Good day, and welcome to the Cheniere Energy Inc. 2Q 2020 Earnings Call and Webcast. Today's conference is being recorded. At this time, I'd like to turn the conference over to Randy Bhatia, VP of Investor Relations. Please go ahead sir.

Thank you, operator. Good morning everyone, and welcome to Cheniere's second quarter 2020 earnings conference call. The slide presentation and access to the webcast for today's call are available at cheniere.com. Joining me today 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 2 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 3. 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. I'm pleased to be here today to review our results from the second quarter of 2020. We had an outstanding quarter, especially considering the impact of the COVID-19 pandemic on the global economy and energy markets, on how people live and work and how companies worldwide have had to adapt through everyday operations. The current environment has presented challenges, but the resiliency of our customer-oriented business and the professionalism and resolute focus of the Cheniere workforce continues to deliver outcomes, which benefit all of our stakeholders. The second quarter was highlighted by a number of significant achievements across multiple phases of our business and our visibility on achieving our 2020 financial targets remain steadfast. Before I get started though, I'm sure you noticed this morning's personnel announcement of the departure of Michael Wortley, as Cheniere's CFO. I want to personally thank Michael for standing by my side over the last four years. And more importantly, for all of his contributions to Cheniere's success over the last close to 16 years. Michael will be missed and we wish him well on his future endeavors. Succession planning and employee development are core principles here at Cheniere and for our Board. And I am pleased to announce that effective immediately Zach Davis, our Senior Vice President of Finance will assume the role of Chief Financial Officer. Zach has been with Cheniere for nearly seven years, during which time he has led our capital markets activities and has also been responsible for capital planning, financial planning and in the corporate budget. Please join me in congratulating Zach on his new role and you will hear more from him later on this call. Now turn to slide 5. In the second quarter of 2020, we generated $1.4 billion of consolidated adjusted EBITDA and distributable cash flow of approximately $570 million on revenues of $2.4 billion. This resulted in net income attributable to common stockholders of approximately $200 million. Despite continued challenges in the LNG market environment, driven by short-term supply and demand dynamics that are amplified by the impacts of the pandemic. I'm pleased today to reconfirm our 2020 full year guidance ranges of $3.8 billion to $4.1 billion in consolidated adjusted EBITDA and $1.0 billion to $1.3 billion in distributable cash flow. This further illustrates Cheniere's strength and resiliency of our business model and contract structures and our ability to execute on our plan. During the second quarter our long-term customers further utilized the optionality in their contracts by canceling cargoes at both SBL and CCL. As you know, this results in customers paying us the fixed liquefaction fee related to those cargoes and extinguishes our obligation to produce those cargoes. As we discussed in our call last quarter, when this situation occurs we recognize the revenue associated with those cargoes upon receipt of the notice of cancellation, which creates a timing mismatch when looking at our business on a quarter-to-quarter basis. Zach will discuss this in more detail in his remarks. During the second quarter, we produced and exported 78 cargoes of LNG. Since the start-up of operations, we have produced and exported over 80 million tons of LNG from our projects, which has reached over 35 countries and regions around the world. In May, the date of first commercial delivery or DFCD was reached under the long-term SBAs related to Train 2 at Corpus Christi. We have successfully onboarded these long-term customers and we welcome them to the Cheniere complex. While the environment in the spot LNG market remains relatively weak, I'm encouraged that dynamics in the LNG market are improving and unfolding as we have expected. As worldwide economies have begun to recover from the pandemic, we are beginning to see short-term gas prices stabilize and spreads are beginning to improve as we look into the winter months and beyond. The long-term fundamentals supporting our business remain firmly intact as a structural shift to clean burning natural gas continues to progress. Anatol will provide a more fulsome update on the global LNG market momentarily. Our current construction efforts continue our legacy of best-in-class execution. Bechtel is constructing Corpus Christi Train 3 and Sabine Pass Train 6 on accelerated schedules, well ahead of guaranteed time lines and within budget. Corpus Christi Train 3 is over 90% complete and Bechtel commenced early commissioning activities on Train 3 during the second quarter introduced first fuel gas in early July and is maintaining a substantial completion estimate of the first half of next year. We certainly look forward to taking care custody and control of the eight train from Bechtel ahead of schedule and within budget early next year. Sabine Pass Train 6 is approximately 64% complete. And Bechtel has recently informed us of an acceleration to the Train 6 timeline now projecting substantial completion to be achieved in the second half of 2022 ahead of the previous estimate of the first half of 2023. In addition, we recently issued full notice to proceed to Bechtel on the construction of the third marine birth at Sabine Pass and that project is expected to be complete in the first half of 2023. Our finance team was very busy during the second quarter and they were extremely successful in executing our financial strategy. In aggregate, we raised almost $4.7 billion through early July strategically addressing near-term maturities and replacing higher cost debt across multiple entities within the Cheniere structure. I'll touch upon a couple of the transactions. First in May, we refinanced the nearest term maturity in our complex by issuing $2 billion, a 4.5% notes due 2030 at Sabine Pass liquefaction. Then we raised a three-year delayed draw term loan at Cheniere of almost $2.7 billion in order to redeem the 2025 convertible notes issued by Corpus Christi Holdco II and a portion of the 2021 convertible notes issued by Cheniere. This flexible cost effective bank capital enables us to settle the convertible notes with cash as opposed to issuing equity, preventing dilution, which we had previously modeled in our run rate guidance. While we did not repurchase shares under our share repurchase program during the second quarter these strategic transactions resulted in a reduction in run rate share count of over 40 million shares. That's all of Zach's thunder that I'll steal on the refinancings. But investors should recognize that these are material accomplishments, which not only address near-term maturities and relatively high cost debt, but also demonstrate our strong ability to access the capital markets even in this period of volatility and uncertainty, which speaks to the reputation and strength of Cheniere's business with our banks and institutional capital providers. Now turn to slide 6. In early July, we published our inaugural corporate responsibility report titled, First and Forward. The publication of this report represents a significant step forward in Cheniere's commitment to transparency and sustainability reporting and will form the foundation of our disclosures around ESG risks and opportunities going forward. The development of this report was led by Chris Smith, our Senior VP of Policy Government and Public Affairs; our dedicated climate and sustainability team; and by a cross-functional team of subject matter experts from nearly every business unit within the company because ESG issues touch nearly every business unit within the company. The report identifies and reports on approximately 70 key disclosures across six-key things; climate, environment, workforce, health and safety, community and governance. Our key themes and disclosures in line with the recommendations of a leading reporting standards such as the taskforce on climate related financial disclosures, or TCFD, the sustainability accounting standards board and others. Sustainability is a priority at Cheniere and our urgency to address the key considerations of ESG issues is core to our operations and shared values. As such we are committed to transparency and how we report on these issues. We have an excellent evolving story to tell on environmental social and governance issues and we hope this message is communicated clearly in our inaugural report. And now, I'll turn the call over to Anatol, who will provide an update on the LNG market.

