Cheniere Energy's Q3 2025 Earnings Call: Contradictions Emerge on LNG Pricing, Capital Allocation, and Production Reliability

Guidance:

• Reconfirming 2025 consolidated adjusted EBITDA of $6.6B to $7.0B.
• Raising 2025 distributable cash flow guidance to $4.8B to $5.2B (driven by IRS CAMT rule change and prior bonus depreciation guidance).
• Reconfirming CQP distributions of $3.25 to $3.35 per common unit for 2025.
• 2026 production preliminary forecast: ~51 to 53 million tons (50–52Mt after commissioning/in-transit timing).
• Expect ~47Mt contracted for 2026, leaving ~3–5Mt spot for CMI and ~1.5–3.5Mt unsold open capacity.
• $1 change in market margins impacts EBITDA by ~$0.1B–$0.2B; full 2026 financial guidance to be provided in February.

Business Commentary:

* Operational and Financial Success: - Cheniere Energy reported consolidated adjusted EBITDA of approximately $1.6 billion for the third quarter of 2025 and distributable cash flow of approximately $1.6 billion. - The company achieved a record production of 163 cargoes of LNG, including 3,000 LNG produced at Sabine Pass. - These results were supported by the substantial completion of mid-scale trains and the ongoing execution of the Corpus Christi Stage 3 project.

• LNG Market Dynamics:
• Global LNG demand in Q3 was driven by European imports, maintaining a call on U.S. cargoes despite softness in Asian demand.
• Monthly price settlements averaged 1,250 for the JKM and 1,127 for the TTF benchmarks, both relatively unchanged year-on-year.

• The company expects a moderation in global LNG prices in the near term as additional liquefaction capacity comes online.

• Capital Allocation and Shareholder Returns:

• Cheniere deployed approximately $1.8 billion across its capital allocation plan, including $600 million in growth CapEx, $110 million in dividends, and $52 million in debt repayments.
• Through a share repurchase program, the company bought back approximately 4.4 million shares for just over $1 billion.

• The company remains committed to enhancing long-term shareholder value and maintaining a disciplined approach to growth.

• Feed Gas Composition Variability:

• Cheniere faced operational challenges due to variability in feed gas composition, particularly from new transportation infrastructure.
• This required operational adjustments, such as solvent injections and defrosting to clean heat exchangers, to maintain production levels.
• The company is implementing long-term solutions to address these variables and maximize sustainable production.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted substantial completion of Train 3 ahead of schedule, reconfirmed 2025 EBITDA guidance and raised DCF to $4.8–$5.2B, repurchased ~4.4M shares for ~$1B, and forecasted 2026 production of ~51–53Mt with expectations of a record year—all indicating an upbeat, execution-focused tone.

Q&A:

• Question from Jeremy Tonet (JPMorgan): Just want to start off, I guess, Zach, here with the buybacks, quite the pace this past quarter here and granted is opportunistic in nature, but just wanted to see any thoughts you might be able to share with regards to the pace of the trajectory going forward, given what you've been able to accomplish so far?
  Response: Buybacks are opportunistic and funded by strong liquidity; management intends to continue repurchases when valuation is attractive and expects to seek additional board authorization next year.

• Question from Jeremy Tonet (JPMorgan): Got it. That's helpful. And Anatol, pivoting to the LNG market and picking up some of the commentary you put out there with regards to inflection point. I was just wondering if you might be able to comment a bit more on lower prices incentivizing demand, what type of demand within Asia, could you see there? How deep are those pockets? And the pricing range provided on Slide 10 on the right is a pretty wide range. Any thoughts, I guess, on how things could shape up versus the active forward curve versus some of the consultants?
  Response: 2026 is a transition year; medium-to-long term Asian demand (power generation, industrial, residential) is large and should absorb incrementally lower-priced supply over time, but growth will be choppy and weather dependent.

• Question from Theresa Chen (Barclays): With the EU moving forward to ban imports of Russian natural gas by Jan 1, 2026, do you think we could see upside to your marketing activities next year with 75 to 175 TBtu of unsold volumes as block lean further into U.S. LNG during the winter ahead?
  Response: Europe represents significant opportunity given strong counterparty relationships and past cargo flows; Cheniere stands ready to support European demand though some Russian volumes may find other markets.

• Question from Theresa Chen (Barclays): Got it. And with the previous comments from Anatol about medium- to long-term demand elasticity in mind and tying it into your views on project commercialization given the onslaught of competing liquefaction project FIDs we've seen so far this year. How is to your thinking about your own incremental capacity expansion from here beyond what has already been sanctioned?
  Response: Cheniere will only sanction new growth that meets strict internal financial hurdles—brownfield-focused, ~6–7x CapEx/EBITDA economics, ~90%+ contracted counterparties, and credit-accretive financing; Sabine first-phase has line-of-sight for near-term FID candidates.

