Venture Global, Inc. (VG) Q2 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to the Venture Global, Inc. Second Quarter 2025 Earnings Call. At this time, I would like to turn the conference call over to Ben Nolan, Senior Vice President, Investor Relations.

Thank you, operator. Good morning, everyone, and welcome to Venture Global, Inc.'s second quarter 2025 earnings call. I'm joined this morning by Mike Sabel, Venture Global's CEO, Executive Co-Chairman and Founder; Jack Thayer, our CFO; and other members of Venture Global's senior management team. 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. I encourage you to refer to the disclaimers in our earnings presentation, which is available on the Investors section of our website. Additionally, we may include references to certain non-GAAP metrics such as consolidated adjusted EBITDA. A reconciliation of these metrics to the most relevant GAAP measures can be found in the appendix of the earnings presentation posted on our website. Finally, the guidance in this presentation is only effective as of today. In general, we will not update guidance until the following quarter and will not update or affirm guidance other than through broadly disseminated public disclosure. I'll now turn the call over to Mike Sabel.

Thank you, Ben. Good morning, everyone, and thank you for joining us today. We are pleased to share our second quarter 2025 results and update our guidance for 2025, which we believe will be a strong year for Venture Global. I will begin the call with an overview of our second quarter 2025 key accomplishments and results before shifting to our LNG projects individually. I'll then make some remarks on the LNG industry broadly before turning over the call to Jack, who will provide a more detailed review of our financial results and updated guidance for fiscal year 2025. Following our prepared remarks, we will open the call to Q&A. Turning to Page 5 of the presentation. We are pleased to highlight that the past several months have been especially productive for Venture Global. First, we took our final investment decision, or FID, on Phase 1 of our CP2 project, which was the single largest standalone project financing ever. And as we'll discuss more in a moment, our team is fully deployed and working to safely build our third large-scale LNG production facility. Importantly, we took FID without issuing incremental equity and retaining 100% ownership in the project. Secondly, I'm happy to say that the team here delivered on the commitment I made last quarter to sign multiple long-term LNG sales and purchase agreements, or SPAs, in coming quarters. In July, we signed 2 new 20-year contracts, one with Petronas and one with Eni, and expanded our long-term sales to SEFE Germany, increasing the total exported volumes under that contract at 3.75 MTPA. We expect our long-term contracting activity to continue through the remainder of this year. And finally, on the capital front, in addition to the $15.1 billion of financing, we completed as part of the CP2 FID, we also raised $6.5 billion in new bonds to refinance construction term debt at Plaquemines. Adding to these notable milestones, Venture Global shipped a record 89 cargoes in the second quarter of 2025, which is at the top of the guidance range, as we continued the production ramp up at Plaquemines. This ramp-up in combination with stable output from Calcasieu Pass enabled us to generate $3.1 billion of revenue, $1 billion in income from operations, net income attributable to common shareholders of $368 million and $1.4 billion of consolidated adjusted EBITDA, representing increases of 180%, 186%, 21% and 217%, respectively, compared with the second quarter of 2024. Once again, this impressive financial performance and the growth in LNG production are attributable to consistent execution and operational excellence by the Venture Global team. As we noted last quarter, changes in natural gas prices, both domestic and international, could impact our consolidated adjusted EBITDA guidance. While both domestic and international gas prices had fluctuated since our last report, we have continued to lock in future cargo sales and reduce our exposure to pricing variability for the year. As a result, looking ahead to the remainder of 2025, we are maintaining our guidance for $6.4 billion to $6.8 billion of consolidated adjusted EBITDA for 2025, which reflects a $6 to $7 per MMBtu fixed liquefaction fee range for available cargoes, which is consistent with recent contracting in current TTF and JKM forward price expectations. We will continue to update our guidance each quarter to reflect shifts in market forwards, especially during the commissioning phases of our projects. Moving to Slide 6. Following the final investment decision of the CP2 Phase 1, we thought it would be interesting to take a look at how far Venture Global has come in a short time. Six years ago this month, we took FID on our first facility, Calcasieu Pass. Now based on our 3 projects in operation exporting or under construction, totaling approximately 67 MTPA, we would be the largest LNG producer in North America and the second largest in the world and with $46.5 billion of assets as of June 30. We have an average remaining contract duration of 19 years now relative to nameplate capacity, and we expect to have 17 MTPA of excess production capacity from our first 3 facilities before including brownfield expansions. And we believe we are on track to meet our goal of 100 