Capital allocation framework prioritizes reinvestment of available cash in growth capital projects, achievement of investment-grade credit metrics, and return of excess capital to shareholders
$1.0 billion share repurchase authorization approved by Board of Directors
Final Investment Decision reached on Sabine Pass Train 6 and Full Notice to Proceed issued to Bechtel
Run-rate production guidance increased to 4.7 – 5.0 mtpa per Train
Run-rate Consolidated Adjusted EBITDA guidance raised to $5.2 – $5.6 billion
Run-rate Distributable Cash Flow per share guidance raised to $8.40 – $9.60
HOUSTON–(BUSINESS WIRE)–Cheniere Energy, Inc. (“Cheniere” or the “Company”) (NYSE American: LNG) announced today that its Board of Directors has approved a comprehensive capital allocation framework for the Company that prioritizes reinvestment of cash flows to grow Cheniere’s world-class LNG platform, achievement of improved credit metrics for the Company’s liquefaction project entities and on a consolidated basis, and return of excess capital to shareholders through a framework that provides the Company flexibility to adapt to changes in growth opportunities and market conditions.
Cheniere expects to generate over $9 billion of available cash through the first half of 2024. The capital allocation framework provides for the following allocation through the forecast period of approximately five years:
- Growth Investments – Reinvest cash flows to fund accretive projects using at least 50% equity funding
- Sabine Pass Train 6 – Over 50% equity investment
- Corpus Christi Stage 3 – At least 50% equity investment for expansion project adjacent to the Corpus Christi Liquefaction Project (“CCL Project”) with total expected nominal production of approximately 9.5 million tonnes per annum (“mtpa”), for which a positive Final Investment Decision (“FID”) is expected as early as 2020.
- Debottlenecking Projects – capital investments to increase production of existing liquefaction platform
- Balance Sheet – Ensure resiliency of investment grade ratings at liquefaction project entities and move toward an investment grade corporate rating for Cheniere
- Leverage – proactively reduce consolidated debt and achieve an investment grade debt to Consolidated Adjusted EBITDA ratio
- Capital Return – Platform that enables meaningful capital return to shareholders while maintaining flexibility for Cheniere
- Share Repurchase Authorization – 3-year, $1.0 billion share repurchase authorization approved by Cheniere’s Board of Directors
“The capital allocation framework we announced today prioritizes continued investment in our LNG platform through new high-return growth projects, beginning with Sabine Pass Train 6, on which we have made a positive FID and have issued full notice to proceed to Bechtel. We believe the framework will also strengthen the balance sheets across our corporate structure, which is vital to our sustained growth, and enables us to return excess capital to shareholders through share repurchases,” said Jack Fusco, Cheniere’s President and Chief Executive Officer. “The market-leading execution we have achieved across our world-class LNG platform has provided stable and growing cash flow, which forms the foundation for this capital allocation framework, and we remain committed to delivering long-term shareholder value through growth.”
Sabine Pass Train 6 Final Investment Decision
Cheniere’s subsidiary Cheniere Energy Partners, L.P. (“Cheniere Partners”) (NYSE American: CQP) announced today that the Board of Directors of its general partner has made a positive FID with respect to Train 6 of the Sabine Pass Liquefaction Project (“SPL Project”) in Cameron Parish, Louisiana, and Cheniere Partners has issued full notice to proceed with construction to Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”).
To fund a portion of the construction of Train 6 and a third LNG berth and required supporting infrastructure at the SPL Project, Cheniere Partners has entered into 5-year, $1.5 billion senior secured credit facilities with 29 banks and financial institutions in a transaction that closed on May 29, 2019. The facilities include a $750 million delayed draw term loan, and a $750 million revolving credit facility. SG Americas Securities, LLC acted as Financial Advisor to Cheniere Partners for the transaction, and MUFG Bank, Ltd acted as Sole Coordinating Lead Arranger.
Increased Run-Rate Production and Financial Guidance
Cheniere has also raised its run-rate production guidance to 4.7 – 5.0 mtpa per Train, up from 4.4 – 4.9 mtpa per Train. The increase in run-rate production is based on the impact of production optimization, maintenance optimization, and debottlenecking projects at both the SPL Project and CCL Project.
Incorporating the impact of Sabine Pass Train 6 and increased run-rate production guidance, Cheniere has revised its run-rate financial guidance as follows:
• Consolidated Adjusted EBITDA
|$5.2 – $5.6 billion|
• Distributable Cash Flow per share
|$8.40 – $9.60|
Cheniere has provided a presentation for investors which includes additional details about the capital allocation framework, the upwardly revised financial guidance, and additional updates on strategic priorities at the Company. The presentation is available on the Company’s website at www.cheniere.com.
Share Repurchase Authorization
Under the share repurchase authorization, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements. The timing and amount of any shares of the Company’s common stock that are repurchased under the share repurchase authorization will be determined by the Company’s management based on market conditions and other factors. The share repurchase authorization does not obligate the Company to acquire any particular amount of common stock, and may be modified, suspended or discontinued at any time or from time to time at the Company’s discretion.
Cheniere Energy, Inc. is the leading producer and exporter of liquefied natural gas (LNG) in the United States, reliably providing a clean, secure, and affordable solution to the growing global need for natural gas. Cheniere is a full-service LNG provider, with capabilities that include gas procurement and transportation, liquefaction, vessel chartering, and LNG delivery. Cheniere has one of the largest liquefaction platforms in the world, consisting of the Sabine Pass and Corpus Christi liquefaction facilities on the U.S. Gulf Coast, with expected aggregate adjusted nominal production capacity of up to 45 million tonnes per annum of LNG operating or under construction. Cheniere is also pursuing liquefaction expansion opportunities and other projects along the LNG value chain. Cheniere is headquartered in Houston, Texas, and has additional offices in London, Singapore, Beijing, Tokyo, and Washington, D.C.
For additional information, please refer to the Cheniere website at www.cheniere.com and Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed with the Securities and Exchange Commission.