Executive Summary / Key Takeaways

• Cheniere Energy is a leading U.S. LNG exporter leveraging a highly contracted, brownfield infrastructure platform to capitalize on growing global natural gas demand and energy security needs.
• Recent financial results reflect strong underlying operational performance and revenue growth driven by higher volumes and market prices, though reported net income was impacted by non-cash derivative fair value changes.
• The Corpus Christi Stage 3 expansion is progressing ahead of schedule and budget, with Train 1 achieving substantial completion and the first three trains targeted online by the end of 2025, providing a clear catalyst for near-term production and financial growth.
• Cheniere is actively developing further brownfield expansions at both Corpus Christi (Midscale Trains 8-9 targeting 2025 FID) and Sabine Pass (Expansion targeting 2026-2027 FID), aiming for over 90 mtpa of permitted capacity to support long-term growth.
• The company's disciplined capital allocation plan prioritizes shareholder returns (active buybacks, growing dividend), balance sheet strength (investment grade ratings, debt reduction), and funding accretive brownfield growth, targeting over $20 per share of run rate distributable cash flow.

Powering the World: Cheniere's Foundation and Growth Engine

Cheniere Energy (LNG) stands as a cornerstone of the global liquefied natural gas market, transforming abundant U.S. natural gas resources into a vital energy supply for nations worldwide. As the largest producer of LNG in the United States and a top-tier global operator, Cheniere has built its business on a foundation of large-scale infrastructure, long-term contractual commitments, and a relentless focus on operational excellence. This integrated platform, spanning liquefaction, export terminals, and connecting pipelines, positions Cheniere to play a critical role in meeting the world's increasing demand for secure, affordable, and cleaner-burning energy.

The company's strategic approach is centered on leveraging its established brownfield sites at Sabine Pass, Louisiana, and Corpus Christi, Texas. This strategy minimizes development risk and capital intensity compared to greenfield projects, allowing for efficient, accretive expansions. The core of Cheniere's business model lies in its long-term Sale and Purchase Agreements (SPAs) and Integrated Production Marketing (IPM) agreements. These contracts, predominantly structured with fixed fees and variable components indexed to U.S. natural gas benchmarks like Henry Hub, provide significant revenue stability and insulate the company from much of the volatility in international spot prices. With approximately 95% of anticipated production from existing and under-construction capacity contracted through the mid-2030s, Cheniere boasts a level of cash flow visibility that differentiates it within the energy infrastructure sector.

A key aspect of Cheniere's operational and technological approach, particularly evident in its latest expansion, is the adoption of midscale liquefaction trains and electric compression. The Corpus Christi Stage 3 project, featuring seven midscale trains, represents a different design and technology for Cheniere compared to its larger, original trains. This modular approach is designed for faster construction and commissioning, as demonstrated by Stage 3 progressing ahead of schedule and budget, with Train 1 achieving substantial completion in March 2025 and Train 2 well into commissioning. Lessons learned from Train 1 are expected to accelerate the ramp-up of subsequent trains. The use of electric compression at Stage 3, as opposed to gas compressors used previously, is another specific design choice aimed at managing electricity demand and potentially offering efficiency or environmental benefits. Furthermore, Cheniere is implementing advanced operational technologies like its Quantification, Monitoring, Reporting, and Verification (QMRV) programs, which utilize measurement-informed data to establish rigorous environmental targets, such as the voluntary Scope 1 methane emissions intensity target of 0.03% by 2027. These technological and operational differentiators contribute to Cheniere's competitive moat by enabling more predictable project execution, potentially enhancing cost efficiency, bolstering operational reliability, and supporting the company's ESG positioning, which is increasingly valued by global customers.