Thanks Jack and good morning everyone. Please turn to slide 8. I'll start by reviewing the trends we observed throughout the first half of 2020, then highlight the factors that we think will continue to impact the global LNG supply and demand dynamics going forward. Many of these factors started to become apparent late in the second quarter. And we believe they bring into focus two main themes, the flexibility of the global LNG supply system and the resilience of LNG as a fuel choice. Global LNG supplies increased 6% year-on-year in the first half of 2020, reaching 188 million tons. The U.S. contributed most of this LNG production growth with exports rising 64% year-on-year to approximately 26 million tons. However, supply growth for the first half of this year was at a lower rate than the significant growth in LNG supply that began several years ago, as the current cycle of supply additions started to slow and as global liquefaction supply adjusted output downwards to adapt to the impact of COVID-19 pandemic on gas demand. Most measures introduced to contain the coronavirus including city lockdowns and restrictions on travel impacted gas demand and LNG markets in the second quarter. With weak LNG demand in Asia, more global production was pushed into Europe, resulting in record seasonal gas inventory levels and exerting downward pressure on spot gas prices in Europe and Asia. During the second quarter, TTF averaged $1.76 per MMBtu, approximately 60% lower than the comparable 2019 period, while JKM averaged $2.58 in MMBtu during the second quarter, 50% lower year-on-year. By late May, the combination of supply side flexibility demonstrated by U.S. and global operations with a gradual recovery in LNG demand in India China and the Middle East had reduced the flow of surplus LNG cargoes to Europe. Global LNG supply trended down for the third consecutive month in June, dropping slightly below the levels of the second quarter of 2019. The global supply utilization decreased to 82% on average in the second quarter this year versus 93% in the first quarter. As a result, LNG supply growth turned negative in the second quarter, declining by about one million tons ending a six quarter run of supply additions which averaged close to 10 million tons each quarter. While it’s too early to call this a bullish market, we believe the recent slowdown in production is constructive in the near term and reduces the risk of reaching maximum natural gas storage levels too early in the year at European storage facilities. Now turn to slide 9, where I will address the European market in some more detail. The four residual LNG cargoes to Europe continued through a significant portion of the second quarter despite gas consumption declines, resulting from measures put in place to fight the spread of COVID-19. LNG imports into Europe grew 6.7 million tons or about 15% year-on-year during the first half of 2020. Consumption data however suggests that gas demand in Europe declined nearly 8% or 4.5 Bcf a day during this period due to a mix of weather and COVID 19 impact. Sharp declines in LNG imports into Europe began in June and have continued into July. These decreases have played an important role in helping ease the European storage surplus from 15 BCM or over 0.5 trillion cubic feet in May to six bcm or just over 200 Bcf at present. LNG is not the only lever that impacts over supply risk in the current gas market environment in Europe. As you might expect, pipeline supplies which are the largest component of European gas supply saw a large decline in the first half of 2020, decreasing by 6.8 Bcf a day year-on-year. The reduction in LNG flows into Europe in June is in large part a direct result of the turndown in global supply that I highlighted on the prior slide. The ability of global LNG buyers to exercise load management more effectively whether by lower contract dispatch or lower U.S. cargo nominations in combination with destination flexibility has given them important new tools to help manage the impact of adverse events. As a result, this has helped increase the flexibility and resilience of the global LNG trade. Finally in Europe, despite robust renewables output during the quarter as well as a decline in total electricity demand, the price competitiveness and elasticity of LNG have helped facilitate gas dispatch contributing to its resilience versus pipeline imports and other competing fuels. Now let's move to slide 10 to look at supply-demand dynamics in Asia. Total second quarter LNG imports into Asia remained flat throughout the quarter and only declined slightly year-on-year by less than one million tons as demand declines in Japan and South Korea were largely offset by a swift recovery in Chinese gas demand and double-digit LNG import growth rates in Taiwan and Thailand. Year-on-year LNG imports increased 20% in China, 14% in Taiwan and 10% in Thailand, Japan and South Korea LNG imports declined by 9% and 8% respectively. In the second quarter as these markets dealt with the impact of COVID on gas demand as well as demand fallout from a mild winter. However, looking forward, we see some positive factors for these two markets. Recently South Korea's Ministry of Trade Industry and Energy introduced additional policy measures that are expected to support gas demand. The government plans to lower retail natural gas prices for households and industries by an average of 13.1% beginning in July to reflect lower LNG import costs. In Japan, operational nuclear capacity fell to its lowest level in two years in June and is expected to further decline in the coming months, as capacity is expected to be taken off-line as a result of not meeting antiterrorism requirements. Only four out of nine restarted nuclear power units are expected to be operating by November of this year, which could anchor additional LNG demand. Through the first half of 2020, imports into Asia increased year-on-year with most of the support for demand coming from India, Taiwan, Thailand and China. In China gas demand in April and May, increased by 8% over 2019 levels compared to a growth rate below 2% in the first quarter. After a steep economic contraction in the Chinese economy in February, China's manufacturing PMI has been in expansion mode for four consecutive months since March. Also China's second quarter GDP was up 3.2% year-on-year, a rebound from a 6.8% drop in the first quarter. These factors all supported the increase in China's LNG demand which also gained market share by displacing pipe imports from Central Asia. Similarly in India, despite strict virus containment measures LNG use in the first half of 2020 increased 15% year-on-year to just over three Bcf a day while domestic gas production declined approximately 15% to an average of just over 2.5 Bcf a day in the January to May period. Overall, gas demand in that same period increased by 6% to about 5.5 Bcf a day. A similar pattern of prioritizing LNG imports over domestic gas production was seen in Thailand, where LNG imports also rose about 14% to just over 3 million tons in the first half of 2020, as a result of favorable economics and the flexible attributes of LNG. To conclude, COVID-19 has impacted industrial activity and have adverse effects on gas demand worldwide. This was particularly notable in key LNG markets in the second quarter. Towards the end of the quarter, we saw a slowdown in LNG production and decreased flows of excess cargoes to Europe. We believe this supply response is constructive in the near term and reduces the risk of reaching natural gas storage capacity at European storage facilities. While risks still remain in the near-term, as a result of ample storage inventories and reduced overall levels of economic activity, we see some positive factors for gas demand that are supportive of a near-term recovery in key LNG markets. We also reiterate that the long-term fundamentals remain attractive for LNG as a flexible and cleaner fuel. We see a supply demand gap of over 100 million tons by 2030 driven mainly by requirements from Asia's growing economies to feed new power generation and industrial demand displace coal and/or supplement declining domestic gas production. We continue to see interest from global players to enter the LNG import market from new players in existing importing countries to incumbents flying to expand into new markets, such as Africa and East Asia. We believe these markets require sustainable energy solutions including competitive LNG. As more than 150 million tons per annum of potential LNG capacity has been delayed or canceled and as high-risk projects continue to be sidelined, we Cheniere are well positioned and ready to address long-term supply shortages and capture demand opportunities for competitively priced LNG in the global market. Before turning the call over to Jack, I'd like to thank Michael for his partnership and tireless contributions to Cheniere and I wish him nothing but the best in the next chapter of his life. Likewise, I'd like to join Jack in congratulating Zach on becoming CFO and I will now turn the call over to him to review our financial results.

