Earnings Call: Q1 2017

May 4, 2017

Morning. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cheniere First Quarter 2017 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Mr. Randy Battia. You may begin. On on the on on on. For on on on on to Ladies and gentlemen, thank you for standing by where we had technical difficulties. I would now like to go ahead and turn the call over to Mr. Randy Battia. Thanks, Amy. Sorry about the technical difficulties, everyone. Good morning, and welcome to Cheniere Energy's Q1 2017 earnings conference call. The slide presentation and access to the webcast today's call can be found on our website located at cheniere.com. Participating on today's call are Jack Fusco, Cheniere's President and Chief Executive Officer Anatol Fagan, Executive Vice President and Chief Commercial Officer and Michael Wardley, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind all listeners that our remarks, including answers to your questions, may contain forward looking statements. 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 non GAAP financial measures such as consolidated adjusted EBITDA, distributable cash flow and distributable cash flow per share. A reconciliation of these non GAAP financial measures to the most comparable GAAP financial measure can be found in the appendix of the slide deck. As part of our discussion of Cheniere Energy Inc. Results, today's call may also include selected financial information and results for Cheniere Energy Partners LP or CQP and Cheniere Energy Partners LP Holdings or CQH. On this call, we do not intend to cover CQP or CQH's results separately from those of Cheniere Energy Inc. After our prepared remarks, we will open the call for Q and A. As shown on the agenda on Slide 3, Jack will begin with an overview of the quarter and then give an update on construction and operating progress at our liquefaction projects. Following Jack's comments, we will hear from Anatol on our commercial activities and then from Michael, who will review financial results. I will now turn the call over to Jack. Thank you, Randy, and good morning, everyone. I'm pleased to be here today for Cheniere's Q1 2017 earnings call. The prepared remarks component of today's call will be abbreviated compared to our previous quarterly calls as we recently held our 2017 Analyst Day where we presented the company to the investment community in considerable detail. We spend a lot of time talking about our outlook, plans for growth, our strategic approach to managing our financials and the competitive advantages we've built via best in class execution on multiple phases of our business model. The Analyst Day slide presentation and the transcript of the event are available on our website. In addition to my review of the Q1 results and highlights on today's call, I will review some of the key takeaways from our Analyst Day presentation, then turn the call to Anatol to briefly review our marketing activities for the quarter, followed by Michael, who will review our financial results. Turn now to Slide 5 for an overview of some key operational and financial highlights for the Q1 of 2017. In the Q1 of 2017, we generated consolidated revenue of approximately $1,200,000,000 $483,000,000 in consolidated adjusted EBITDA. Net income attributable to common stockholders for the Q1 was $54,000,000 Growth in all metrics compared to 2016 period is driven primarily by our continued transition into operations at our Sabine Pass liquefaction project and favorable market dynamics for our marketing cargoes, which emerged during the quarter. During the Q1, we loaded a total of 43 cargoes of LNG from Sabine Pass, 7 of which were commissioning cargoes related to Train 3. And Anatol will provide some color on the market for LNG cargoes during the quarter in a few minutes. As you all know, Train 3 reached substantial completion near the end of the quarter and the commissioning process began on Train 4. With the commencement of operations of Train 3, Cheniere became the largest consumer of natural gas in the United States. Immediately after the quarter ended, we exported our 100th cargo from of LNG from Sabine Pass. The 100th cargo is a milestone we celebrated as a company at our locations around the world. As it is yet another significant achievement and tangible result of the hard work and dedication of Cheniere's professionals. During the Q1, we continued to execute on our goals to strengthen our balance sheet and increase our liquidity. Michael will cover these in more details in a few minutes, but I did want to highlight a couple of important transactions we did during the Q1, which further demonstrate our commitment to managing the balance sheet throughout our structure and our ability to leverage our improving credit profile. In January, our Sabine Pass liquefaction entity received its 2nd investment grade rating. On the heels of that, we completed 2 bond transactions for a total of $2,150,000,000 That completed the refinancing of the SPL credit facilities. And in March, we closed on a 4 year $750,000,000 revolver at our parent entity, which gives us a lot of flexibility as we continue to bring the trains online over the next couple of years. Slide 6 provides an update on construction progress at our LNG projects at Sabine Pass in