• Question from John Mackay (Goldman Sachs): I wanted to start on some of the comments on the feed gas this quarter. Jack, I appreciate your walk-through on everything the team has done to kind of fix that. I guess if you can just talk us through what that looks like going forward. Are there investments you guys can make at the plans or investments upstream? Is it something more of this process and it takes some time? Maybe just walk us through that one more time, if you don't mind.
  Response: Feed-gas variability is being managed via operating changes (wet mode), solvents, defrosts and targeted small-capex fixes now, plus a longer-term plan and planned maintenance baked into next year's production forecast to improve resiliency.

• Question from John Mackay (Goldman Sachs): That's clear. I appreciate that color. Just a quick one for me, Zach, following up on your comments a couple of minutes ago. Can you just remind us, at this point, kind of gating items for being Train 7 specifically? And I understand there's a few more moving pieces, but like loosely speaking, what's your bogey for potential FID timing?
  Response: The primary gate for Train 7 is the FERC permit expected later next year; only after permits and meeting economics (target ~7x CapEx/EBITDA) would Cheniere proceed to FID, though some long‑lead procurements (LNTPs) could start earlier.

• Question from Spiro Dounis (Citi): I wanted to start, Jack, maybe with some of your opening comments just around the trade outlook and some of the uncertainty there. I would love just to get your updated thoughts around trade relations, maybe how that's impacted your SPA and commercialization efforts, the President in Asia this week. So just curious if you're optimistic that maybe we could see some more announcements come through on the LNG side.
  Response: Management is optimistic about additional commercial opportunities in Asia given demand growth there and active engagement; expects more SPA opportunities.

• Question from Spiro Dounis (Citi): Yes. Now you'd appreciate the color there, Jack. Second one, maybe for you, Zach, on 2026 volumes. So first flush, it did look a little conservative to us, but it sounds like you're baking in some of that feed gas issue. So that could be it but also just wanted to get your sense for what you've assumed around the cadence for Trains 5 through 7, reaching substantial completion next year. Just especially you seem to have cut that time in half between first LNG and substantial completion. And there I'd say is there even a chance that we could see Train 8 speak into 2026?
  Response: 2026 guidance excludes Train 8 (not on schedule for 2026); forecast assumes Train 5 spring, Train 6 summer, Train 7 fall—timing shifts can swing ~1Mt per month but current 51–53Mt range is management's working view.

• Question from Brandon Bingham (Scotiabank): Would just love to hear your thoughts as it's become more commonplace over the past couple of years to have market participants enter the LNG space from non-LNG arenas. Could you just discuss some of the impacts or even just the dynamics in contracting from having these non-LNG operators enter the market?
  Response: New entrants have increased supply-side competition and sometimes weaker discipline on contracting; Cheniere will maintain a >95% contracted portfolio with experienced counterparties to mitigate market risk.

• Question from Brandon Bingham (Scotiabank): That's very helpful. And then maybe just a quick follow-up to one of Spiro's questions here on the 2026 outlook. Maybe asking it in a different way. Is that range that you gave on total volumes? Does that include like is the high end potentially baking in an acceleration of Trains 5 through 7 or would an acceleration of Trains 5 through 7 similar to like a Train 4 time line sort of a setup, push you above the range?
  Response: Small acceleration of train timing (e.g., each train one month early) could add ~1Mt; significant acceleration could push results above the range, but management is conservatively holding to 51–53Mt for now.

• Question from Jean Ann Salisbury (Bank of America): Well, the debottlenecking for CCL3 occur kind of gradually from now until 2028 or would you expect most of it to occur concurrently when Trains 8 and 9 start up?
  Response: Debottlenecking has been ongoing since commercial operations began and will continue incrementally; some debottlenecking tied to mid-scale Trains 8/9 will occur over time and should lift per‑train output above the current ~1.5Mt assumption.

• Question from Jean Ann Salisbury (Bank of America): Great. And then as has been referenced a lot on this call, there's been so much contracting year-to-date so many projects going forward. So I guess my question for Anatol is in terms of global project FIDs, do you think we're near the end of this wave or in the middle?
  Response: There have been many FIDs this year but contracting is cyclical; while a robust year of FIDs is underway, the market remains in an active phase rather than at the end of the wave.

• Question from Manav Gupta (UBS): We actually went through your revised Sabine Pass filings in June. And just like if you look at the earlier February filing of 2024, you seem to have found a number of extra MTPAs in a very short period of time. And I'm just trying to understand how are your engineering teams able to accomplish this so quickly? And if you could help us understand how this additional capacity was realized or could be realized as you bring this project on?
  Response: Incremental MTPA arises from ongoing engineering and operational debottlenecking and permitting optimization; the team is pursuing low‑cost productivity improvements but FID decisions will require meeting Cheniere's strict investment standards.