Thanks, Anatol and good morning, everyone. I'm excited to be here this morning. Over the last few years I've met many of you at investor events, conferences or in conjunction with our capital markets transaction. I look forward to getting out and meeting with more of the investment community, virtually for now, but hopefully in person at some point soon. Michael certainly leaves big shoes to fill but I'm beginning my role as CFO with the benefit of having had him not just as a boss but also as a mentor for nearly seven years as he hired me to work for him at Cheniere back in 2013. Under his leadership during that time we have raised over $50 billion in capital and reached FID on five trains, including the first greenfield LNG project in the Lower 48. Together, we developed Cheniere's capital allocation framework and balance sheet strategy including getting both Sabine Pass and Corpus Christi to investment grade and I fully intend to continue executing on those long-term plans. Michael delivered on Cheniere's long promised financial transformation which has accompanied our transition from development to operations and Cheniere is now in a strong financial position with investment-grade-rated projects, access to cost-effective capital and with the financial flexibility to de-lever, grow, provide capital returns or all of the above. When Michael became CFO, we had no EBITDA and most of the numbers on our financial statements had parentheses around them. But this year we'll generate around $4 billion of EBITDA and we are nearing an inflection point on free cash flow. To say I'll miss working side-by-side with Michael every day is an understatement but with the benefit of his guidance and mentorship over the last seven years, I'm confident that I'm well equipped to lead a smooth transition and to continue -- Slide 12. For the second quarter we generated net income of $197 million, consolidated adjusted EBITDA of approximately $1.4 billion and distributable cash flow of approximately $570 million. For the first half of the year, we generated net income of $572 million, consolidated adjusted EBITDA of over $2.4 billion and distributable cash flow of approximately $830 million. For the first half of the year, we exported 727 TBtu of LNG from our liquefaction projects. We exported 274 TBtu of LNG or 78 cargoes, from our liquefaction projects during the second quarter. Total volumes exported were almost 40% or almost 182 TBtu, lower than exports in the first quarter of this year, primarily as a result of cargoes for which long-term customers elected not to take delivery. Additionally, we fulfilled some marketing sales utilizing third-party sourced cargoes, during the second quarter. For the second quarter we recognized an income, 305 TBtu of LNG produced at our liquefaction projects. And 34 TBtu of LNG sourced from third parties. Approximately 77% of the LNG volumes recognized, in income during the second quarter, was sold under either long-term SBAs or IPM agreements and the remaining 23% was sold by our marketing affiliate, either into the spot market or under short and medium-term contracts. Volumes sold under SBA or IPM agreements, decreased by approximately 113 TBtu, compared to the first quarter of 2020, driven primarily by cargoes for which long-term customers chose, not to take delivery of LNG, partially offset by the impact of reaching the data first commercial delivery or DFCD, under the long-term SBAs related to Corpus Christi Train 2 on May 1st. For the first half of the year, we recognized an income 764 TBtu of LNG produced, at our liquefaction projects and 48 TBtu of LNG sourced from third parties. As Jack mentioned, during the second quarter, our results were impacted by the timing of recognition of revenue related to cargo cancellations. When customers notify us that, they do not intend to lift cargoes flexibility, we provide them in their contracts. We recognize the related revenue, the fixed fees for those cargoes, at the time the notice is received. During the second quarter, we recognized revenue of over $700 million, related to, cancelled cargoes, including $458 million related to cargoes that would have been lifted during the third quarter, if customers had elected to lift the cargoes. Excluding the impact of cancelled cargoes, originally scheduled for the third quarter. And the $53 million impact of second quarter cargoes that were cancelled and recognized in the first quarter, our total revenues would have been $2 billion for the second quarter and approximately $4.65 billion, for the first half of 2020. The impact on consolidated adjusted EBITDA is similar to the impact on revenue. The impact of cargo cancellations on the recognition of fixed fees in our financial statements is one of timing, as we continue to record revenue and receive fixed fees under our long-term contracts overtime. But the forward nature of these cancellation notices means our results may fluctuate quarter-to-quarter, depending upon the number of cancellations for each period. To be clear, the aggregate impact of this revenue recognition timing, consideration to our financials over time is zero. When the global LNG market returns to balance and our projects return to full utilization, the current impact will reverse. And we may have a quarter with lower EBITDA. Income from operations for the second quarter was $937 million, a decrease of over $400 million, compared to the first quarter. The decrease was primarily due to the non-recurrence of net mark-to-market gains from the changes