Corpus Christi. We remain very pleased with the overall progress of construction at Corpus Christi and the construction and operations at Sabine Pass. As I've mentioned on all of our previous calls, our number one priority at the sites is to execute on the construction of our LNG platform safely, on time and on budget. Highlighting the Q1 was a substantial completion of Train 3. With the achievement of that milestone, Cheniere is now placed into service 3 trains in just 10 months, and we expect Train 4 in the second half of twenty seventeen. The Cheniere engineering and construction team and our EPC partner Bechtel continue to set the bar on construction of liquefaction facilities worldwide. As I mentioned previously, Train 4 commissioning activities commenced during the quarter. We remain laser focused on transitioning the trains from construction management to operations management safely, efficiently and effectively. Slide 7 is a slide I presented at our Analyst Day. I just wanted to reiterate the key points here on this call I think they're important for investors to understand. This slide lays out how the Cheniere platform creates competitive advantages on multiple fronts, driven by our ability to leverage our infrastructure and expertise in development and execution to ensure our position as a low cost provider of additional liquefaction capacity in the U. S. 1st, our construction. Our sites have distinct advantages to Greenfield sites as we can leverage our sites, utilities, storage, marine and other key pieces of in place infrastructure to drive efficiency and cost savings. We have recently acquired additional real estate positions to enable significant growth at both sites with the expectation that our existing sites will remain advantaged relative to Greenfield for the foreseeable future. 2nd, our operating advantage can be realized through scalability and efficiency gains in operating expenses given our existing in place infrastructure. This is true not only at the project sites themselves, but also upstream of the facilities in gas supply and transportation infrastructure. Next, on finance. Our improving balance sheet, credit and cash flow profiles are expected to allow us to significantly more flexibility relative to our historical reliance on other project finance markets. We look to achieve savings on our initial expansion of upwards of $200 a ton in financing costs alone. In addition, as we have now begun commercial operations, funding growth from cash flow is a near term capital allocation consideration, which would reduce capitalized financing costs and leverage metrics. Finally, on the commercial front, the capacity of LNG we have available to market and sell to customers today is a significant advantage. That capacity can be flexible, giving us the ability to tailor solutions to different customer profiles and different customer needs on key terms such as tenor, price and counterparty credit. These advantages position Cheniere to win in the global LNG marketplace and serve as a foundation for our continued growth. We believe our LNG expansion opportunities and potential growth investments along the LNG value chain should be viewed by our customer stakeholders and investors as being a competitive advantage based on our ability to leverage our significant infrastructure and real estate positions as well as the expertise we maintain throughout all aspects of project development, construction and operations. And now Anatol is here to provide an update on our commercial activities during the Q1. Thanks, Jack, and good morning, everyone. As Jack mentioned, I'll briefly review some of our commercial activities for the Q1 of 'seventeen. Before addressing our activities downstream of the plant on the demand side, I'd like to mention our activities upstream of the plant on the gas supply side. The Q1 saw record pipeline flows and LNG production numbers as Trains 12 were in operation the entire quarter and Train 3 commissioning was successfully completed. During the Q1, we were able to manage the changing day to day plant consumption related to commercial operations and commissioning. We've long maintained that our commercial model, which includes the procurement of gas for LNG production is not just a differentiator, but a structural competitive advantage. We're proving it today with reliable supply and leveraging pipeline and storage infrastructure to ensure flexibility and responsiveness to plant and to market conditions. Slide 9 illustrates the global destination that cargoes produced at Sabine Pass since the start up of operations a year ago. Global LNG demand continued to grow in the Q1 and Sabine Pass volume was there to help fill the demand. The 43 cargoes that Jack mentioned that were loaded from Sabine Pass during the quarter were delivered to 16 countries. That brings the total number of destination countries for Sabine Pass cargoes to 20, an increase of 6 from the end of the year. It's notable as LNG from our facility has now reached more than 50% of all currently imported countries worldwide, basically within the 1st full year of operations. We expect LNG from our facility to reach 2 incremental new countries in the near future and expect LNG from Sabine Pass to continue reaching new destinations in upcoming quarters. Now