Cheniere Energy, Inc. (LNG) Earnings

Management highlights

### Geopolitical and Market Context - Geopolitical tensions and ongoing conflict have severely constrained LNG exports through the Strait of Hormuz, removing ~18 million tons of Q2 2026 supply. Global LNG exports still declined ~3 million tons year-over-year despite production increases elsewhere, creating one of the largest sudden disruptions to internationally traded gas supply in recent years. - Global LNG markets remain precariously balanced: Europe entered summer with an 11 BCM storage deficit (equivalent to ~100 cargoes) versus the five-year average, and is unlikely to reach the 80% storage target before winter 2026/27 even if Hormuz flows normalize. Each additional month of constrained flows reduces Europe's starting winter storage level by ~5 percentage points. - U.S. LNG exports shifted decisively to Asia in Q2, reaching a quarterly record of ~11 million tons, with flexible destination contracts allowing the company to quickly respond to changing market price signals. China's diversified supply portfolio allowed it to absorb most of the supply shock via reduced imports and cargo redirection, rather than widespread global demand destruction. ### Operational Construction Progress - CCL Stage 3 project is over 98% complete: Substantial completion of Train 6 was achieved in June 2026, commissioning of Train 7 has commenced with first LNG expected imminently, and substantial completion of Train 7 is expected in the coming months, well ahead of the 2027 guaranteed date. - Mid-scale Trains 8 and 9 and the associated de-bottlenecking project is over 48% complete, tracking ahead of schedule across all critical work streams, with piling completed and major equipment arriving on or ahead of schedule. - Phase 1 of the Sabine Pass expansion has signed a $4.7 billion lump sum turnkey EPC contract with Bechtel Energy, with early engineering and critical equipment procurement already underway under a limited notice to proceed. The project adds over 6 million tons per annum (Mtpa) of production capacity (a 10% total increase for Cheniere) via a new Train 7 and boil-off gas reliquifaction unit, leveraging existing brownfield infrastructure to reduce costs. Regulatory approvals are expected by end-2026, with final investment decision (FID) expected in early 2027. ### Capital Allocation and Financial Management - In Q2 2026, the company repurchased 2.2 million shares for $550 million, bringing total first half 2026 buybacks to $1.1 billion for nearly 5 million shares, aligned with the long-term target of 175 million outstanding shares by the end of the 2020s. - A quarterly dividend of 55.5 cents per common share was declared, bringing first half 2026 total dividend payout to ~$230 million. Management remains committed to growing the dividend by at least 10% annually through the end of the decade, with a next increase expected to be approved for Q3 2026. - In May 2026, the company issued $1 billion of 2036 notes and $750 million of 2056 notes at CQP, the first ever 30-year issuance at CQP, further extending debt maturities. Net proceeds were used to redeem $1.5 billion of 2027 senior secured notes and fund early work on the Sabine Pass expansion. Growth capex of $1.1 billion was funded in Q2, with ~$900 million from debt and ~$200 million from equity. - An accounting change was implemented at end-Q2: normal purchases and normal sales accounting exception was designated for 75% of IPM agreement volumes, eliminating quarterly mark-to-market derivative adjustments for these volumes and reducing future net income volatility from commodity price swings, better reflecting the company's stable long-term cash flow profile.

Guidance

- Full year 2026 guidance has been upwardly revised for the second consecutive quarter, with the new low end of both adjusted EBITDA and DCF above the previous high end of the ranges. Consolidated adjusted EBITDA is now guided to $7.9 to $8.4 billion, and distributable cash flow is guided to $5.3 to $5.8 billion, a $650 million and $550 million increase at the midpoint respectively. - Full year 2026 production guidance has been tightened and increased from 52 to 54 Mt to 53 to 54 Mt, a 0.5 Mt increase at the midpoint driven by operational reliability improvements, accelerated new train ramp-up, and debottlenecking gains. More than two-thirds of the production increase comes from reduced downtime and reliability improvements at existing facilities, with only one-third from early Stage 3 ramp-up. - CQP 2026 distribution guidance is maintained at $3.10 to $3.40 per common unit to accommodate early funding for the Sabine Pass expansion. - The upside to guidance is driven by: improved production outperformance and reliability, higher realized and forecast marketing margins for the remainder of 2026, and locked-in gains from upstream and downstream optimization activities. Less than 1 million tons (50 TBTU) of 2026 production remains unsold, meaning a $1 change in market margins impacts full year EBITDA by less than $50 million. - On the Q3 2026 earnings call, management will provide the first 2027 production forecast and expected open capacity, the first full year with all of Stage 3 operational. Management expects the current $8+ billion run-rate EBITDA level to be sustained long-term even at $2.50 to $3 LNG margins, as the company completes its expansion projects.