million tonnes or more of production online or under construction by 2030. As I mentioned, I think it's worth reiterating, we have not needed to sell any equity interest in either Plaquemines or CP2 to support our financings and retain 100% ownership with our shareholders in both projects. Our facilities will significantly improve U.S. balance of trade with potentially more than $1 trillion of export value to the United States over the coming decades. I'm also extremely proud to continue our industry-leading safety record, as Venture Global's top priority is making sure that our hard-working people make it home safely each day. Lastly, Venture Global is continuing to support thousands of jobs in Louisiana and across the country and making a positive impact on the communities in which we operate. Turn to Page 8, and we'll dive a little deeper into the projects. As you know, we announced the FID for CP2 Phase 1 on July 28. Phase 1 is a nameplate capacity of 14.4 MTPA, but following the improvements we have made as a result of our ongoing optimization efforts, we believe the peak run rate production level of Phase 1 should be closer to 20 MTPA. Including Phase 2, which we expect to FID in 2026, the 36 factory-built liquefaction trains from both phases should be capable of production of 28 MTPA once completed and commissioned. We expect first LNG before the end of 2027 and continue to estimate more than 550 cargoes will be exported during the construction and commissioning of the project's 2 phases. On June 3, our team fully mobilized and started site work at CP2, following final approval and notices to proceed from FERC as well as our receipt of the conditional non-FTA export authorization from U.S. Department of Energy. There are now over 1,200 people and more than 500 major pieces of construction equipment on site. Key on-site activities include early site preparation, logistics establishing roads, installing silt fencing, dewatering and drainage, cut-and-fill soil stabilization and establishing pile test pads. Key accomplishments including the placed -- include the placement of over 13,000 loads of soil in aggregate, the placement and consumption of over 26,000 tons of cement, the dredging of over 650,000 cubic yards and the clearing of over 700 acres, including 100% silk fencing. Lastly, we have begun full mobilization, including crane delivery and erection for the storm surge wall construction and the tank construction. Tank 1 soil stabilization final grade and test pile program were now complete and transferred over for construction. Of course, all of this work is being executed in parallel with our off-site procurement and fabrication activities. In particular, I'd highlight that Baker Hughes has completed the first 2 liquefaction trains, which are currently being stored at its fabrication facility in Italy. Incidentally, we have included a number of pictures in the appendix showing site progress, equipment under construction and a number of long lead time items like gas turbines and pipes that have already been delivered and are in storage awaiting construction. The final investment decision of Phase 1 was made possible by the support of 29 banks lending $15.1 billion, including the refinancing of the $3 billion pre-FID bridge loan we discussed on the last call. We appreciate the support of our lending partners, and I'm happy to report the project financing was nearly 3x oversubscribed, despite already being the largest standalone project financing in history. With financing in place, a solid start to both on-site work and on the construction of our numerous project components, the project is progressing smoothly, and we believe our early preparation will enable CP2 to potentially reach first LNG production on pace with or even faster than our first 2 projects. Commercially, we signed 2 new 20-year offtake agreements last month with Petronas and Eni, respectively, and expanded our sales commitments under an existing SPA with SEFE, increasing their total LNG volumes to 3.75 MTPA of LNG. Importantly, Eni's 2 MTPA contract with CP2 was its first ever long-term offtake agreements with a U.S. LNG producer. Collectively, these 3 new commitments bring the total contracted volume for CP2 up to 13.5 MTPA. At this point, we are contracting for Phase 2, which has 5.6 MTPA of nameplate capacity with expected peak production capacity of about 8 MTPA. Following several additional offtake agreements, we anticipate Phase 2 FID at some point next year funded by internally generated cash flow and project financing similar to what we executed for Phase 1. Next, I'd like to focus on Calcasieu Pass, which is covered by Page 9 of the presentation. During the second quarter of 2025, Calcasieu Pass was able to export 38 cargoes and realized a weighted average fixed liquefaction fee of $2.66 per MMBtu in the second quarter. The cargoes were a blend of commissioning cargoes sold prior to April 15, 2025, COD day and cargoes sold under our long-term SPAs. The lender's reliability test was completed in May, and production levels have stabilized. For the third and fourth quarters of 2025, based on liquefaction fees achieved from cargoes sold on a forward basis to date, we anticipate capturing a weighted average liquefaction fee of $1.95 per MMBtu across all forward sold Calcasieu Pass production, which reflects contracted sales under our long-term SPAs, plus a small number of excess cargoes, including the 72 cargoes exported from the facility in the first half. We