the world today. LNG consumers recognize and value LNG's flexibility, reliability, affordability, and the critical role natural gas plays in improving environmental performance and achieving decarbonization goals. We forecast that global LNG trade will approximately double expanding by approximately 350 million tons per annum to over 700 million tons per annum by 2040, which would support additional approximately 225 million tons per annum of incremental global supply. Our constructive long-term view on the LNG market was recently reinforced for the results of a comprehensive climate scenario analysis we conducted with a leading global management consulting firm. We published this analysis last month and it's available on our website. This study analyzed Cheniere's business over the long-term under various energy transition scenarios and concluded that even under the most aggressive energy transition scenario analyzed, demand for LNG and natural gas is expected to grow for decades to come. In that not only are Cheniere's existing assets well-positioned to take advantage of that, but new LNG capacity will be needed to meet that demand. With regard to Cheniere specifically, our accomplishments and progress over the past five years of LNG operations have been nothing short of transformative and position the company to take full advantage of the constructive market, we see in front of us. We have established ourselves as a premier LNG operator, demonstrating to LNG buyers worldwide the reliability and certainty associated with a long-term supply agreement with Cheniere. In addition, our continuous improvement efforts have yielded efficiency gains and debottlenecking has unlocked a significant amount of extremely cost-effective volume across our projects, which further improves our competitive position and increases financial returns. As construction ramps down, the long-awaited financial results of our multiyear capital programs are bearing fruit as evidenced by today's results. This year, we expect to generate well over $1 billion of free cash flow, and we are quickly approaching our expected run rate metrics. Our run rate forecast of $11 per share, and distributable cash flow not only has a high degree of visibility, but also empowers us to execute on an all-of-the-above strategy for capital allocation, which includes achieving investment-grade credit metrics, funding a significant portion of Corpus Christi Stage 3 with cash flow after that project is commercialized, and returning significant capital to shareholders via buybacks and dividends. Zach and his team, and I are working diligently with the Board and the rest of management on our detailed capital allocation plans, which we will communicate to you later this year. I'm excited about what we are seeing in the LNG market, how Cheniere is positioned to capitalize with our portfolio volumes, a shovel-ready brownfield expansion project, commercial offerings tailored to customers' needs, and an improving credit and cash flow profile. With that, I'll turn the call over to Anatol, who will provide some more details on recent LNG market developments.