in fair value of commodity derivatives, which occurred in the first quarter. And increased costs incurred in response to the COVID-19 pandemic, partially offset by the $458 million of revenue recognized for cargoes cancelled during the second quarter, that were scheduled to be lifted during the third quarter. Excluding the impact of out-of-period cancellations, total margins on LNG were materially consistent in the first quarter to the second quarter. As a slight decrease in volumes sold, was offset by an increase in margins per MMBtu of LNG, which was driven by a higher proportion of volumes sold under long-term contracts, during the second quarter. Net income attributable, to common stockholders for the second quarter was $197 million or $0.78 per share, basic and diluted a decrease of over $175 million from the first quarter of 2020. This decrease was driven primarily by the decrease in income from operations, and increased loss on modification or extinguishment of debt partially offset by decreased interest rate derivative loss and decreased income tax expense. Turn now to slide 13. During the second quarter, we completed multiple financial transactions to address the nearest term debt maturities, across our structure which Jack touched on earlier. In May, SPL issued $2 billion or 4.5% senior secured notes, due 2030, and used the proceeds from the offering to redeem its senior secured notes, which were set to mature, in February 2021. In June, we entered into a $2.62 billion three-year delayed draw term-loan credit agreement, which was upsized in July to $2.695 billion to address the 11% CCH Holdco II convertible notes, due 2025 and our 2021 convertible notes. In July, we drew on the term loan to redeem all of the 11% convertible notes outstanding, at CCH Holdco II with cash, at a price of $1,080 per $1,000 principal amount. And we repurchased $844 million of the 2021 convertible notes outstanding at the Cheniere level at individually negotiated prices from a small number of investors. We anticipate using the remaining capacity under the term loan facility, along with cash on hand, to repay and/or repurchase the remaining outstanding 2021 convertible notes. After these transactions, there's approximately $465 million principal outstanding for the 2021 convertible notes and undrawn capacity of $372 million on the CEI term loan. These convertible notes transactions address the significant portion of a near-term maturity, eliminated the most expensive debt within our structure, simplified our capital structure and prevented significant share dilution that would have occurred if these notes were converted to shares. These transactions reduce our expected run rate share count by over 40 million shares or about 15%, thereby increasing our expected run rate distributable cash flow per share. With the 2021 maturities effectively addressed, the next maturity in the Cheniere complex is not until 2022. In the meantime, we will continue to manage our maturity profile by opportunistically refinancing and/or paying down callable bank debt in our structure, subject to market conditions. We did not repurchase any shares under our share repurchase program during the second quarter, but clearly made significant progress on reducing run rate share count by redeeming convertible notes with cash. Though, we did so by increasing our consolidated leverage. With that said, we remain committed to the capital allocation priorities we released in mid-2019, including reducing our consolidated leverage to achieve investment-grade credit metrics across our structure. Including a consolidated debt-to-EBITDA ratio in the mid to high 4 times range. Refinancing the convertible notes with debt was not in our original run rate guidance and we are committed to using excess capital for debt reduction to achieve our leverage targets. This will be our capital allocation priority in the short and medium term. Last week, we announced the quarterly distribution for CQP, the payment of which will end the subordination period and trigger the conversion of the $135 million CQP subordinated units owned by Cheniere into common units of CQP on a one-for-one basis, further simplifying our capital structure. The distribution payment and subordinated unit conversion are expected to occur in mid-August. This week, Moody's investor service upgraded its rating of CCH's senior secured debt from Ba1 to Baa3. CCH is now rated investment-grade by all three rating agencies, a reflection of the strength of our project economics and a result of derisking the project over time, through increased equitization and completion progress. Before I turn the call over for Q&A, I'd like to review our 2020 guidance. As Jack mentioned we have a clear line of sight to achieving our financial goals for the year, despite continued market headwinds. And today we are reconfirming our 2020 full year guidance of consolidated adjusted EBITDA of $3.8 billion to $4.1 billion and distributable cash flow of $1 billion to $1.3 billion that we continue to track to the lower end of the EBITDA guidance range. As we have hedged market price exposure for almost all of our LNG production capacity this year, today a $1 move in market margin would result in approximately $35 million change in consolidated adjusted EBITDA for the year. With that sensitivity weighted to the upside, given today's market margins. That concludes our prepared remarks. Thank you for your time and your interest in Cheniere. Operator, we are ready to open the line for questions.