Segment performance

Cheniere Energy does not break out performance for distinct product segments in this call. All operations are consolidated around liquefied natural gas (LNG) production, marketing, and export infrastructure. For the second quarter of 2026, consolidated results were: adjusted EBITDA of approximately $1.8 billion, distributable cash flow (DCF) of approximately $1.2 billion, and net income of approximately $3.1 billion, an increase of nearly $1.5 billion year-over-year. The firm produced and exported 184 cargoes totaling 672 TBTU, a 20% increase over the second quarter of 2025, with 657 TBTU of LNG recognized in income during the quarter. The year-over-year increase in revenue and profit is driven by higher LNG delivery volumes from new capacity at CCL Stage 3, no major planned maintenance outages in the quarter, higher marketing margins, and gains from optimization activities amid elevated gas price volatility.

Risks & headwinds

- Persistent geopolitical tension and continued disruption to LNG exports through the Strait of Hormuz further tighten global LNG markets, leaving Europe more exposed to cold winter weather and competing Asian demand for marginal cargoes, which could increase price volatility and supply shortages globally. - A large amount of new LNG capacity (over 100 Mtpa) has reached FID since 2025 that has not yet been contracted to end users, creating a competitive landscape for long-term offtake agreements that could pressure pricing for future expansion projects. - Elevated and sustained LNG market volatility creates uncertainty around full year 2026 results, despite the low level of unsold volumes, due to potential impacts from the timing of Train 7 substantial completion, year-end cargo timing, and Henry Hub price swings on lifting margins. - Feed gas nitrogen content variability from Permian Basin production creates operational challenges, though management has implemented multiple mitigation strategies to manage current levels.

Analyst Q&A

• Q: With Europe's low winter storage levels, how will LNG demand and trade flows balance between Asia and Europe, when will we see new long-term SPAs to support future expansion, and have we reached the limit of China's demand flexibility? /

  A: Management confirms Europe faces a major challenge reaching even 70% winter storage, much less the 80% target, and competition for marginal cargoes will be elevated. Cheniere expects to secure mid-single-digit millions of tons of new long-term offtake within 12-18 months to support its approved expansion projects. Management states China is near the limit of its ability to absorb global supply shocks via demand reduction and cargo redirection, as China will prioritize rebuilding its own inventories ahead of winter.

• Q: What has driven the recent operational outperformance that supported the guidance upgrade, and is sustainable higher effective capacity possible? /

  A: Operational outperformance comes primarily from improved reliability and reduced downtime after fixing root-cause issues from 2025, optimized maintenance scheduling, and targeted de-bottlenecking projects like new high-efficiency fin fans that deliver 40% more cooling for the same energy use. More than two-thirds of the 0.5 Mt production increase comes from these reliability gains, with only one-third from early Stage 3 ramp-up. All gains are expected to be repeatable and sustainable in future years.

• Q: How has the Middle East conflict changed long-term commercial discussions for new SPAs, and what pricing impact has it had? /

  A: Post-conflict, customer discussions are much more focused on supply security and reliability, which plays to Cheniere's strengths as a proven, consistent operator with an untarnished delivery track record. The main competitive headwind remains that ~100 Mtpa of new FID capacity globally is still seeking end-user offtake. Management expects to secure its targeted mid-single-digit Mtpa of offtake at its desired premium price levels over the next 12-18 months, but large-scale 20 Mtpa contracting is unlikely in that timeframe.

• Q: Can you break down the sources of the $650 million midpoint guidance increase? /

  A: Half of the guidance increase ($300 million) comes from the 0.5 Mt production upgrade, when multiplied by current elevated margins of $10 to $13 per ton. Another $200 million comes from selling the previously unsold ~1 million tons of 2026 production at current high margins, plus a small uplift from higher Henry Hub prices. The remaining $100 to $150 million comes from upstream and downstream optimization activities. Less than 50 TBTU of 2026 production remains unsold, and management is already locking in 2027 cargoes at margins well above long-run trend levels.