Thanks, Jack, and good morning, everyone. Please turn to slide 8. The global LNG market exited 2020 on a positive note, as cold weather across Asia and continued economic expansion in China helped contribute to an increase in Asian LNG imports in Q4. As non-US supply was slow to respond, markets tightened as Asia pulled cargoes from Europe, a trend which continued in Q1 of 2021. In the first quarter, global LNG supply showed positive year-on-year growth for the first time since the first quarter of 2020, but net growth was modest as a healthy 17% growth in US exports was largely offset by declines at several LNG facilities around the globe, which were either shut down or underperforming, including facilities in Norway, Nigeria, Australia, Trinidad and Tobago, and Russia. Extreme cold weather in Asia and then Europe during the first quarter combined with the supply constraints and a tight shipping market caused unprecedented price spikes in JKM in the early part of the quarter, reaching all-time highs of over $30 in January. Since then extreme temperature conditions have passed and JKM prices have moderated. However, price levels are still well above where they were a year ago, with March JKM settling at $8.26 and June trading above $9 currently. Well above prices around the $2 MMBtu level a year ago, indicating an underlying structural tightening of the market, supported by strengthening demand fundamentals. As I just mentioned, in Asia, LNG imports were very strong in Q1, up over 7 million tons or 11% year-on-year. China added nearly 5 million tons of LNG demand despite robust domestic gas production and increased Russian pipeline gas imports. Early reports of total gas demand in China show an increase of approximately 15% year-on-year in Q1. Weather continued coal-to-gas switching and a remarkable over 18% increase in Q1 GDP drove the demand increase. In the Japan, Korea, Taiwan area, LNG imports increased 8% or 3 million tons year-on-year, due partly to scheduled nuclear and coal outages. From a structural demand level, 10 years after the Fukushima earthquake, most Japanese nuclear plants remain offline with only 9 units totaling 9.1 gigawatts resuming operations as of Q1 2021 compared with 42 gigawatts in 2010, solidifying LNG as a critical fuel for the stability of the energy system in Japan and in the region as a whole. In Europe, gas demand in major markets rose by 9% year-on-year during Q1 due to stronger heating and gas-fired power demand. Significant draw-downs from storage through winter and into April left European storage approximately 34 BCM or around 50% lower than the prior year by the end of April and approximately 11 BCM or approximately 375 Bcf below the 5-year average. To attract LNG volumes away from Asia to help replenish storage, TTF prices remain elevated. April TTF settled higher than JKM at $6.46 per MMBtu, that was 13% higher on the month and up almost 200% year-on-year. Current propane margins are in the $3 range, inclusive of a dramatic upward shift in charter rates from the $30,000 a day range to well above the $80,000 a day range today. Based on these demand fundamentals, although specific conditions during the first quarter led to some dramatic LNG price volatility, we believe we have also seen indications that the structural tightening that we've been predicting for some time is now underway. As such, we have continued to transact incremental volumes aligned with our midterm strategy. The team has secured an additional approximately 1.7 million tons, locking in over $200 million in fixed fees across 2022 and '23. We see strong appetite for midterm agreements as both intermediaries and end users add diversity security and flexibility to their portfolios. Turning now to Slide 9 where I will discuss some longer-term aspects of the market. We've discussed over the last few years that we viewed 2021 as a transition year to a tight market. And as we just described that has played out somewhat faster than we expected. Forward margins today during the Northern Hemisphere Spring shoulder season are higher than they have been at any point for this season since we began operating just over five years ago. A number of market conditions that have been headwinds to entering into long-term commitments have more recently become tailwinds, such as oil prices, prompt margins, and forward supply growth just to name a few. We remain quite sanguine on the long-term contracting market for our products over the coming quarters and years as the demand for LNG will continue to increase over time, with many current markets expanding and new markets continuing to be added. Specific to Asia, along with China and India, markets in South and Southeast Asia have shown keen interest in expanding their natural gas infrastructure from pipelines to power plants to support their rapidly growing economies. In power generation, forecasts suggest that gas is expected to be the second highest growth segment after renewables in terms of capacity additions. The need to expand access to reliable energy across the region means that natural gas is expected to play a crucial role in ensuring sustainable economic growth while reducing emissions intensity. Of the roughly 3,000 gigawatts of forecast incremental power generation capacity in Asia by 2040, over 300 gigawatts is expected to be gas-fired. Just for reference, a gigawatt of combined cycle natural gas generation operated as baseload requires approximately 1 million tons of LNG per annum. A significant portion of that sum will be in China, but almost half of it is expected to satisfy growth in South and Southeast Asian countries such as India, Indonesia, Bangladesh, Vietnam, and the Philippines. Some of these countries are already well-established gas users with indigenous resources that are mature and declining. Data from Wood Mackenzie suggest that the region could lose more than 20 Bcf a day of domestic output by 2040, and while current upstream developments are considered unlikely to offset more than just a small fraction of that decline. In addition, gas demand in the region is currently expected to grow by at least 18 Bcf a day during the period to 2040, creating a gap of more than 35 Bcf a day of gas, which we expect to be satisfied in large part by LNG. Again, for reference, 35 Bcf a day is equivalent to approximately 250 million tons per annum of LNG. Please turn to slide 10. LNG demand growth across the various markets of South and Southeast Asia is in aggregate very significant. LNG demand growth in South and Southeast Asia is expected to accelerate and potentially grow fivefold by 2040, adding between 160 million and 200 million tons to global trade. We believe that over the next two decades, over 20% of the growth in Asian demand will come from China and approximately 70% will come from South and Southeast Asia as these countries prioritize gas over coal to secure economic growth and meet their climate goals. This region consumed over 17% of global coal and was responsible for more than one-third of global greenhouse gas emissions in 2019. While most net zero pledges came from outside the region, we believe that nations in South and Southeast Asia have been increasingly determined to improve environmental performance and find ways to fuel growth in a more environmentally sustainable manner. We see Cheniere's LNG as a secure, reliable, and cost-effective fuel for the region, which along with renewables will displace more polluting fuels. Jack already touched on our leadership and initiatives in ESG, and I'll just add that we are seeing increasing interest and engagement from both existing and potential customers on the environmental opportunities we are developing. Cheniere stands ready to work with customers in the region and all over the world to create practical solutions that fit their commercial needs and satisfy global environmental imperatives. We believe our low emitting LNG standards will play a role in supporting the region's environmental goals and its energy priorities. Thank you all for your time. I'll now turn the call over to Zach, who will review our financial results and guidance.