Thank you. [Operator Instructions] We'll take our first question today from Christine Cho with Barclays.

Good morning, all. First, I'd like to offer my congratulations to Zach. Look forward to working more with you. And also would like to send our wellies to Michael. If I could maybe start -- since Q2 was a pretty difficult environment. But curious if you could give us an idea of what sort of opportunities you saw for CMI with third-party cargo. I guess I was a bit surprised at the number of third-party carloads, but there were also reports during the quarter that you issued a tender seeking LNG supply. So was that just an opportunity to take down production at your facility by really cheap cargoes at a price lower than what you could have supplied to customers for? And should we think that you lost in lower prices for later this year as well?

Good morning, Christine, it's Anatol. Thanks for the questions. I would say, in general, we are a fairly sizable player in the market and have demonstrated over the last four years a lot of commercial flexibility and ability to respond to market conditions and roll with these punches. As you know, we were quite substantially hedged for this year and that as markets all over the world became volatile and correlated presented a number of opportunities to us. You see that in the numbers of third-party sourced cargoes in the second quarter and allowed us to genuinely optimize the positions that we had on intra-quarter. I won't comment on specific tools and outcomes of attempting to leverage those tools, but suffice it to say that there were a number of bites at the apple that market's presented as they rebalanced throughout this period.

And I'll say Christine, this is Jack. That we have tested all aspects of our business model including our flexibility and reliability of the way these trains have been designed and/or operated. So we -- the supply response that you saw from the U.S. LNG industry to low prices is what we were designed to handle. And that's what we did. And we took advantage of some opportunities of other facilities that maybe couldn't respond so quickly and we were able to buy significantly cheaper LNG from them and have it delivered to meet our CMI requirements.

And assuming that market is stable right now we shouldn't assume that like this repeats in the future or like for the remainder of the year? Is that correct?

Yes. As Anatol highlighted, we're seeing a strong recovery in LNG demand growth especially in Asia. And I'd say we are cautiously optimistic that the economies around the world will come back. We'll continue to see the growth. Hopefully, we get some cooler weather in this winter and we'll see spreads continue to increase.

Okay. So I guess on that note as we look at the Asia demand, how are you guys thinking about the trajectory of Asia LNG imports specifically in China relative to overall gas demand in the region? And what are the puts and takes to consider for U.S. LNG whether it's trade agreements I don't know like what the storage position look like in China and/or commitments that China may have with non-U.S. LNG facilities?

Yes. Thanks, Christine. From a fundamental standpoint the medium- and long-term fundamentals through this period, we think have actually improved for the business. And as we've said for years now, China is one of the key drivers of that. It is committed to natural gas. It is showing that commitment clearly as GDP rebounded there, gas demand growth rebounded even stronger. We're seeing that across multiple economies as Jack mentioned. And as we've discussed in the past, we are quite sanguine about opportunities for gas into Europe as solid fuel power is retired there. China will continue to be a very important factor for us. As you've seen we've sent cargoes over half a dozen cargoes now to China as things there start to normalize both in terms of demand in terms of tariffs and other opportunities present themselves. Clearly, there is a headwind in terms of the geopolitical backdrop that we're operating in. But commercially there's a massive tailwind. And this is the flexibility the reliability that we've demonstrated the relationships we've built on the commercial side all position Cheniere quite well to capture substantial share of that market when the stars align. So we continue to be very optimistic. And this 20% growth we saw in Q2 is just the start we think of those tailwinds.

And Christine I'll add our Beijing office is open. They've been extremely busy, back at work back entertaining different clients and customers. And I'm very pleased with how the relationship is forming with our Chinese counterparts.

Great. Thank you so much.

Next, we'll hear from Jeremy Tonet with JPMorgan.

Hi, good morning.

Good morning, Jeremy.

I know that you guys aren't going to comment on individual cancellations from customers not your policy to do that. But I was just wondering I guess at a high level, if you could discuss with us any trends and cancellations overall. It seems like going into the winter there will be less. And maybe another way of asking this I guess just how do you see the market tightening over time, or how long do you see the market right now?

So first Jeremy just on cancellation of cargo. So we've given a lot of disclosures in this queue. And there's just some basic rules that you could back calculate number of cargoes. And I'll ask Zach just to kind of walk through that part of it for you first. A – Zach Davis: Sure. So I think we mentioned, Jeremy. But I think we mentioned in the prepared remarks, we're reducing production from the facilities from Q1 to Q2 by about 180 TBtu. Just define that by 3.5 TBtu. So that's about 50 cargoes. And then if you look at the numbers that we were talking about. Pretty much each cargoes up let's say on average very simple, $10 or so.

$10 million.

$10 million, yes. So when you account for that in Q2 not including what occurred in Q3 there was about $300 million of count cancellation, $250 million that stayed in the quarter and $50 million that were brought forward into Q1. That's about 30 long-term cargoes or so. So you can kind of break out what was CMI and what was the long-term customers.

So -- and while we're not going to comment on individual customers and their cancellations. I would also add in there Jeremy that you had the pandemic -- you had a warm winter first and you had the pandemic and then you follow that up with the shoulder months and things looked a little bleak. I mean as I said I'm cautiously optimistic that we're beyond that. And we're starting to ramp up. I'll turn it over to Anatol if he has anything to add.

Yes. I just -- as we've commented and highlighted in these slides and it does look to us that the lows are in. You've seen a very dramatic rebound in global prices. Obviously there is a transmission mechanism from the U.S. to the rest of the world now which is underutilized. And so that is one of the factors that's contributing to a rally in NYMEX as well which of course is -- from a spread standpoint dampening that value. But we do see a fairly robust demand response. You're seeing that in GDP numbers. You're seeing that in the transportation numbers across various economies. You're seeing that in power dispatch, and in terms of the magnitude of this supply response adding up U.S. and the rest of the world kind of in the mid-single digits in terms of the global LNG market. And three out of the last four years the LNG market has grown by double digits. So a way to look at it is, what's been happening now is about half a year's worth of market growth. And the one thing that we know for a fact is what the supply additions could max out at right? You know as well as we do, what projects are scheduled to come online over the next 4 five years. So to not be sanguine on the market rebalancing, you have to be fairly pessimistic about global gas demand. And there's -- there are no signs of that that we see today. So rebalancing is a question of to us of quarters not years. And if we get a little bit of a weather tailwind as opposed to the headwinds we've had over the last number of years that will be that much sooner.