please turn to Slide 10. Destinations of Sabine Pass cargoes continue to provide insight into wider LNG market trends and supply demand dynamics. Asian LNG demand remained strong in the Q1 as Northern Hemisphere winter needs, especially from China, South Korea and Taiwan pulled cargoes in from the Atlantic basin. But as expected post winter, Asian demand has moderated and we've seen the beginnings of the Middle East, North Africa's upswing as those markets head into their cooling season. During the quarter, Cheniere's marketing functions sold 22 cargoes from Sabine Pass, the highest quarterly total for us so far. The group continues to broaden its future as our Cheniere marketing portfolio expands to a mixture of short term and medium term strip sales and while always optimizing our growing shipping portfolios. At our Analyst Day, we talked about how important we believe floating re gasification terminals have been and will continue to be in opening new markets. It's interesting to note that so far almost a quarter of the LNG loaded at Sabine Pass and start up has been delivered to floating regas terminals in 8 countries. That is a significant rate considering that total FSRU capacity is just over 10% of the global regas capacity in its entirety. So it certainly appears that floating regasification is playing a significant role for us in broadening the range of markets our LNG accesses. Given our ability to sell portfolio volumes today tailored to specific customer needs and profiles, as Jack mentioned, and our fully permitted cost advantage expansion capabilities, we believe Cheniere is ideally positioned to capitalize on these growth opportunities. We will continue to leverage our reputation of reliability and world class execution as we work to become the premier global LNG provider. With that, I'll now turn the call over to Michael, who will review our financial results. Thanks, Anatol, and good morning, everyone. I'm pleased to announce our financial results for the Q1 2017, a summary of which begins on Slide 12. Before I begin, there are a couple of things I'd like to point out as we go through these results. First, as we stated earlier, Cheniere Energy consolidates the results of CQP and CQH. 2nd, if you have reviewed our 10 Q, you'll notice that we now report results as a single segment rather than 2 segments as in the past. This was borne out of some of the organizational results as the trains at Sabine Pass enter into commercial service. For the Q1 2017, we reported consolidated revenue of $1,200,000,000 compared to $69,000,000 in the corresponding 2016 period. Revenue recognized from LNG sales was approximately $1,100,000,000 in the Q1. During the Q1, we loaded 43 cargoes at Sabine Pass, 7 of which were commissioning cargoes. As a reminder, proceeds from the sales of commissioning cargoes are recorded as an offset to construction and progress on the balance sheet because these amounts are earned prior to our taking over care, custody and control of the respective train. Of the 43 cargoes loaded during the quarter, our 3rd party SPA customers lifted 21 cargoes and our marketing function lifted 22 cargoes. On a volume basis, we recognized revenue in the Q1 on approximately 140 TBtu produced at Sabine Pass. This number does not quite equate to the volume of LNG loaded at Sabine Pass during the Q1 because revenue for cargoes sold on a delivered or DES basis are recognized in the period that the cargo reaches its destination. Therefore, when reconciling volume loaded to revenue volumes, volumes sold DES in 2016 that were still in transit at the end of the 4th quarter are added, while volumes sold DES which are still in transit at the end of the Q1 2017 are subtracted. Also note that these volumes exclude any cargoes sold by our marketing function that were sourced away from Sabine Pass. Consolidated adjusted EBITDA for the Q1 was $483,000,000 compared to a loss of $45,000,000 in the Q1 of 2016, obviously driven primarily by the startup of operations at Sabine Pass and enhanced by some of the favorable marketing and market dynamics during the quarter that Anatol discussed. Total operating costs and expenses increased $675,000,000 during the Q1 of 2017 compared to the Q1 of 2016, generally as a result of the commencement of operations at Sabine Pass and expensing certain items that were previously capitalized during construction. Depreciation and amortization expense increased in the Q1 compared to the prior year period as we began depreciation of our assets related to Trains 1, 2 and 3 at Sabine Pass. SG and A expense decreased 18% in the Q1 2017 relative to Q1 2016, primarily due to the implementation of organizational changes and due to a reduction in professional service fees. SG and A expense for the Q1 2017 includes $12,000,000 of share based compensation expenses. Net income attributable to common stockholders was $54,000,000 or $0.23 per share for the Q1 2017 compared to a net loss of $321,000,000 or $1.41 per share for the corresponding 2016 period. On Slide 13 are some recent highlights from key finance initiatives. 