now anticipate exporting between 144 and 149 cargoes by the end of the year, a single cargo decrease in cargoes from our previously reported range due to minor maintenance scheduled for Q3. On August 4, Calcasieu Pass received approval from the Department of Energy to export an additional 0.4 MTPA to non-FTA countries, bringing total DOE export approval for the project to 12.4 MTPA. Moving on to Plaquemines and flipping to Page 10 in the presentation. Construction and commissioning continues to progress nicely for Phases 1 and 2. Since the start of the second quarter of 2025, the Venture Global team added 6 safe start-ups of liquefaction trains, bringing the total to 28 trains now in operation, with 8 more scheduled over the next months. The continued progress enabled Plaquemines to export 51 commissioning cargoes during the second quarter, surpassing the high end of our previously projected range by 1 cargo. The facility realized a weighted average fixed liquefaction fee of $7.09 per MMBtu on these cargoes. As we have discussed in prior reports, Plaquemines is engineered, permitted, procured and installed approximately 400 megawatts of temporary power at the facility. This proactive measure has enabled Plaquemines to mitigate contracted delays, especially with respect to the power island, and continue progressing commissioning and start-up activities. We expect to be able to transition from these temporary power units to our permanent power island capacity in the fourth quarter of 2025. Including the 80 cargoes exported from Plaquemines in the first half of the year, we now anticipate the facility exporting between 227 and 240 cargoes by the end of the year, which represents a 6 cargo increase to the lower end and a 1 cargo increase to the high end of our previously reported range. For the second half of the year, Plaquemines has contracted 102 or 64% of the remaining cargoes, capturing a weighted average fixed liquefaction fee of $7.04 per MMBtu on those contracted cargoes. Collectively, across Calcasieu Pass and Plaquemines, we contracted 59 more cargoes for export in the second half of 2025 since our prior report and have contracted 198 of a potential 326 cargoes or roughly 74% of our total Q3 to Q4 2025 production. We believe this strategy allows us to derisk our LNG production and reduce sensitivity to movement in market prices. Additionally, we have added to the number of cargoes sold for 2026 the total of 57 commissioning cargoes booked. For the first 2 quarters of next year, we have 34 cargoes or 19% of the potential cargoes now contracted with a weighted average fixed liquefaction fee of $5.41 per MMBtu. Turning to Page 12 and the LNG industry broadly. We remain optimistic on the outlook for both growth of the global LNG market and continued stability of LNG prices. As you see on the left, the forward curve reflects the market's expectation for largely stable pricing of LNG in both Asia and Europe, driving healthy spreads above the Henry Hub. Flipping to Page 13. We also have confidence that LNG markets will continue to grow, and prices should remain relatively stable. The chart on the left shows 20 years of LNG production growth, which has averaged 5.5% per year based only on projects which have made FID, final investment decisions. The supply growth rate through the end of the decade would be 7.4%, but that assumes no delays in project timing, which historically has been the case on most new facilities. Yet as you can see on the right side of the page, meaningful LNG growth has already occurred in the first half of 2025 with Europe, in particular, stepping up, buying actively. As a result, price levels remain unchanged. We continue to monitor the ongoing trade discussions EU plans to eliminate Russian LNG and potential secondary sanctions on Russia from the Trump administration. Due to our flexible large-scale LNG capacity, we are uniquely positioned to scale up our support to European partners should the market demand it. We expect that number is only growing as new countries like Vietnam and the Philippines and others become importers, and these countries like China continue to grow their import infrastructure footprint. China specifically is growing the regasification capacity from 152 MTPA currently to 260 MTPA by 2030. With some forecasting, that number could be more than 300 MTPA by 2030, an enormous percentage of the market. And finally, on the arbitration, we are pleased with the tribunal's determination, which reaffirms what Venture Global has maintained from the outset. The plain language in our contracts mutually agreed upon with all of our customers is clear. We have consistently honored these agreements without exception. Our industry and the investors and lenders who underpin it all rely on respect for both the sanctity of negotiated contracts and the experienced objective regulatory and legal bodies that govern it. These principles will ensure our industry remains dynamic, fair and competitive, enabling the innovation and breakthroughs that benefit all market participants and the customers we serve. Venture Global's unique ability to incrementally export commissioning cargoes during the construction of our facilities has brought LNG to the market years faster than ever before and strengthened global energy security. The world needs more abundant, low-cost energy, and our company looks forward to playing a leading role in meeting that demand for years to come. Now I'll hand it over to Jack Thayer, our CFO.