That's very helpful. Thank you. And just want to come back with the second question on capital allocation. And I guess maybe the long rage timing to hit investment-grade or to institute a dividend I think the last June, June last year you talked about a 3 to 5 year range and kind of being in a position to hit that. Obviously as you said taking out the convertibles was not in that plan. It's nicely accretive. I assume that pushes it back a little bit here. But just wondering if you could update us on your thoughts on that time line?

Hey Jeremy, it's Zach again. I'd say though we did raise debt for -- and instead of equitizing those converts and clearly added to the amount of debt paydown that will eventually need to do to get to IG. Really doesn't push out our targets of early to mid-2020s at this point. And now our ultimate goal is getting to let's say mid 4x range on a debt-to-EBITDA basis on a consolidated balance sheet. We think we should be in a good position for IG as soon as we cross over 5x and show that commitment to managing the balance sheet. And we always said the debt paydown won't really start in earnest until the back half of the 5-year plan. So once CCL Train 3, SPL Train 6 come online and the excess cash flow really ramps up, you'll see us really making a dent in it. And just to put in perspective with our numbers, over the next five years or so we're going to have approximately $10 billion of available cash. And once Train 6 comes online in 2022, we have almost $3 billion a year of distributable cash flow. So we feel pretty good that we have line of sight with our cash flow to achieve not only IG during that period of time, but have excess cash flow on top of that for future capital returns and even push forward with Stage three once it's commercialized.

Got it. That’s very helpful. Thank you.

Our next question will come from Julien Dumoulin-Smith with Bank of America.

This is Anya. I'm filling for Julien here. So first question on -- could you talk about cargo cancellations on just a second on that how do you expect cancellation revenues? And then there is subsequent reversal to play into where you fall within 2020 guidance range? And then also anything you can add on that even preliminarily on impact on 2021, just based on your assessment of the market?

Let me make sure I understand the first part of that question was on cargo cancellations and how we account for them?

No. The question is more on cargo cancellations and what has been the impact of those cancellation revenues. And then the reversal of those revenues as cargo cancellations decline. Just thoughts on your -- just assessment of the market overall and how would that impact EBITDA? So trajectory of carrier cancellations moving better with that…

Clearly, we brought in revenue - this is Zach. We brought in revenue from Q3 into Q2 of $450 million that would have normally been in Q3. That's really because they have to give us around two months notice if they're canceling. And if they give us notice that they're canceling, our obligations are complete so we can recognize the revenue. What you could see is year-to-date, our EBITDA is more -- well more than half of our guidance range. So we're accounting for this meaning that clearly in Q3 and then Q4 it should reverse to an extent because those revenues were brought forward. And based on just the curves today and how we see it, we do think our customers would be lifting. That's economic to be lifting through the winter. So you will see the reversal in Q3 or Q4.

Okay. Great. Thanks. And then also just given more limited growth prospects with the markets of our own. Is there anything you can add on how much you can take out on the cost side? How should we think about run rate O&M just in a no-growth scenario? And then any other de-bottlenecking opportunities that you could add?

I'll start with the de-bottlenecking. So we've taken this opportunity with the customers canceling cargoes to move some maintenance forward. So we're doing a significant amount of work on the trains with our own crews. Because of COVID, we want to minimize a number of outside contract crews at our facilities, but they're doing a great job working around the clock in some cases. And we feel very good about our ability to optimize the output of those trains. In November when we give guidance for 2021 it's my expectation that we'll have a revision to our production guidance also as well as a run rate guidance that Zach had mentioned. Zach do you have anything you want to add?

Sure. I mean, we're quite transparent on the run rate numbers. And when we go through the budget process, which we're literally kicking off now in preparation to make that guidance in the next quarter. We assume the 9-train program. And only once FID is made on the next project. Do we add those costs or those revenues to the forecast. So that's pretty transparent. But if you just look at this year and the quantum of cancellations that we've had and the fact that we've been able to reaffirm guidance that's all thanks to the great work that our operations team has done to offset a large portion of that lifting margin that we'd normally make on those liftings.

Great. Thank you.

Thank you.

We'll now hear from Michael Webber with Webber Research & Advisory.

Good morning, guys. How are you?

Good morning, Michael.

I will start by wishing Michael well. And welcoming Zach. Just two questions for you. First on the impact of COVID, but specifically with related to construction. You guys kind of surprisingly pull-forward the time frame for Train 6 to the second half 2022. So in a market where we're talking about shared schedule relief and force majeure you guys are pulling forward the construction time line for a project. It seems to -- seems to be a bit counterintuitive or kind of run contrary to maybe what we're seeing elsewhere. So I guess that question is kind of twofold. Is that -- do you expect maybe some of the competing projects around you in the U.S. to all be able to stay on pace and hit the market as planned, or is your data point more of an outlier? And then two what's the primary driver from that? Is that just slack in the schedule? Is it a function of maybe union versus non-union labor? It's just -- it's an interesting data point in the middle of the pandemic to be pulling something forward.

So first – Michael, thanks. So I want to give a shout out to Bechtel in the Cheniere E&C team because we moved swiftly on isolating crews and putting in well beyond what the CDC was recommending different policies and procedures to ensure that there wouldn't be a big impact on the engineering and construction effort. And that if there was an impact it wouldn't impact our operating forces at our facilities. So it has worked extremely well. And Bechtel has done a good job at managing their COVID cases that they have had and made sure that they didn't run rampant throughout the construction effort. We had some good weather that allowed Bechtel on the E&C -- Cheniere and E&C team to make up a lot of lost ground. And up until recently now where we've had some tropical storms a little bit of hurricane activity. They were able to significantly progress both Corpus Christi Train 3 and Sabine Pass Train 6. So I'm very, very pleased with what they're able to do. I think if you're asking me my view on the rest of the LNG market as Anatol mentioned in his prepared remarks, we've seen a significant number of our competitors either delay or cancel their liquefaction plans. And it's put us on much stronger footing in the marketplace than we were pre COVID. And I'll look at Anatol.