Thanks, Anatol, and good morning everyone. I'm pleased to be here today to review our first quarter financial results and key financial updates, as well as our increased 2021 guidance. Turning to slide 12. For the first quarter, we generated net income of $393 million, consolidated adjusted EBITDA of approximately $1.5 billion, and distributable cash flow of approximately $750 million. Our financial results for the first quarter were positively impacted by increased global LNG prices and margins, particularly margins realized on spot and short-term cargoes sold through our marketing affiliate and a higher than normal contribution from LNG and natural gas portfolio optimization activities due to significant volatility in LNG and natural gas markets during the quarter. As we have discussed in prior quarters, our IPM agreements, certain gas supply agreements and certain forward sales of LNG qualify as derivatives and require mark-to-market accounting, meaning that from period to period, we will experience non-cash gains and losses as movements occur in the underlying forward commodity curves. The impact of shifts in these curves on the fair value of our commodity and FX derivatives during the first quarter 2021 was a net loss of approximately $120 million, which was substantially all non-cash. For the first quarter, we recognized an income of 456 TBtu of physical LNG, including 442 TBtu from our projects and 14 TBtu from third parties. 84% of these LNG volumes recognized in income were sold under long-term SPA or IPM agreements. During and after this winter storm, we were able to work with our long-term customers on cargo schedules as well as shift some volumes from Corpus to Sabine, leading to no material impact to our production for the quarter. We received no cargo cancellation notices and had no revenue related to cargo cancellations in the first quarter. However, we previously recognized $38 million of revenues during fourth quarter 2020 related to canceled cargoes that would have been lifted in the first quarter. Commission activities for Corpus Train 3 went well as Jack discussed and we received $191 million related to sales of commissioning cargoes in the first quarter, corresponding to 25 TBtu of LNG. As a reminder, amounts received from the sale of commissioning cargoes are offset against LNG terminal construction and process, net of the costs associated with production and delivery of those cargoes. 6 TBtu of LNG-related to commissioning activities was on the water at the end of the first quarter and will be recorded as an offset to construction in process upon delivery. Turning to the balance sheet. We prioritized debt reduction since raising this near-term loan to refinance convertible notes last year and have committed to pay down at least another $500 million of outstanding debt in 2021. We made good progress toward that goal during the first quarter when we paid down $148 million in outstanding borrowings under the Cheniere term loan. I'll provide some additional color in a few moments. But we are in an excellent position to reach and likely surpass our minimum debt reduction target this year. In February, we locked in an approximately $150 million private placement of long-term amortizing fixed rate notes at SPL, that are committed to fund in late 2021 at a rate of 2.95%, the lowest yielding bond ever secured across the Cheniere complex. In March, CQP opportunistically issued $1.5 billion of 4% senior notes through 2031, the proceeds of which together with cash on hand were used to extend the maturity and accretively refinance all of CQP's 5.25% senior notes due 2025. Our efforts on execution, performance, and prudently managing the balance sheet throughout the Cheniere structure continue to be recognized by the credit rating agencies. As we mentioned on our last call, in February, Fitch revised the outlook of SPL's senior secured notes rating to positive from stable while reaffirming its existing BBB minus investment-grade rating. In April, S&P revised the outlook of both Cheniere Engineered Partners BB ratings to positive from negative, a signal that ratings upgrades may be coming. In addition, S&P's commentary indicated a leverage level of 4.5 to five times on a debt-to-EBITDA basis in the next couple of years could be consistent with an investment-grade rating, commentary which is in line with and supportive of our deleveraging plan and goal of investment-grade credit metrics throughout the structure. Turning now to Slide 13. As Jack mentioned, today we are again increasing our guidance ranges for full year 2021 consolidated adjusted EBITDA and distributable cash flow by $200 million, bringing total increases to $400 million above the original ranges we provided in November of last year. Our revised guidance ranges are $4.3 billion to $4.6 billion in consolidated adjusted EBITDA and $1.6 billion to $1.9 billion in distributable cash flow. Today's increase in guidance is largely driven by our strong results in the first quarter, the continued improvement in global LNG market pricing and our ability to execute additional higher-margin forward sales into the stronger pricing. Since the last call, we have continued to lock in additional volumes for the remainder of the year. Though those sales have been offset by an upwardly revised production forecast driven by maintenance optimization, some favorable weather, and a much faster than expected ramp-up to steady Train 3 volumes. We currently forecast that a $1 change in market margin would impact EBITDA by approximately $40 million for full year 2021. As we have now sold almost all of our production for the remainder of the year and have completed and placed Corpus Stage 3 into service in line with our previously forecasted timing. Our remaining exposure this year is not material and we only plan to provide another update if that were to change. We are confident in our ability to deliver results within these upwardly revised guidance ranges for the full year. With Train 3 now in operation, we've also now passed the free cash flow inflection point, we have long discussed with our stakeholders. We expect to generate meaningful free cash flow this year for the first time in Cheniere's history of well over $1 billion. We originally committed to $500 million in debt reduction this year but we now think $500 million is conservative due to our strong performance and cash flow generation year-to-date and the forward sales of LNG we have executed in a strong LNG market. We are continuing to work on our long-term capital allocation strategy with our Board and we anticipate communicating this multiyear plan to you in the second half of the year, including more comprehensive plans for the remainder of free cash flow this year after meeting our initial 2021 debt reduction goal of $500 million. That concludes our prepared remarks. Thank you for your time and your interest in Cheniere.

Thank you. Our first question comes from Jeremy Tonet with JPMorgan.

Hi, good morning.

Good morning, Jeremy.

Just want to start off with the kind of improving LNG market here and see what that could mean for Cheniere. It seems like you guys are able to kind of sign some more contracts here. So I'm wondering, how much visibility do you have? Do you think the market is tightening, where longer-term contracts might be at attractive rates that you would look to sign or even just looking at 2022, just how much spreads are you able to capture at this point kind of de-risk your outlook for 2022?