Thank you, Mike, and good morning to those on the line. I'll be referring to the Venture Global, Inc. Form 10-Q for the quarterly period ended June 30, 2025. The 10-Q is available on our website, and some of the key results are summarized on Page 16 of the presentation. During this call, I will highlight results I believe are salient to this audience, and I encourage you to review the entirety of our financial statements in detail. Beginning on Slide 16 with revenue. Our top line was $3.1 billion for the second quarter of 2025, a $2 billion increase from $1.1 billion during the equivalent period in 2024. This increase in revenue was driven by $2.2 billion from higher sales volumes, 329 TBtu in the first quarter of 2025 compared with 132 TBtu in the first quarter of 2024, which was partially offset by $241 million from lower prices. Weighted average fixed facility fees were $5.58 per MMBtu in the second quarter of 2025 versus $6.14 per MMBtu in the second quarter of 2024. And weighted average commodity fees were $3.97 per MMBtu in the second quarter of 2025 versus $2.20 per MMBtu in the second quarter of 2024. Our income from operations was $1.0 billion in the second quarter of 2025, a $675 million increase from $363 million in the second quarter of 2024. The shift was primarily driven by the higher sales volumes I mentioned previously, which resulted in a greater total margin for LNG sold. These increases were partially offset by $197 million higher depreciation and $91 million higher operating costs in support of the ramp up of LNG production at the Plaquemines project and operating our LNG tankers. As I mentioned last quarter, we did see a reduction in our development expenses of $117 million as many of the costs associated with CP2 were able to be capitalized. Our net income attributable to common stockholders, which we will refer to as net income, was $368 million for the second quarter of 2025, a $65 million increase from $303 million in Q2 2024. This increase in net income would have been more substantial, but was offset by noncash factors, such as unfavorable changes in the fair value of our interest rate swaps, which constituted a quarter-over-quarter decline of $288 million. Shifting to consolidated adjusted EBITDA. We realized $1.4 billion during the second quarter of 2025, a $953 million or 217% increase from $440 million in Q2 2024. This increase in consolidated adjusted EBITDA was driven chiefly by higher sales volumes. As Mike discussed, our project exported a total of 89 cargoes in Q2, which increased from 36 cargoes compared with the same period in 2024. Of these cargoes, 329 TBtu of volumes are reflected in our results for Q2 2025 compared with 132 TBtu in Q2 2024. Advancing to Page 17. Consistent with our previous outlook, we are guiding to a consolidated adjusted EBITDA range of $6.4 billion to $6.8 billion for 2025, incorporating a forecasted 144 to 149 cargoes from Calcasieu Pass and 227 to 240 cargoes from Plaquemines, inclusive of the 152 cargoes we exported in the first half across both facilities. This consolidated adjusted EBITDA range was determined assuming fixed liquefaction fees of between $6 and $7 per MMBtu for cargoes remaining to be sold over 2025 and is consistent with current TTF and JKM forward price expectations. On average, if fixed liquefaction fees over the remainder of 2025 increase or decrease by $1 per MMBtu, we expect our consolidated adjusted EBITDA range to adjust accordingly by between $230 million and $240 million, down from the $460 million to $480 million range provided in our previous guidance. This reduced sensitivity to market prices reflects the contracting we executed during the second quarter and thus far in the third quarter. I'll now turn the call back over to Mike.