Yeah. No. As Jack said, we see medium to long-term demand at/or above pre-COVID levels and we see the competitive landscape as substantially beneficial to us over this period as Jack mentioned. And we mentioned in the prepared remarks. And the construction and execution to your question is just one of those. And I would say more from a reputational benefit commercially right? There isn't -- I don't think there's a counterparty that we deal with that it does not appreciate our ability to bring these trains on early under budget and operate them reliably and flexibly.

Got you. Okay, that's helpful. And then second this is probably a question for Anatol and at the risk of maybe being a bit too far ahead in front of something. One of the themes that hasn't slowed down at all during the pandemic has been the decarbonization of Europe. And we've seen a number of countries that are -- with national champions that make up your customer base come out and talk about hydrogen and natural gas blending targets at 10% to 15% by 2030. So taking a sizable chunk out of the future European natural gas market. So I'm just curious how do you think about that standing here today? And I know it's been relatively recent and it's pretty far out in the front. But I'm just curious what impact you think that has on the approach from European buyers? And then two, is there a possibility of turning them into an opportunity for Cheniere in terms of investing downstream maybe to offer more integrated solutions for those customer bases considering they're simply blending other molecules with your natural gas?

Michael, if it's all right with you. I'm going to start with the second part of that and then I'll hand it over to Anatol for the first part of it. So as you know, we're always looking for strategic opportunities, and especially where we believe we have a competitive advantage. And we can leverage our scale in our platform. And it's not lost on me that we move four hydrogen atoms for every carbon atom that we sell that we're a leader in developing, constructing, operating and owning cryogenic infrastructure here in America. So in addition, we believe that LNG has a major role to play in this whole global decarbonization effort across the globe. And that hydrogen may present an opportunity to complement those environmental benefits, as well as leverage our own core competencies in terms of market access, infrastructure development, operations, construction as Anatol mentioned. So you would expect that I am extremely excited about our prospects and about evaluating our opportunities to participate in the hydrogen market. And I don't know Anatol if you…

Yeah. I'll just add the plug for the teams, the broad team's great efforts in our inaugural CSR report. I think to be perfectly honest before we embarked on this process now probably a good two years ago, we thought we were a part of the solution but we weren't 100% sure. And we didn't have the science and the analysis to back that up. Now we're that much more confident. And you'll see us participating a lot more and taking control of that narrative, which we needed to check a lot of boxes internally and verify that that was the case. So we are now that much more confident that we are part of the solution and you've seen this from a number of players in the industry whether that's the European – majors, the European, load serving utilities even the -- some of the trading houses are continuing to push LNG and gas as part of the long-term solution to climate issues and we are confident that Cheniere will be at the forefront of that.

Okay. Thanks for the time guys.

Our next question will come from Shneur Gershuni with UBS.

Hi, good morning everyone. A lot of my questions macro-wise have been asked and answered. What I did want to focus on was actually the refinancing that you did. I think it's interesting and I'm not sure -- I want to make sure I understand it correctly. Basically what you've done is you've effectively lowered your coupon rate from 11% to the 3% zone. So that's kind of an $80 million savings in terms of savings per year. But it also negates the conversion of debt into 40 million shares. And so is it fair to say that you've done a de facto backdoor buyback of shares at the end of the day and then you can use excess cash flow between now and then when it would have converted towards debt paydown? Is that the right way to think about it that you're offsetting upcoming dilution and lowering your coupon payment?

Yeah. I think you already wrote your research report. But I'll just summarize everything that we've accomplished so far this year just to help everybody appreciate what we've really done. So I'll start off by reiterating what was said in the prepared remarks that our commitment to get to EIG across the entire complex, but the early to mid-2020s has not wavered. However, we did mention going into this year that it would be a jump ball between debt paydown and buybacks. And if we had to defer debt pay down a little bit to be opportunistic with the stock. That's what we do. And that's exactly what you saw us do in the first half of this year. So in Q1 not only did we buy back over $150 million of shares. We bought back $300 million of the EIG notes that were -- that we gave guidance that we're going to convert. And with that we got that option for six months to take out the rest. So we immediately went to work on this term loan knowing that that could be incredibly attractive to us in terms of the cost, the runway, the callability to not only take out EIG but RRJ at the same time and just be able to say we have no maturities across the complex now till 2022. So yes, we reduced share count on a run rate basis. I mean, we came out with that run rate guidance in 2019. So we'll update it probably after budget at the November earnings call. But that's well over 40 million shares that we've saved in that run rate guidance. So now with where we stand we're going to focus on that debt paydown with the incremental leverage that we just raised. So you'll see us prioritizing debt pay down for the next few quarters as you would expect. And make a dent on this incremental leverage and ensure that we're still on that path to EIG by the mid -- early to mid-2020. And then I'll just note again that capital allocation gets a lot more impactful, once Train 3 comes online. Because at that point, we'll finally hit that inflection point that I mentioned earlier where we go from free cash flow negative to free cash flow positive. Like we've all been waiting for. So the numbers start to get a lot more meaningful then. And so we should be on a path to EIG. But at the same time be able to consider capital returns in 2021 again. And be ready for stage three once it's commercialized.

Okay. That makes sense. So this was sort of a clever way to lower your coupon payment and basically offset a big dilution that was coming and position you to basically pay down debt with all the excess cash. That makes perfect sense. [Technical Difficulty] I recognize there was a reluctance to update guidance. And if I understood all the comments earlier, it's effectively a pull forward of third quarter revenues into second quarter revenue -- into second quarter. Given Anatol's comments about things starting to improve and so forth, do you see a scenario where you can exceed your guidance or be on the upper end for this year, or is it kind of -- you kind of feel pretty good with where you're seeing things right now as to how you've reaffirmed your guidance for this year?

Well on this call we're reconfirming our guidance for the year. And which as you know we gave that guidance back in November of 2019 which was pre-COVID. And to me that would be a massive success. And I'd be popping a lot of champagne at the end of this year. It has been extremely stressful and a tough year.