So Jeremy, this is Jack. I'll begin, and then I'll hand it over to Anatol, followed by Zach. First, I want to express my satisfaction with my operating staff and their capacity to improve and streamline our maintenance program. During the freeze at Corpus, we managed to perform substantial maintenance on the facility. As a result, when we resumed operations, we returned stronger, updated our production forecast, and identified a significant number of additional cargoes we can monetize this year. I expect the team to keep working on operational efficiency and effectiveness to align our production with market conditions. Anatol, Jeremy's question was about the market for mid and long-term contracting.

Sure. Good morning, Jeremy. Things are, as we mentioned, turning around even faster than we had expected. Some of it is a system from weather. Some of it is an assist from other facilities that are having operational issues and legacy production declines. We've talked at length over the last couple of years, quarters about the investment that's being made that Jack mentioned in his remarks on the pipeline re-gas facilities, with additional countries investing hundreds of billions of dollars in long-dated commitments to natural gas. A lot of those places want to have security of supply. And one of the things as Jack mentioned, we've displayed is that through thick and thin through ups and downs, not only do we reliably perform on those commitments. Our product has the lowest volatility, the most price stability of any of the other long-term contracting options. So, we're entering into a very good period. We are right around the same level that we saw in 2018 in terms of forward margins for the next three, four years. That was, as you know, a very good period for us. That's not a necessary condition, but it's certainly very helpful. And the difference between 2018 and now is that was a bit of a countercyclical rally in the market that was driven by a surprising strength in demand out of Asia and delays in terms of some infrastructure coming online like some of the other US projects. So, the difference now, as Jack said, 30 million tons a year were added 17 through 2020. You look forward through the middle of this decade. There's not a lot of supply coming in and we are very well positioned with these additional volumes that we're transacting in the short and mid-term. As you may recall, bridging volumes were a key part of our commercial offering and that's something that allows our customers and load-serving utilities to sleep at night with that reliability and production. So again, I feel very good about the hand that we're playing and feel very good about securing additional margin. And now, I'll hand it over to Zach to clean up.

Sure. Thanks, Anatol, and hey, Jeremy. Today, we obviously aren't going to give you a look at our open capacity for 2022 yet. We have to get through that budget process. We have the annual delivery program or ADP process. And by November, we'll give you our best outlook for 2022 and the open position and probably have even a better sense of when Train 6 is coming online. But you can expect we're already proactively thinking about it and executing on 2022 and the attractive margins now in the curve over the next few years. And with the success that CMI has had on terming out physically, including through mid-term deals, some of our debottleneck capacity, this has really helped lock in fixed fees this year for the next few years actually. And post-2021, we've already secured over $500 million and just in 2022 over $200 million. So you can say we've already been pretty proactive in locking up a portion of that open capacity for next year.

Got it. That's very helpful. Maybe just shifting to carbon here. I was just wondering if you could provide thoughts as far as this new transaction you did, the value chain carbon-neutral LNG cargo to Shell. How do you see that market developing? How much appetite do you think that could be for that over time? And when it comes to carbon capture do you think the current fiveQ provides sufficient economics for Cheniere to pursue CCS given the dense purity stream of CO2 that comes off LNG facilities?

Yes. Well, Jeremy thanks. And as I’ll add, I was very pleased to work with Shell, one of our largest foundation customers on that first carbon-neutral cargo. And I think its successful execution ensures that Cheniere's capabilities to actually operate across the entire value chain. I think offering climate solutions to our customers is going to be a bigger portion of our business and right in line with what our value proposition is for the customer. As I've talked about before in the past, our first goal though is to monitor, validate, and report on our carbon footprint. And that's when we announced our cargo emission tags or the CE tags. We're well on our way on that aspect of it. You mentioned CCS. CCS is important; our initial blush is that it looks very promising at our facilities. I think we're committed and have committed some real dollars to development and engineering resource to flush out CCS and its potential capability to help us both at Sabine and at Corpus Christi. But I think our customers are going to expect us to continue to offer a sustainable LNG product. Anatol, do you have anything to add?

Thanks, Jack. Just very quickly, as Jack said, transparency and our ability to offer that to our customers is very important. This is another arrow in our quiver and it is part of the comprehensive offering that allows us to continue to capture market share. So, this is another box that we have checked in terms of our capabilities and we're grateful to have a partner like Shell as we navigate this and continue to develop our ESG offerings.

Got it. Thank you very much for the thoughts.

Thanks, Jeremy.

Our next question comes from Shneur Gershuni with UBS.

Hi, good morning everyone. I just kind of wanted to follow-up on the first question that was asked. Just given the fact that you've been successful negotiating incremental contracts into 2023 and kind of the volatility that we've seen and so forth and kind of the forecast that you laid out, how close are we to securing enough contracts to give the board comfort in sanctioning Stage 3 to an FID process? And would you do it all at once, or would you do it kind of in a piecemeal type of approach?