1st, in January, SPL received an investment grade rating of BBB- from Fitch Ratings. The 2nd investment grade rating enabled SPL to access the investment grade market, which we did in February when we placed and closed a private placement of $800,000,000 aggregate principal amount of senior secured notes due 2,037, which priced that par to yield 5%. These bonds began to amortize in year 9 and have a weighted average life of just over 15 years and a final maturity of 20.5 years. We completed terming out the SBL credit facilities in March when we sold $1,350,000,000 principal amount of investment grade senior secured notes due 20.28, which priced yield 4.2%. Subsequent to the issuance of the 2028 notes, we terminated the SBL credit facilities. In March, we also entered into a 7 $50,000,000 revolving credit agreement at Cheniere Energy to serve as a backstop for our equity funding for corporate liquefaction, pipeline and related facilities and for general corporate purposes. We view this revolver as an important step in managing our liquidity and implementing our long term balance sheet strategy. Finally, we released consolidated financial guidance for Cheniere at Analyst Day in April. Today, we reconfirmed 2017 full year guidance consolidated adjusted EBITDA of $1,400,000,000 to $1,700,000,000 distributable cash flow of $500,000,000 to $700,000,000 and distributable cash flow per share of $2.10 to $2.80 Thank you for your time today and for your interest in Cheniere. Operator, we're now ready to open the line for questions. Your first question today comes from the line of Jeremy Tonet of JPMorgan. Your line is open. Good morning. Congratulations on the strong quarter. Thanks, Jeremy. Just wanted to touch base with the results in as it stands with relation to your guidance out there. It seems like you're tracking a significant portion of that just 1 quarter in the books and you have 2 more trains coming online over the course of the year granted there's favorable seasonality in this quarter and kind of helped out a bit. But just wondering if you could help me reconcile those two things. And do you is this conservatism or do you see, I guess, room to track above guidance at this point with what you've achieved? Jeremy, it's Michael. Yes, we'll stick with the 1.4 to 1.7. Certainly off to a good start. We knew that when we gave you the guidance obviously 2 weeks ago. And I'm not sure we can help you with 2017. We always knew that 2017 was going to be the year that we had a lot of exposure to the short term market due to going to be the year that we had a lot of exposure to the short term market due to the fact that the trains come on prior to the DSCD dates of the contracts, right? And that is most pronounced this year. So we had strong we had a lot of volume at our CMI disposal in the Q1 as Anatol and as you've seen in the markets, markets were very strong. So we made a lot of money in the Q1. We still have those volumes in the second quarter, but margins are substantially lower, and Anatol can comment on that, but you see that in the market as well. So Q2 is likely to be weaker than Q1. We'll see how marketing margins end up. And then we'll start to do better later in the year as CoGas comes on June 1, and then we'll see when Train 4 comes on ultimately and what margins are at the end of the year. So it's going to be there's a lot of moving targets this year, but I think we're still comfortable with our guidance, but off to a good start. Yes. And Jeremy, I would just add, this is Jack, that I am extremely pleased with Cheniere and our professionals all the way through from procuring the gas to operating the trains to constructing the trains. I mean, we just we had all cylinders were clicking for us to marketing and disposing of the cargo. So I'm very pleased with our performance in the quarter. Great. Thanks for that. And just one follow-up. Just want to touch base with Midship, it seems like you've developed a really good project to source gas at an attractive basis. Just wondering if you had any updated thoughts as far as the Permian and Waha there because the basis continues to gap out even further from where it was at Analyst Day. And just wondering, it seems like that could be really interesting opportunity for you guys as far as participating in a pipe solution or sourcing really cheap gas. Just wondering if you could share any thoughts there. Thanks, Jeremy. This is Anatol. Thanks for your kind comments on mid shift. We're clearly very excited about that, especially given what we're seeing in the SCOOP and the STACK from that producer success standpoint. And from a gas supply standpoint, we do think this is a key structural competitive advantage of ours given our scale and given our early mover advantage on that front. But recall, we approach all of this from a best economic value proposition standpoint on buy versus build. You can trust that we are involved in all of the discussions with, I believe it's now 10 pipeline projects that are proposed out of the Permian. We get involved from an investment standpoint, if we think that that's the best option for us from a holistic kind of sourcing and supply standpoint. So we'll continue to monitor the situation. We'll continue to be involved in dialogue with producers from whom we are buying gas already and on the infrastructure side. So we're the opportunity isn't lost on us how we decide to prosecute it depends on what the best value proposition will be. That makes sense. Thanks for the color. Thanks. Your