Contradiction Point 1

LNG Market and Pricing Dynamics

It involves differing perspectives on the LNG market's pricing dynamics and how lower prices might incentivize demand, particularly in Asia, which can impact revenue forecasts and investor expectations.

How could lower LNG prices boost demand in Asia and what is the forward curve pricing range? - Jeremy Tonet(JPMorgan)

2025Q3: We expect a transition in the LNG market as supply increases. In Asia, demand is expected to grow steadily, driven by infrastructure expansion and increased gas consumption in sectors like power. The pricing range suggests moderation, which will benefit demand elasticity and stabilize global balances. - Anatol Feygin(CMO)

How does the EU's energy purchase agreement affect business discussions, especially with APAC customers? - Jeremy Bryan Tonet(JPMorgan)

2025Q2: We see LNG volumes ramping aggressively over the next few years. The market does have some pricing dynamics to it where, with increased volumes, it moderates the price. We think the current pricing environment is sustainable given the demand going forward. - Jack A. Fusco(CEO)

Contradiction Point 2

Capital Allocation Strategy

It involves changes in the company's capital allocation strategy, specifically regarding share buybacks and the deployment of tax savings, which are crucial for investor understanding of the company's financial priorities.

Can you comment on the pace of share buybacks in light of recent activity? - Jeremy Tonet(JPMorgan)

2025Q3: The buyback program is supported by significant liquidity and valuation that is lower than FID projects. The program aims to demonstrate conviction in Cheniere's long-term value, and we expect to continue with our aggressive buyback strategy. - Zach Davis(CFO)

How much incremental cash from tax savings do you expect in the next few years, and how will it be allocated? - John Ross Mackay(Goldman Sachs)

2025Q2: Our capital allocation remains flexible and disciplined. We are focused on maintaining our strong balance sheet, investing in growth and utilization of our existing liquefaction capacity, strategic investments and acquisitions, as well as returning capital to shareholders when opportunities arise. - Zach Davis(CFO)

Contradiction Point 3

Feed Gas Challenges and Production Reliability

It involves the company's approach to addressing feed gas challenges, which are critical for production reliability and operational performance.

How is Cheniere addressing feed gas challenges this quarter? - John Mackay(Goldman Sachs)

2025Q3: Our teams have been addressing variabilities in feed gas composition, particularly from the Permian, using small capital investments and operational adjustments to maintain production reliability. - Jack Fusco(CEO)

How does the EU's energy purchase agreement affect your commercial discussions, especially with APAC customers? - John Ross Mackay(Goldman Sachs)

2025Q2: We have seen an uptick in production reliability. We've been doing a lot of work in this area to try and improve the quality of our feed gas sources. - Jack A. Fusco(CEO)

Contradiction Point 4

Contracting Strategy and Market Sophistication

It highlights differences in how Cheniere views its competitive strategies and the sophistication of market participants, potentially impacting its ability to secure favorable long-term contracts.

How do you see contracting with non-LNG market entrants? - Brandon Bingham (Scotiabank)

2025Q3: The LNG market has evolved significantly from a decade ago, and new entrants face a competitive landscape. We will focus on maintaining a disciplined approach to contracting with investment-grade counterparties to manage volatility. - Anatol Feygin(CMO)

Can you discuss the current contracting market and how trade agreements with the U.S. and others affect it, particularly regarding LNG as a key vehicle for balancing trade? - Jeremy Tonet (JPMorgan)

2025Q1: Cheniere is in a strong position due to LNG's significant contribution to the U.S. trade balance. We are fortunate to have a reputation and track record that allows us to be highly selective in our commercial engagements. The sophistication of market participants and the liquidity brought by flexible volumes help us navigate trade dynamics effectively. - Anatol Feygin(CMO)

Contradiction Point 5

Train 4 Production Contribution

It involves differing statements about the expected production contributions from Train 4, which could impact financial forecasts and investor expectations.

How will the EU's ban on Russian imports impact marketing activities next year? - Theresa Chen (Barclays)

2025Q3: Train 4's impact in 2025 is minimal, but the focus remains on the 47-48 million tons from existing trains. Major maintenance this summer reduces production, and we're optimistic about meeting guidance. - Zach Davis(CFO)

How might a resumption of Russian gas flows affect Europe's vulnerability to supply shocks? - Theresa Chen (Barclays)

2025Q1: We have made very good progress on Train 4. We're currently investing in that and expect to bring Train 4 online in the second step by the end of '25. We expect Train 4 will end up, as we said at the analyst conference, contributing approximately 2 million tons by the end of 2025. - Zach Davis(CFO)