So, just to be clear we are 100% focused on making sure that Stage 3 gets commercialized as soon as possible. But as I talked about on previous calls, I mean, we literally have a virtual train of LNG that we need to sell and secure, which is what our mid-term product offering is helping us do. So through our de-bottlenecking efforts and maintenance optimization, there was at least 7 million tons of additional LNG we can produce, that we're blessed to have, quite honestly. So that's first and foremost, is making sure that we secure the existing nine trains worth of LNG, before we go off and build Stage 3 with another 11 million tons. But I don't know, Anatol or Zach do you have anything to add?

Thanks for the question. Sure. We're again very optimistic. And this all contributes to our goals of increasing the contractual coverage. And we will not waver on our investment commitments which require roughly, we talk about this 1.7 million tons that's total tonnage over time. As Jack said, this is a $10-plus million ton project, plus the volume we have in the portfolio. Per annum, right? So you're talking about kind of an order of magnitude more commercialization that's required, but we feel very good about what we're seeing today and for the coming quarters.

Great. No. I appreciate the color. And maybe for a follow-up, during the quarter, you prepaid $148 million on the term-loan, you've been able to issue debt at 4%. You've had positive outlook revisions from both S&P and Fitch. And you kind of touched on it in your prepared remarks. But I was wondering if you can expand on the guidance or soft targets around leverage levels to get the upgrade to BB+ and then to investment-grade. Any expanded discussion on that would be super helpful. Thank you.

Hey, no problem. This is Zach here. And I think the S&P note last month for the outlook upgrade at CEI and CQP really validates everything we've been communicating to you all for the last few years on capital allocation. And it's pretty consistent with how we step-by-step got our project ratings over time from high-yield to investment grade. That's the being in Corpus by every agency. And now looking ahead, there's a, I guess, a defined path of EBITDA growth plus debt paydown to get below six times consolidated leverage to get to BB+ in the next year or so. And then leverage down to sub-five times to get to BBB in the next few years. So our path is pretty straightforward to get to Investment Grade with S&P, as metrics improve and as we simply grow into our run-rate and follow through with capital allocation and debt paydown of up to $4 billion pretty much consistent with what we've told you. So that's the plan and that's on a consolidated debt-to-EBITDA basis.

Perfect. Thank you very much. Really appreciate the color. Take care, guys. Have a great day.

Thanks.

Our next question comes from Christine Cho with Barclays.

Good morning. When I look at your shareholder list, I think there's probably still some turnover needed in the stock. Maybe it's lack of dividends or debt levels that keeping some of the investors out of stock. But as you think about capital allocation, how are you thinking about bringing new investment? As you talk to investors, who you like in the stock, but aren't currently what do they want? And how is that going to be factored into the broader framework that you're going to come out with later in the year?

Christine, it's good to hear from you. I'll start. And I'll turn it over to Zach. I am concerned about the lack of float that we've had in the stock lately. I mean, I think it's consistent with some of the oil and gas industry overall, but I'd like to see the float get up a little bit more. I think larger investors, especially index funds, at least in my experience, like to be able to get into stock and then get out of the stock without having too much pain. And so, we need to work on expanding our horizon and being more desirable for the investment community at large. And I think, a big portion of that is what Zach has highlighted is, getting our credit metrics under control. We don't screen very well on a Bloomberg screen. And we need to rectify that. We think we are at an inflection point where we're going to have an opportunity here to give our shareholders back their investment. And we need to be thoughtful about it, which is why we're spending a lot of time trying to make sure that we get this capital allocation program done right the first time.

And I'll just add to what Jack said, Christine. And I think it's pretty obvious, if we can get to investment-grade in the next couple of years, or even just get into the S&P 500 index, it'd be helpful to bring more and more new investors into the stock. And I think it's pretty safe to say, we're on track for both of those with a bit more time. And it's probably time. That's the operative word for this company, because every day that goes by, we'll be making progress on our leverage, getting closer and closer to our run rate cash flows. And $11 is just going to be too hard to ignore.

Okay. Thanks.

Especially in relation to capital allocation and growth, I would like to add that it's reasonable to say that we aim to attract more income investors to the stock over time. However, we understand the importance of managing our leverage to ensure that shareholder returns are sustainable not just for a few years, but for decades. Therefore, our comprehensive approach to capital allocation, as Jack noted in his prepared remarks, is exactly what we intend to implement in the coming year or so.

Got it. That's helpful. And then maybe if I can move on to contracting. In the last several weeks and months, we've seen a number of long-term contracts signed in the market. And most of them have been with Chinese counterparties. So just curious, with no U.S.-China trade deal how should we think about interest from portfolio companies, especially with delays that are going on with other ongoing LNG projects that are in construction?

Thank you, Christine. That's a valid point. The market for term contracts is continuing to shrink. We believe that long-term contracts are essential for the growth and development of this market. As we discussed with Seer, there has been a period where oil indexation was more appealing to buyers than NYMEX. However, we now anticipate a shift in this trend. We are optimistic about the gas and LNG market in China, as it plays a crucial role in the country's economic and environmental goals. The ongoing five-year plan indicates a commitment from President Xi to reduce coal generation, which is beneficial for us. We take pride in our achievements so far and have established strong commercial relationships with our Chinese partners, including state-owned enterprises and smaller players, which we expect will continue to yield success. This market is significant and, as Jack mentioned in earlier calls, it has the potential to double Cheniere's size. We remain actively involved there. However, we want to highlight that there are numerous opportunities in Asian markets outside of China. Therefore, our capital allocation strategy will encompass a variety of options. We believe we are entering a prolonged phase where long-term NYMEX-based contracts will become increasingly attractive.