next question comes from the line of Ted Durbin of Goldman Sachs. Your line is open. Good morning. Thanks for taking my question. So I just want to dial in a little bit here. I know we talked about it a little bit at the Analyst Day, but your operating expenses as we move through the rest of the year on the O and M side, you've got Slide 7 here where you say the next trains are going to be 30% of the initial train size. As we move forward, how should we think about the incremental trains as they come online and the run rate O and M even into 2018? No, I don't think we really want to get into O and M by train. I think we gave you some color on the 30% as a competitive advantage. Once you get the first train built, it's cheaper to operate the subsequent trains. But I think we'll keep our guidance sort of at the EBITDA level rather than getting into what each train is going to cost to operate. Okay. That's fine. And then just coming back to the I think on the same slide, the $500 to $600 a ton for your next expansions. Can you just talk about additional storage you might need or berthing or other things associated with those costs that is in those costs and how that might differ between if you were to do Corpus 3 versus Sabine 6? Yes. So as we reiterated, we think Corpus 3 will be the lowest cost LNG expansion project on the Gulf Coast. And so in that number is what it would take for us to not only to build the train, but also load the ships and process the LNG. So we're not trying to hide anything from the market. If we further expand Corpus beyond Train 3, then we'll have to look at what our needs would be if we needed additional berth or if we need additional tankage. Sabine VI, as you know, Ted, we're just getting 4 up. We'll have 5 about a year after 4 and then Train 5. And then for Sabine 6, and that will give us a lot of operating information on those 2 bursts and those 2 loading arms. There are probably incremental improvements we can make on our ability to load faster. But as far as tankage is concerned, I'm pretty sure the 17 Bcf of LNG over there should be sufficient for us. Does that help? Helpful. I'll leave it at that. Thank you. Thanks. Your next question comes from the line of Greg Fear of Tuohy Brothers. Your line is open. Good morning. Total EBITDA divided by total liquefaction volumes recognized in the quarter, if I'm doing the math right, might be just over 3.75 per MMBtu. And that seems especially high even accounting for some strong winter spreads. Assume that is due to some margin on volume sourced from 3rd party supply possibly to serve the legacy 100 and 50,000,000 MMBtu of Asian pre sold volumes through next year. Now that you've collapsed reporting to one segment, can you provide some color as to how to think about marketing contributions and the repeatability of above market performance? Well, I think the first thing, Craig, it's Michael. We said 2 years ago, we sold 45 cargoes or so in I think 2014 at very high margins and you could go back and look at what prices were there and kind of figure out what the margins were and most of those are going to get delivered this year. So not all 45, but maybe 35 or 40, I'm not sure exactly what the number is. So those cargoes are going to be there. And then everything above that from marketing is really totally subject to very short term margins. And so you can watch a screen like us and we're certainly selling into the highest price market, highest price that we see. And that's what those margins will be. And then I think the 3rd party deals are easy for you to figure out. Would you add anything, Ersel? No. Just thanks, Michael. Thanks, Craig, for the question. As Michael said, on the commissioning cargoes, they are sort of by definition at market. You can do the math with our guidance to figure out how much of that kind of legacy volume was included here. But yes, it's at this point, there are no huge mysteries. And again, to Michael's comments earlier on guidance, this will be a year where there is a lot of market access with relatively short notice by the marketing team. So we'll leave it at that. And I would just say, Craig, that looking in the future, I think we are all very impressed with the increase in demand, especially in Asia. And I don't think any of the consultants have anticipated the demand increases that we're starting to witness. Fair enough. And those roughly maybe 9 cargoes a quarter from those legacy Attractive Asian pre sold contracts. Is that relatively even through the year? Or should we think about that being front end or back end loaded? Good, good, as good an estimate as any. Okay. Thank you. Thank you very much. Your next question comes from the line of Michael Webber of Wells Fargo. Your line is open. Hey, good morning guys. How are you? Good, Michael. How are you? Good. Glad we just touched on the pre-fifteen volumes. It seems like a lot of that's still ahead of you. I wanted to touch base on just a macro question first and then kind of a leverage question towards the back end. But just from a high level perspective, if we think about you mentioned kind of the forward demand and obviously there's kind of a rising tide of 2nd wave projects in the U. S. That's building to try to meet that demand, whenever that balance may strike. When you tier