Fair enough. Appreciate the color today.

The next question will come from Sean Morgan with Evercore.

Hi, guys. Thanks for taking the question. So I appreciate you did a lot to sort of shift this dilution by repaying these notes, but there's still -- I think in 2045, there's $625 million of convertibles that I think you can start redeeming as of March 2020. So I'm wondering if maybe there's a longer time frame that you have to sort of deal with those or what's the thought as to why those are being treated differently than the ones you've kind of more aggressively than paying down to avoid that dilution?

Yes. This is Zach. Thanks for the question Sean. Those are unsecured notes at CEI due in 2045 with a rate around 4%. And what we just focused on was something due within a year and the most expensive debt on the whole balance sheet of 11%. So it's like another world those converts. So they're really not the priority for quite some time. So they're going to sit there. I think the conversion price is in the 140s. And when we get closer to that we can talk. But in the meantime we're going to focus on paying down debt in the bank deals. Those are totally callable and they're both secured at CEI and BCH. And that's the type of debt that we want to get rid of first.

Okay. And then maybe just -- maybe this is a question for Anatol. But is there any evidence that customers that have been canceling the long-term cargoes have been kind of going back into the spot market and buying it sort of at a spot at a discount rate. And is that arm open? Is that something you're seeing?

Well again as we mentioned earlier, the market has been quite volatile. This is an unprecedented time in terms of the flexibility that this U.S. Cheniere model has brought into the market. One of the things that you saw publicly was a buyer cancel and prepay some cargoes to an entity that happens to be a foundation customer of ours. So there are lots of tools being deployed by the market at the margin to properly position themselves. And again this option to cancel the cargoes, not pay the commodity charge is a great flexible tool that obviously our customers have taken advantage of as have we ourselves. So again, at the margin, you see lots of activity to optimize portfolios. And that's what our business model allows the customers to do.

Okay. Yeah. And I guess the lower utilization some of those are kind of going unfilled. But that's interesting. Thanks a lot. I’m going to turn it over.

Thanks, Sean.

Next, we'll hear from James Carreker with U.S. Capital Advisors.

Hi. Thanks for taking the question. Just a quick accounting question. I understood you're bringing forward the revenue recognition for canceled cargoes. When do you actually receive the cash for that?

So when we receive the cash is the normal time period. So, even, if they canceled now or let's say in Q2 for Q3 delivery the actual cash will come in Q3.

So your cash from operations for Q2 may be significantly lower than the adjusted EBITDA but then that reverses next quarter as well?

Yeah. It all comes together over a few months. Got you. And I was wondering if I could get a quick update on how you see remaining capital spend for both Train 3 and Train 6?

Sure. So for Train 6, I think, we said last quarter we had $1.4 billion left of unlevered costs before contingency. And that's down to $1.1 billion at this point. And then, in terms of Train 3, it was around $600 million or so. Let's just say, we're under $600 million at this point with – for Corpus before contingency and most of that will be spent this year with us being really deep in commissioning by early next year.

Got it. And then if I could fit one more quick one in. I guess, how should we think about capital spend kind of post train construction with nine trains assuming there'll be some de-bottlenecking projects kind of ongoing, but what order of magnitude kind of – what do you expect that number to be once you complete the build out?

Sure. In 2019, when we gave that investor update we said Cheniere share of these de-bottlenecking projects and some development costs would be around $700 million. I'd say that number is a few hundred – a couple or a few hundred million dollars less at this point just because we did spend some of that money to get to the higher ranges of our production at both sites. But that's over a five-year period. So it's not a huge amount of money when we're talking about over $10 billion of available cash.

Okay. Thank you. That's all I had.

Our final question will come from Ben Nolan with Stifel.

Yeah. Hey, thanks, guys. So I have a couple of commercial questions. The first is maybe could you just talk through – we've heard a lot of noise about maybe a little bit of an improvement in the appetite for incremental long-term contracts. And I was curious if you might be able to frame whether there's any change in the dynamics there. People looking for more flexibility or shorter terms or sort of anything to kind of break the ice in terms of incremental new business.

Thanks, Ben. Yeah, this is Anatol. I'll take that. It's – I guess the answer is all of the above. We've demonstrated commercial flexibility over the last 2.5, three years, as contrasted with our original very innovative, but very stat 115% plus x-type transactions. We're going to continue to do that. That includes lots of different levers tenor is one of them. How we structure those offtake agreements and the flexibility we provide to them is another. These are, as you know, multibillion-dollar transactions. They're not consummated over the phone. They do require a lot of time and effort especially to get it over the proverbial finish line. And the entire world has been working from home. So, we've continued to be engaged and make progress on a number of fronts, but to get them across the finish line requires a market that has some level of normalcy both in terms of pricing as well as in terms of being able to finalize negotiations. So, we're very well-positioned. We're very excited, as you can tell from these remarks and the charts that we put in front of you lots of green shoots and good engagement. But, to get it over the finish line, the precise timing is really anybody's guess.

Okay. I appreciate that. And then sort of similar, but in a different direction over the last, I don't know, quarters to really few maybe a month, the U.S. is approved LNG by rail. You have a smaller downstream developer looking to do big ISO container development. Is there is it possible or has there been any thinking about maybe adding a little infrastructure to your facilities to be able to maybe facilitate or service maybe some of those smaller well small-scale kind of projects and development and that so thing?

Ben, I'll say, we spent a lot of time looking at bunkering and how we can be a service to the bunkering market. I am not a big believer of shipping LNG on rail myself, but it doesn't mean there may not be an opportunity for somebody. But, our quantity of LNG that we produce and ship every day is massive. So that is a very small -- would be a very small stream for us or business line for us.

All right, I appreciate that. I was just curious, if it was an area that you were looking to -- but appreciate. Thank you, guys.

This makes a lot. And I want to thank everybody for their support over this quarter. And I hope everyone stays safe and healthy.

That will conclude today's conference. Thank you for your participation. You may now disconnect.