Got it. Thank you.

Our next question comes from Michael Lapides with Goldman Sachs.

Hi, guys. Thank you for taking my question and congrats for a good start to the year. Can you talk a little bit about Sabine 6, just like when you talk about bringing it up into the first half of 2022 are you talking just a couple of months ahead of what you were originally planning, or is it conceivable you could get it very early in the course of next year online?

Hi, Michael, it's Jack. And thanks for the kind words. Sabine Pass, which is what you would expect Train 6 is actually our Train number 9 with Bechtel. And I'd like to say we have figured out how to stick-build these trains faster and better than probably anywhere else in the world. And it is way ahead of accelerated schedule probably close to a year ahead. So I would expect that barring decent weather because we are about ready to head into the hurricane season again, which seems almost never-ending anymore. But barring decent weather that we'll be producing LNG and commissioning on that train before the end of the year. And so we're hopeful that we can exceed the first half of the year guidance that we've given. And by November when we talk about 2022 guidance, we might be able to be more specific than just the first half of the year. But it's tracking in the right way right now. And in terms of cost, there's $600 million to $700 million remaining of unlevered costs there before contingency, and a large majority of that is this year. So things are really ramping up there.

Got it. That's very helpful. I'm thinking about Stage 3 at Corpus. Is there a significant impact on your construction costs if you take the final investment decision before the major construction work you’ve completed over the last five to seven years with Bechtel comes to an end? Specifically, if Bechtel leaves the site, would that affect the costs for Stage 3? Alternatively, if there were a two or three-year delay before the final investment decision for Stage 3, would that change the economic outlook and the associated costs?

Not necessarily, Michael. For me, it's more about the team. We've got a great team at Cheniere; Bechtel has a great team supporting us right now. If there's that much of a delay, I'm sure those folks will get assigned elsewhere around the world. They're an international EPC contractor, and they're not going to keep their people waiting. So for me, it's more about the team and less about mobilization and demobilization costs because those are quite frankly, immaterial to the total investment. I would just add that we're partnering with Bechtel, as we speak, actively looking at ways to make it cheaper and more cost-competitive. So they'll be around.

Okay. And then last one just real quick. You mentioned doing short-term contracts one or two years, $200 million of incremental revenue roughly 1.7 million tons. Just real back of the envelope that's a little over $2 in MMBtu. I would assume that all kind of drops to the bottom line, or almost all drops to the bottom line?

Absolutely. That's the beauty of some of these midterm deals. It just gives us even more clarity on how much cash is available for the company to support capital allocation efforts as we give you guys an update later this year.

Got it. Thank you, guys. Much appreciate it.

Thanks, Michael.

Our next question comes from Jean Ann Salisbury with Bernstein.

Hi, good morning. Qatar has taken some steps the last few months to move forward with their mega expansion. A lot of investors that I talked to that's their biggest worry is that Qatar could price low enough to keep any other new projects from moving forward? You're obviously in the market. So I just wanted to hear your comment on, if this price pressure is a real thing that you're seeing?

Anatol?

Thanks, Jean Ann. It's Anatol. Every supply stack that we've ever put together has our friends at Qatar on the far left. And there's no question that, that thing gets dispatched and gets built, but it's 32 million tons, right? And as we've mentioned and Jack just mentioned, this market, when it was a smaller market grew at 30-plus million tons per year. So if you as we look at that supply curve, and we've talked about this over the last year and half, there were a lot of things in that we thought even a year ago were a foregone conclusion that now may not even materialize this year. The QP North field expansion, of course, has been FID and we're always fully expecting that it will get placed into the market. It will be done on an oil index basis most likely. And it's one of our two main competitors that we see kind of as a foregone conclusion being in the market. So we're not afraid of that. We're part of the sort of diversification of supply and contracting structure along with Qatar and our friends at Novatek.

And Jean Ann, I would say that, Zach mentioned we're working very closely with Bechtel to ensure that our expansion at Corpus Christi is the most competitive economic Henry Hub indexed expansion in the US.

Great. Thank you. And then just as a follow-up, if you can disclose this and I apologize if it was mentioned earlier somewhere, but how much on a per MMBtu basis did the carbon-neutral offset ad for the Shell cargo?

Thanks, Jean Ann. This is Anatol. We are not disclosing that. Again, we partnered with Shell on that, and Shell has the lead in using its methodology as we continue to develop our LCA and get that completely buttoned up, peer-reviewed, etc. But those commercial terms and economics we are not disclosing.

Thank you.

And our next question comes from Michael Blum with Wells Fargo.