A Track Record of Execution and Recent Performance

Cheniere's history is marked by a successful transition from an LNG import focus to becoming a dominant export player. The formation of CQP (CQP) in 2007 laid the groundwork, followed by the development of the Sabine Pass and Corpus Christi terminals and their associated pipelines. Operational milestones, such as exporting the 4,000th LNG cargo in March 2025 and Cheniere Marketing selling its 1,000th cargo in Q1 2025, underscore the scale and reliability achieved over just nine years of export operations. The company's safety record, including Corpus Christi surpassing 6 million and Sabine Pass surpassing 10 million man-hours without a lost time incident, further reinforces its reputation for operational excellence – a critical factor for global energy buyers.

Recent financial performance reflects the strength of this established platform, even amidst market volatility. For the three months ended March 31, 2025, total revenues increased significantly to $5,444 million, up from $4,253 million in the same period last year. This increase was primarily driven by a $725 million rise in revenues tied to higher Henry Hub pricing (benefiting long-term contracts) and a $428 million increase from Cheniere Marketing's short-term sales volumes at higher international prices. However, reported net income attributable to Cheniere decreased to $353 million from $502 million year-over-year. This decline was largely due to a $277 million unfavorable change in the fair value of derivative instruments, primarily commodity derivatives, influenced by fluctuating market conditions and price differentials. A $70 million decrease in sublease income also contributed. These impacts were partially offset by a $214 million increase in revenues net of cost of sales (excluding derivatives) from higher marketing margins and a $37 million decrease in net interest expense due to increased capitalized interest on construction assets and debt reduction. The stability in Consolidated Adjusted EBITDA, approximately $1.9 billion in Q1 2025 compared to Q1 2024, highlights the underlying operational cash generation power, distinct from the non-cash impacts of derivative accounting.

Cheniere maintains a robust liquidity position, with $10,553 million in total available liquidity as of March 31, 2025, including $2,511 million in cash and cash equivalents and $7,685 million in available credit commitments.

Net cash provided by operating activities was strong at $1,228 million in Q1 2025. This financial strength supports the company's capital allocation priorities.

Strategic Growth and Capital Deployment

Cheniere's strategic focus is firmly on expanding its brownfield capacity and returning value to shareholders. The Corpus Christi Stage 3 project is the immediate growth engine. With Train 1 substantially complete and commissioning underway for Train 2, the project is on track to bring the first three trains online by the end of 2025, with potential for Train 4 commissioning as well. Total CapEx spend on Stage 3 reached over $4.8 billion by March 31, 2025. The company continues to equity fund this project, preserving flexibility to utilize its over $3 billion undrawn Stage 3 term loan later in 2025, potentially for funding the next phase of growth.

That next phase is the CCL Midscale Trains 8-9 project, expected to add approximately 3 mtpa of capacity. This project is rapidly progressing towards a final investment decision (FID) targeted for the coming months of 2025. Key milestones achieved include receiving the FERC permit in March 2025 and site work authorization in May 2025. The company has already issued over $500 million in limited notices to proceed (LNTPs) to Bechtel, locking in costs and schedule ahead of FID and mitigating inflation risk.

Looking further ahead, Cheniere is also developing the SPL Expansion Project at Sabine Pass, with potential for up to 20 mtpa of additional capacity. An application was submitted to FERC in February 2024, and the company is targeting FID for a first phase in late 2026 or more likely 2027. The strategic intent is to secure permits for over 90 mtpa of total capacity across both sites, leveraging brownfield advantages and positioning Cheniere for sustained growth well into the next decade.

Underpinning these growth ambitions is Cheniere's disciplined 2020 Vision capital allocation plan. The company has already allocated approximately $15 billion of its initial $20 billion target by 2026. This includes significant shareholder returns: repurchasing approximately 1.6 million shares for $350 million in Q1 2025 (with $3.5 billion remaining on the authorization through 2027 and active buybacks post-quarter) and paying a quarterly dividend of $0.50 per share, with a commitment to 10% annual growth through the decade. The plan also focuses on balance sheet management, achieving investment grade credit ratings (Fitch upgraded Cheniere and CQP to BBB in Feb 2025) and strategically reducing debt, including the repayment of the SPL 2025 notes in March 2025.