out the probabilities, or sort of kind of probability weight those projects that you're competing with long term, It seems like the brownfield extension certainly are at the top of the queue. But I'm curious at what point maybe it's after Sabine or Corpus III and Sabine VI. At what point do you think it's more of a dogfight between extensions versus say Golden Pass or even a Lake Charles or something along those lines? Are you going to tier out the competition coming from the U. S? At what point do you think you start running into a competitive dynamic? I think, Michael, you have to look at all of the infrastructure that we've put in place and its scalability. So it isn't easy getting that quantity of natural gas into one location in the United States, right, into one single point. And I would hate to do that with 1 pipeline going into one single location in the U. S. So that's one. The second thing I would consider is that fact that we're a full service shop. So a lot of the utilities around the world do not like the tolling model and they don't like the FOB model necessarily because they don't want to deal with shipping. So if you're a utility and you need reliable supply, you'd rather have that thing delivered directly to your dock, right? And that's what we offer. So we offer more flexibility, more customer options, if you will. And quite honestly, I'm very pleased with our reputationally that we're being recognized as a company that we can actually deliver what it says it can deliver. So that's why I feel good about our positioning relative to some of the newer facilities or wannabes, if you will. Got you. Okay. That's helpful. Just one more and I'll turn it over. It's actually a question for Michael. Around your maximum kind of leverage targets, it's really kind of a holdover from the Analyst Day, but it's still permanent today. I'm just thinking about the delta between kind of I believe you gave leverage limits at kind of the subs at around 5x EBITDA and then kind of a consolidated or kind of a parent level maximum of about 7x EBITDA. So one, I believe I got those figures right, but I'm just curious where the delta comes from and whether it's viable to think there's room there for leverage to help facilitate an eventual streamlining of the structure? No, we think we have the right amount of leverage, right? So I don't think we have lots and lots of capacity to go borrow a bunch of money to go buy in things. So no, I think we're where we want to be on a leverage standpoint, right? 7x on a consolidated basis, 5x on a standalone basis. I want to point out, I don't think I did a good job at the Analyst Day pointing out that the 5x is contracted only. I think it says that in the presentation, but I didn't emphasize that. When you add marketing volumes in there, add $1, add $2, add $3 whatever you want, you get into kind of mid-4s, even low-4s on a standalone basis. So I would just point that out as some added information. That's how we look at it, obviously. Our marketing business is likely to make money over time. Got you. Okay. I can follow-up offline. Thanks, guys. Your next question comes from the line of Fuentes Giannakoulis of Morgan Stanley. Your line is open. Yes. Hello and thank you for taking my question. Jack, I want to go back on the demand picture and you mentioned about the strong growth in demand of demand in Asia. I want to ask more particularly for Latin America, where it seems that you have sold most of your volumes El Campesino project, where does this the El Campesino project, where does this stand? And if you are looking other similar projects that they can provide some additional long term selling opportunities? Good. Well, thanks, Fotis. And I'm going to actually turn the answer over to Anatol, who was just down in South America recently. So, Anatol? Thanks, Jack. Thanks, Fotis. Yes, so again, we're advertising amongst other things the flexibility and the responsiveness of this business model and Cheniere's volumes. As you clearly see from us and from all the other sources, the market raises a flag and the supply response that is going to continue to be a seasonal issue. We just spend a lot of time kind of blanketing Asia and it's pretty clear that not only is demand rising there, but winter peaking demand is rising even faster and that's going to continue to drive this kind of seasonality. We think that again the pie continues to grow and that the flexibility and the diversion optionality is the right business model for the LNG market going forward and we're going to be there to fill that. In terms of your question on El Capucino in Chile in particular, We are very supportive of this project as are our partners, EDF and AME. We continue to push forward. We are very well engaged in the permitting process, which has resumed. We have good dialogue with the indigenous groups and are optimistic that we'll get that squared away this year. In terms of the broader question, are we interested in continuing to do that in the Southern Cone and elsewhere? Absolutely. We're looking to continue to grow the value chain downstream of the plant. We have skills. We have resources. We have an E and C group that's 100 people strong that can help those new to this business understand what the issues are, how to put this infrastructure in