Thank you, Jack. And now we'll open it up to Q&A.

Our first question today comes from John Mackay, Goldman Sachs.

I wanted to start on the arbitration news from last night. I understand you might be limited in how much you can say at this point. But just wondering how we should think about the remaining cases. Were other contracts written similarly? And then kind of more broadly, what does this mean for your ability to contract and kind of commercialize the future projects?

Sure. No. Thanks, John. No, the contracts are all very similar. They're all based on the standard U.S. project finance contract that has been used by multiple companies, including us in the market for years. And we're extremely pleased, obviously, as we've said, with the result of announced yesterday with the arbitration with Shell. And we remain confident of similar outcomes in the balance because the -- it's the same contracts and the facts around construction and the facts around the completion of the facility are all the same. So we remain very confident that the straightforward analysis of the same contracts will be similar. This was an unnecessary, we think, distraction because this contract language has always been clear and standard and straightforward and required as part of the project financings. And as you all know, we have recently taken COD for Calcasieu Pass, which ended up being about 68 months from FID, which is one of the faster greenfield projects and in line or better than many projects have executed over the years. And even in the face of being our first project and COVID and a couple of hurricanes, the team was still able to safely execute in 68 months. And now our customers at Calcasieu Pass have been taking deliveries and will enjoy what we think are the lowest suite of -- lowest priced suite of contracts that have been done -- long-term contracts have been done on a project ever.

And then just following up on the contract front. You mentioned in the prepared remarks you expect the pace to continue. Maybe if you could just put a finer point around that. Would you expect to contract out the CP2 Phase 2 portion this year? And then anything you can share on where you think -- or where you're seeing pricing kind of trending versus your expectations?

Yes. No. Thanks. I missed the second half of your question. Yes. No, we're very pleased with the contracting that we've completed recently, the long-term contracting. And we are confident as we proceed through this year that we'll execute additional 20-year contracts. And we're intending to layer in contracts that will cover what we want to get done for the second phase of CP2. And we'll also look to begin contracting for the third phase of the brownfield expansion for CP2 as well, and we may be doing some of that contracting this year as well. The contract prices in the market are kind of in the -- in kind of the mid- to lower end of the $2 range. And we believe that we're the low-cost liquefier in the market and are able to price competitively to win the contracts that we need and want in order to size the construction loans for the next phases of CP2 and the third phase or brownfield expansion for Plaquemines as well.

Our next question today comes from Jean Ann Salisbury from Bank of America.

The ramp at Plaquemines continues to be expectations. Can you talk about if you're starting to bump up on any constraints from here to get all the way to the end, either around the power island timing or around gas sourcing constraints?

Thanks, Jean. No, we feel good about the -- our plan -- our ramp-up plan from here to the end of the year. It's extremely challenging because we're still obviously in commissioning. And so the teams have to deal with typical surprises all the time in commissioning, but are -- we're very experienced operating and commissioning and executing the configuration and systems in our facilities now, and so we manage it. But we still feel good about the ramp-up plan that we've guided to for the balance of this year. And the power plant is certainly one of -- or power plants are one of our big focus, but we're still on plan.

Great. And for the Plaquemines expansion, I guess, as you eventually turn to contracting that, are you kind of thinking of doing that in a couple of large phases as you've done before? Or would that one be potentially more gradual, more incremental?

No. I think we'll be able to -- right now, our plan is to do large-scale, long-term contracting there, 20-year contracts that will allow us to do it as 1 or 2 large project financings or financings similar to what we just did for CP2. And we feel the demand is about as strong as it has been in at least in the 15, 16 years that I've been doing this now that there's sufficient demand in the market for us to do the long-term contracts, to do the construction loan financing and sizing the way we like and want to do it and have been guiding to. First step is going to be -- to do finish the contracting for CP2 Phase 2 and Phase 3 and then move on to the brownfield expansion for Plaquemines.

Our next question today comes from Manav Gupta from UBS.

Very, very happy for you about the arbitration. We always believed in you. My first question to you is you will be one of the biggest suppliers of LNG to the world. And how are you going about securing the supply for this gas from within United States, if you could talk a little bit about that, sir?

Sure. No, thank you. We -- unlike the case for Calcasieu Pass and really Plaquemines where we had relatively short laterals, 25, 26 miles, where for CP2 and the brownfield expansions are executing on longer pipelines that connect deeper into the gas supply grid, the laterals for CP2, it's -- the which is the primary lateral, is around 90 miles, and that interconnects with multiple pipes, but also with another pipe, Blackfin, which is around 190 miles. That interconnects with more pipes, including up around Katy above Houston that interconnects with Permian gas pipes coming over. And for our brownfield expansions, we'll be doing similar to where we're making larger investments and longer pipeline interconnects. We -- around the interconnect points, we'll continue to do term gas supply deals to layer in a conservative gas supply for our projects. In this permitting environment, where pipelines in the market are getting permitted and built, we feel really good about the gas supply from all the basins, being able to bring liquid gas supply to not just us, but other demand in the market as well.