This balanced approach aims to deliver over $20 per share of run rate distributable cash flow.

Competitive Positioning and Market Dynamics

Cheniere operates in a global LNG market alongside integrated energy majors like ExxonMobil (XOM), Chevron (CVX), Shell (SHEL), and TotalEnergies (TTE), as well as other U.S. LNG developers. While majors offer scale and diversified portfolios, Cheniere differentiates itself through its specialized focus, operational efficiency, and integrated marketing capabilities (CMI). Cheniere's brownfield development strategy and modular construction approach (midscale trains) offer advantages in execution speed and cost relative to greenfield projects. Its long-term, take-or-pay contracts provide a level of revenue stability that contrasts with the more volatile segments of its larger, more diversified competitors. Cheniere actively avoids participating in a "race to the bottom" for commoditized volumes, instead focusing on differentiated offerings and building symbiotic relationships with creditworthy long-term buyers who value reliability and flexibility. The company's pioneering of destination flexibility in U.S. LNG contracts is a key competitive strength, allowing volumes to flow to markets where demand is strongest, a capability highlighted during periods of geopolitical and market disruption.

The global LNG market remains characterized by volatility and uncertainty driven by geopolitical risks, trade dynamics, and supply/demand balances. While U.S. projects are expected to add over 80 mtpa of incremental capacity by 2029, this growth is anticipated to help rebalance the market and reinforce LNG affordability, supporting long-term demand. Europe's continued need for secure supply, particularly given low storage levels and uncertainty around Russian flows, and Asia's unwavering long-term demand growth (expected to nearly double by 2040, with China remaining a critical node) underscore the robust market fundamentals supporting Cheniere's expansion plans. The company has successfully navigated trade tensions, such as past tariffs with China, by leveraging the flexibility of its contracts to redirect volumes without impacting overall production or market growth.

Risks and Considerations

Despite its strong position, Cheniere faces several risks. Regulatory and permitting challenges, including potential delays or conditions on expansion projects from agencies like FERC and DOE, remain a factor, although the company has a strong track record of navigating these processes. Market price volatility, while mitigated by long-term contracts, can impact the fair value of derivative instruments and affect earnings from uncontracted volumes. Geopolitical events, unusual weather patterns, and potential disruptions to global energy infrastructure could also impact operations and market dynamics. Construction risks, though managed through fixed-price EPC contracts and experienced partners like Bechtel, could still lead to cost overruns or delays. Changes in U.S. tax policy could affect cash tax payments, although management expects the NPV impact to be immaterial. The uncertainty surrounding USTR maritime transport restrictions on U.S. LNG exports also presents a potential, though currently unclear, risk.

Outlook and Investment Thesis

Cheniere's outlook remains positive, underpinned by its reconfirmed full year 2025 guidance ranges of $6.5 billion to $7 billion in consolidated adjusted EBITDA and $4.1 billion to $4.6 billion in distributable cash flow. This guidance reflects expected production of 47 million to 48 million tons, driven by the ramp-up of the first three Corpus Christi Stage 3 trains, positioning 2025 for growth over the 2024 trough. The remaining unsold volume for 2025 is limited (50-75 TBtu), with a manageable sensitivity to market margin changes ($50-75 million impact per $1 change).

The core investment thesis for Cheniere is compelling: it offers investors exposure to the secular growth in global LNG demand through a highly reliable, predominantly contracted, and expanding infrastructure platform. The company's brownfield development strategy, coupled with its operational excellence and differentiated technological choices like midscale trains and QMRV, provides a competitive edge in bringing new capacity online efficiently. Management's disciplined capital allocation plan, balancing accretive growth investments with increasing shareholder returns and balance sheet strength, supports long-term value creation. While derivative accounting introduces earnings volatility and external market factors present risks, the underlying business fundamentals – stable contracted cash flows, operational reliability, and a clear growth pipeline – position Cheniere favorably to capitalize on the enduring global need for secure and flexible natural gas supply for decades to come.