Thanks. Good morning everyone. I just had a clarification question on the midterm contracts you've been signing. Are you purposely signing these shorter-term contracts for your open capacity, or is that just what the market is willing to bear right now? And given the improving market fundamentals that you described earlier, do you see that changing at all?

Michael, midterm contracts have been a staple in this market for a long time. We are not the first LNG provider to offer them, but they are an effective way for us to expand our customer base and align with their objectives, especially when competing against Qatari, Russian, or French Total offerings of shorter-term midterm contracts. We've noticed a strong interest from customers who are not typically the utility clients we deal with on the long-term side. However, there is a solid market for these contracts, which also assists us in managing some of the excess production volumes. Anatol?

And Jack, you covered everything. It's just another product in our portfolio one that we weren't offering in and of itself as recently as a year ago. We did do midterm contracts that were effectively stapled to long-term, but it is something that as Jack said helps us engage and broadens our commercial offering. And again, we fully expect that long-term contracting will resume in short order given the current margin environment and where we are in the cycle.

Thank you very much.

Our next question comes from Julien Dumoulin-Smith with Bank of America. Julien, we are unable to hear you, please check your mute function. Okay. Our next question comes from Greg.

Thanks for squeezing me in and congratulations on the good quarter. Jack, did I hear you say Corpus Christi Stage 3 could be an 11 MTPA project? And then a related question any updates on further upsizing opportunities for the legacy nine train position?

Absolutely, Corpus Christi Stage 3 could be an 11 million-ton project. And that's currently as we continue to work on value engineering with Bechtel. We continue to drive not only the production of those trains but also drive the cost down. Greg. And then I'm sorry I missed the last half.

The rest was on debottlenecking, further debottlenecking on the nine trains.

The debottlenecking efforts have exceeded my expectations, as the team has done an excellent job identifying quick wins. They are also continuing to find various choke points in the LNG liquefaction process that we can modify to increase output. I believe there is still potential for more improvements. We will provide guidance on this as we identify opportunities and feel confident in our ability to deliver results over the long term.

Thank you.

Our next question comes from Chris Tsung with Webber Research.

Hi, good morning. Thank you for including me. I wanted to discuss the supply curve you mentioned. Can you share any insights on the Mozambique LNG delay, especially considering the projected debt for 13 NTPA being pushed back by at least a year? Have you observed any market impact from this? Additionally, is there any effect on Stage 3 related to that capacity? Thank you.

No, I only know about the Mozambique delay from what I read, just like you did, from Total and Exxon. It's a sad situation, and I hope everyone there is safe and healthy after experiencing the unrest. However, I don't believe it's relevant to our business model. We offer a full value product where customers don't need to invest in equity or worry about the exploration and production side since we have secured nearly 7 Bcf of U.S. natural gas daily from around 100 different producers across 26 pipelines and deliver it to our two facilities. We handle much of what the customer needs, unlike them having to invest equity or be deeply involved in the exploration and production sector. Anatol, do you have anything to add regarding Mozambique?

No. Thanks Jack.

Right. No that's the point. It seems like the project is challenged and you guys are able to offer a product without equity, and you're able to deliver this product. So could you guys possibly be able to absorb some of that off-take or have discussions with those customers that are impacted as the project is delayed, what are your…?

Absolutely. Most customers are interested in the diversity of supply and having a reliable supply of LNG, and that's what we offer, but absolutely yeah.

Okay. I have one more question regarding your ESG efforts. You introduced the cargo emission tags in early February, and it seems you successfully delivered your first carbon-neutral cargo to Shell. These measures appear intended to address the concerns of European businesses and customers about the carbon intensity of your product. How have your discussions on this topic changed, or have they remained consistent in the first half of this year?

Thanks, Chris. This is Anatol. We have made significant progress, and the work done over the past couple of years has made us very comfortable with our environmental and emissions footprint. We are currently in the process of quantifying, validating, and properly assessing these factors before we officially roll them out in 2022. We believe we are part of the long-term solution and are committed to delivering transparency, which we are actively working on. Our engagement with Shell reflects our steps in this direction, and we expect it to play an increasingly crucial role in our commercial discussions. Overall, we have a strong foundation that will continue to improve and help our customers advance.

Great. Thanks so much and congrats on a great quarter.

Thank you.

Our next question comes from Sean Morgan with Evercore.

Hi. This question might be more suitable for Anatol. Last time I spoke with Anatol, we discussed the challenges customers faced due to the significant spike we experienced with JKM. This may create some hesitance for customers when it comes to committing to long-term deals. However, given that Henry Hub has maintained much lower volatility, are you noticing any increase in demand that could benefit Cheniere, perhaps with more customers interested in signing up for Henry Hub-based pricing due to its stability?