You had a very strong second quarter. We are trying to understand the guidance range of $6.4 billion to $6.8 billion. So some of the drivers that can push you towards $6.8 billion and, in our hope, maybe even over it. So if you could talk about that.

Yes. We -- as Jean Ann asked earlier, we still feel good about the commissioning activity and the ramp-up of production at Plaquemines. We still have a portion of our supply as uncontracted. We think that's a huge positive that gives us some upside optionality at this point. The third quarter is pretty well covered, but for the fourth quarter and the winter, we have more unsold capacity. And we're seeing great demand for it. Europe is still below plan and below trend on storage. And so there's still a lot of required buying that has to happen. China, as we mentioned earlier, has enormous -- and Asia around it, but China especially has enormous regas capacity to bid for import of LNG as well. And as we see globally a very hot summer, going into the winter, there's still a lot of pent-up buying that has to happen. And our capacity at Plaquemines is a large percentage of really the incremental available supply to feed into that. So the upside value -- optional value of that unsold capacity, we're very excited about, and that continues into next year at a larger scale.

Our next question today comes from [ Therran Ave ] from [ Infi ].

This is Jeremy Tonet from JPMorgan. Sorry about that. I was just wanted to come back to the 8-K, if I could, with regards to the arbitration and the partial final award. I was just wondering if you could maybe elaborate on that a little bit, what that means exactly. Do you see any financial obligations here? Is it just kind of immaterial in size? Just trying to understand that better, if we could.

Go ahead. I'll let Keith Larson, our General Counsel, answer that question.

Yes. The reference to a partial final award is just -- is more nomenclature from the ICC than anything. It's final in that it is fully resolved the matter. And it is partial in that there is a residual proceeding to determine responsibility for legal fees.

Okay. Got it. That's helpful. And I was just wondering, as we look into '26 a bit more, given supply and demand trends as you see it, just wondering, thoughts on how you think the market shakes out, given geopolitical risk here and thoughts on how much you want to lock in levels versus what you see as kind of fair value for next year.

The -- we're very bullish for next year in terms of demand, and we continue to be optimistic about actually growing demand. The net spreads that we've been selling into the market at the end of this year and in 2026 are very attractive. We layer them in periodically. We're not making price predictions and bets on what prices are going to be in the future. We just kind of dollar cost average them over time, and it generates very, very attractive returns for us at -- attractive returns at current prices. At prices below where we are today, they're very attractive returns. And -- but we're -- continue to see the strong bids and strong interest in our capacity.

Our next question today comes from Robert Mosca from Mizuho Securities.

Wondering -- just wondering maybe what your latest project cost outlook is for CP2 Phases 1 and 2, seeing some data points in the market from other brownfield expansions. And wondering if you still expect CP2 to be in that $27 billion to $28 billion range, just given EPC inflation and potential tariff impacts.

We -- I'll answer that first, and then, Jack, you can add additional detail if you want. There's -- we feel good about the ranges that we're guiding to now, but it is a very tough market. There's still wage inflation out there. In our case, not so much for Phase 1, but Phase 2 and Phase 3 of CP2, there's still tariff uncertainty. So yes, no, there's still lots of challenges out there. There's supply chain inflation that the market is still going to have to manage. Having said that, our approach, we think, is best designed to manage it since so much of our facilities get built in factory settings and fabrication facilities where we're able to -- from -- on a long-term basis, fix both our schedules, but our prices and costs as well. We also manage directly more of the EPC function. And so we've reduced pretty significantly the portions of CP2 that are executed by outside EPC as we've hired and recruited very large internal EPC team now. And so we feel we're in an extremely strong position relative to the rest of the market to manage that. We also work pretty hard to standardize what we do in our facilities that enables us to place orders well ahead of time as we're able to complete our engineering really early. And so we can manage a lot of that exposure by really taking advantage of the similarities and standardization of our facilities. And we continue to actually make a lot of improvements on that from an engineering standpoint. I don't know, Jack, do you want to add to that?