place. And again, to the extent that there are there is a modest amount of capital that we can commit to that, we would look to do that to the extent that it helps us supply those types of projects. So we absolutely continue to view the El Camposino project, not only as a project that we like and continue to support, but also a model that we can replicate along various dimensions, along various geographies. Thank you very much, Anatol. I'll leave it to there. Your next question today comes from the line of Jean Ann Telseye of Bernstein. Your line is open. Good morning. Just a couple of quick ones. First, do you expect the commissioning timeline and ramp for Train 4 to look similar to Train 3? Or is there anything you can see now that would make it look different? No, I think it's going to look similar to Train 3. I think we're and hopefully, we continue to learn, we continue to get better. So hopefully we can even do it better and faster. Great. Thanks. And then is there a point at which the midship pipeline would hit a delay if we don't have a FERC quorum by then? Sure. I mean, it's a very long way out. It's well over a year from now. Recall that we pre filed Midship in November. So the clock has been running. And from an interstate pipeline standpoint, this is as down the center of the fairway a project as you get. The build is all in Oklahoma and it is co located with the existing pipeline right away for the vast majority of the project. So we don't anticipate, of course, any delays, but we've got a lot of time to resolve these issues. And we certainly don't expect to be held up by lack of a quorum at the FERC currently. Okay. So a year from now before that starts to become a constraint? Over a year, yes. Over a year. Okay. That's all for me. Thank you. Your next question comes from the line of Alex Kana of Wolfe Research. Your line is open. Thanks. Good morning. I think this is also going to be a question for Anatol, but just curious what you're hearing in the market on these most recent Australian proposals to restrict LNG exports. Is that kind of changing any demand dynamics you're seeing for kind of marketing cargoes maybe for the back half of the year? No, it's not changing current marketing dynamics or plans, but it is causing quite a ripple in discussions. And there's a lot of interest in participating in AGL's process for the East Coast FSRU. And that kind of, I think, to your broader question, this issue of how does the market continue to rebalance, It's continuing to have kind of supply negative supply surprises and positive demand surprises as you'd expect in this kind of pricing environment and East Coast of Australia is just the latest salvo in that. Great. Thanks very much. Your next question comes from the line of Pavel Molchanov of Raymond James. Your line is open. Thanks for taking the question guys. You mentioned that marketing margins in Q2 are going to be meaningfully down versus the prior quarter. Is that a function of just oil prices coming down? Or are there other dynamics there? No, it's just a function of LNG prices coming down, right. It's not it doesn't have anything to do in the short term with the linkages to with the legacy contracts that are oil index, right? The markets will clear wherever S and D will make it clear. So in the short run, it's purely an issue of what's in the market today and really just short term market LNG prices, not crude. Okay, understood. And then as you get to 4 trains by the end of the year approaching fairly steady state operations, Is there a sense of seasonality in what your cargoes will look like just given the fact that you're shipping to customers in Southern Hemisphere as well as Northern Hemisphere with different demand profiles? Thanks, Kyle. I'll start on that and maybe have some reinforcements. But there is certainly seasonality in Sabine Passes production, and that's something we touched on at Analyst Day. There is no question that refrigerators run better when it's cool and dry and Sabine is going to be kind of the poster child for that volume. Fortunately for us, as I mentioned earlier, the LNG market and the global gas market is continuing to grow and continuing to exhibit this increased Northern Hemisphere winter demand profile. So we are nicely positioned from that standpoint, and we're comfortable that we can continue to supply Sabine Pass with the challenges of logistics and procurement in the winter. In terms of the overall magnitude, recall that this will be our 1st summer operating multiple trains. And we're going to have a much better feel for what the kind of steady state numbers that you referred to look like after we're done with the production testing over this multi train summer period. And I would just say, Pavel, that we don't expect out of the foundation customers to have any real seasonality in the shipping. We may have some seasonality in our excess cargoes that are based on what Anatol said, just weather in the way the technology that's at Sabine versus Corpus for that matter. All right. Appreciate it, guys. Yes. And there are no further questions in the queue at this time. I now turn the call back to the presenters for any closing remarks. This is Jack. I just want to thank everybody for your time and your support of Cheniere. And anyway, thank you.