Thanks, Sean. If I may redirect a little bit, what I think we're discussing is, if we were in a world where natural gas prices, global natural gas prices spiked to such elevated levels, it could create long-term headwinds to natural gas' market share in the primary energy mix. What we've always said is that, that disruption that played out in the short-term spot market was a great advertisement if you will for long-term contracting, right? Our customers enjoyed almost perfect reliability and almost perfect price stability over that period. And what's being highlighted now, as prices and margins have normalized is that, again, the attractiveness of a $3 minus-ish NYMEX product, plus our economics on the long-term side are very stable and very attractive and we think a key part of a diversified and flexible portfolio. So if anything just like some other price excursions that we've seen over the last couple of years, it continues to highlight the attractiveness of our turb commercial offering. And we're very well positioned for these coming years? Sean, did I lose you?

Sorry about that. Yes. Just going back to Mozambique real quick, I noticed that...

We're running out of time, so I'll need to ask everyone in the queue to limit their questions to just one, please.

Sure. Thanks. Thanks, Jack.

We'll take our next question from Ben Nolan with Stifel.

Hi, thanks. I appreciate the opportunity to ask a question, Jack. I apologize if this seems overly simplistic, but in looking at the quarter, you reported $1.5 billion of EBITDA. However, based on your guidance for the rest of the year, it seems to indicate only about $1 billion per quarter, even without the full contribution from Train 3 in the first quarter. Could Zach or anyone else elaborate on how you're approaching the various factors that have led to this level of guidance compared to the performance in the first quarter?

Sure. I think many folks smooth out our quarters over the course of the year and maybe that underestimated what many of you thought we would produce for Q1. But Q1, Q4 often are the colder quarters of the year. They're not shoulder seasons. So there's less demand for LNG as well, and there's more volatility at the same time. All of that adds to higher EBITDA figures for the beginning and the end of the year. So this was as expected to us, and we've made it pretty simple that for the rest of the year there's only about 40 TBtu even open. When those cargoes are delivered, that depends on some of the FOB versus Des deals that we have. But this is right on track for where we thought we would be for Q1, with some additional optimization of higher LNG margins, and then for the rest of the year.

All right. Okay. Thanks.

We'll take our next question from Alex Kania with Wolfe Research.

Great. Thanks for taking my question. Maybe just a follow-up on the Shell deal. Long term, as you just think about the European carbon market developing, we've seen higher prices there, and they could potentially lead to kind of import tariffs associated with carbon. Do you actually envision doing a carbon-neutral or carbon-free product kind of being value additive rather than just providing a good ARB to just get a European buyer to pay more for a generic premium, or is it going to ultimately be a positive for you guys just on an ARB basis?

Yes. Alex, I would say, first and foremost, in Brussels or in Europe, the US gas market is the most transparent market in the world. So the first thing we need to do is get our LCA done, get it published, get it reviewed by all the scientists of how we're going to calculate the life cycle emissions of the whole LNG train, because there's a lot of disinformation out there. And there is not a very good process for defining terms that everyone agrees to. So when we talk about transparency about monitoring, validating, and reporting our carbon footprint that's in direct response to a lot of misinformation and miscalculations to say the least. And then secondly, I do think there's going to be a premium to carbon offsets and our ability to generate and produce carbon offsets to help our customers, and those offsets need to be with their appropriate registrar. They need to be validated. I think it's all in line with what our offerings are for our customer and part of our business line and business proposition. But yes, I think the first go-around will be European or a European customer initially, but I think worldwide the whole industry will move this way. Go ahead Anatol.

Yes. Just to follow-up on Jack's points. We have very good engagement across the world on these issues and metrics. Europe has the most liquid and most transparent carbon emissions market. As you pointed out, it's trading around $60 a ton today. That is a very good sign of the benefits that the natural gas and to the extent that we're comfortable with our LCA and our emissions footprint, Cheniere's LNG is the value that can contribute to that market. But also good engagement really, all over Asia as the world continues to focus and we continue to focus on improving our value chain and life cycle emissions profile that we're quite optimistic about. So kind of again, just like capital allocation all of the above.

Great. Thanks.

Our next question comes from James Carreker with US Capital Advisors.

Hi. Thank you for the question. Regarding guidance, I'm curious about what changes we might see between now and the Q4 call. I believe it was late February when the significant spikes in spot price LNG started to decline, following the storm, and at that time, you only had 50 TBtus of open capacity. Could you explain what has changed since then that could result in an additional $200 million upside?

Sure. This is Zach. And as you mentioned, we were able to raise guidance last time in February by $200 million. Our 200 TBtu of open capacity went down to 50 TBtu. And as the market went up, we were able to take advantage of that. Since that call, the rest of the year had been looking around $2. That's going up another dollar. And at the same time, our operations folks have been pretty opportunistic on the production. Just with the colder weather Train 3 actually ramping up pretty smoothly after March 26th and then just some opportunistic maintenance during the freeze and fog. That they added around 10 more cargoes to the forecast, that's over 30 TBtu. So when you add those two things together that gets to your $200 million pretty much.

Okay. And is there any amount of that you could quantify that's kind of gas optimization related to the storm?

Not really, considering I just gave you a number that's maybe three, four if not more of a $200 move.

Okay. All right. Thank you.

And those are all the questions we have on today's call. That does conclude today's conference. We thank you for your participation. You may now disconnect.