Sure. Thanks, Mike. So just specifically, you may have noticed in the 10-Q that we took our total project guidance for CP2 Phase 1 and 2 up to $28.5 billion to $29.5 billion. That leverages the fully financed budget and understood cost structure for Phase 1 of CP2. And then it incorporates some of the learnings from that process, specifically higher interest rates. As we've navigated a higher interest rate environment, we've accounted for that in our Phase 2 forecast. To the extent that we see rates taper off, as some are suggesting with the Fed reducing rates, that would obviously be a benefit to us. Other variables that we've been addressing, reciprocal tariffs in Phase 2. As you'll recall, we're largely fully procured for Phase 1. So we had less exposure there given the scale of that project. We had previously guided to a range in the first quarter of tariff impact of $210 million to $350 million. That's -- that remains a good estimate of the range of exposure there. And obviously, we're working to find strategies to moderate our tariff exposure. Phase 2 is a much smaller sized project relative to Phase 1, but that has roughly the same exposure as Phase 1 from a tariff perspective, particularly with respect to some of the variability that we've seen of late with reciprocal tariffs. And then, finally, 2 areas where we've accounted for in our budget, with the successful financing of FID of Phase 1, we are now incorporating into our Phase 2 forecast upsizing of certain components in that phase of the project that will ultimately support the inclusion of the brownfield expansion for Phase 3. And finally, given the competition for exceptional craft labor in the region where we're constructing, we've also built in dollars for labor attraction, so that we can secure and retain the best talent and build our projects safely and efficiently. So a very modest increase to the overall size and scale of the budget. We think we're being conservative in how we're approaching this and building in dollars that we hope we won't have to use. We have strategies to optimize that and reduce that exposure in those areas, but wanted to be fulsome in our estimates.

Got it. No, I appreciate that thorough answer. And maybe second for me. Can you talk about the plans to maybe add more liquefaction trains to that Plaquemines expansion you laid out in the last call? How much incremental capacity could there be beyond that 18 to 19 MTPA you laid out? And how do you balance the push to maximize that project size with the absolute costs and potential financing needs?

Sure. We're -- right now, we're guiding to layering on the brownfield Phase 2 at CP2 first, which is on an all-in basis is approximately 10 million tonnes. And so that -- from a timing standpoint, that will go first because it's going to be faster to do the long-term contracting that we want to support the sizing we want for the construction loans for that phase. For Plaquemines, really, we're going to look to manage any increase in -- material increase in spending on the Plaquemines expansion with the pace of the contracting, which we're bullish on, as I mentioned earlier, in this market. And so as we begin to ramp up the 20-year contracts applied to that brownfield expansion in Plaquemines, then we'll script out the pace of the spending for it. The size is, I think, will end up being north of 24 MTPA for the brownfield. We have -- as I mentioned earlier in earlier calls, we've advanced engineering analysis on, really, the throughput capacity of our jetties and common -- some common facilities like tanks that enable us to do a lot more brownfield than we expected at Plaquemines 6 months ago. And so we're excited about the synergies and the accretion opportunities by layering on top of existing infrastructure, additional production capacity. And as we layer in more contracts, we'll talk more about it in coming months and quarters, but the first stop is going to be the brownfield expansion for CP2.

Our next question today comes from Michael Blum from Wells Fargo.

Maybe just staying on the slight, really modest cost increases at Plaquemines and CP2. So you did appreciate all the explanations of what's going on there in terms of why the costs are increasing. But I'm wondering, do those costs increase? Are they fully borne by Venture Global and, therefore, they would impact the return economics? Or are there terms in your contracts for what's contracted so far, which allow for some cost contingencies?

The -- when you say contracts, you mean offtake, the SPA customers?

Yes, yes.

We're -- those costs are borne by Venture Global, and Plaquemines is 100% owned project by Venture Global. So when there are cost overruns at those projects, all that cost is borne by us, and the customers continue to enjoy their contracted long-term prices.

Okay. Got it. And then just one other follow-up on the arbitration proceedings. I'm just wondering -- since you said that effectively, the terms of the disputes are largely the same, I'm wondering, is it the same judge or tribunal that is looking at all these? And is there a chance now that one has been ruled upon that all of these could be consolidated into one case?

No. Those will still be -- they're still separate tribunals. I mean, they're all looking at the same set of facts and the same contract terms, but they're separate tribunals. I want to go back to a little bit of extra color on your first question related to costs. We -- in the case of Plaquemines have now contracted just under $6 billion so far of contracts for commissioning cargoes for Plaquemines, which is approaching 50% of the total debt of $12.9 billion at Plaquemines, and we still have a large portion of commissioning cargoes for Phases 1 and 2 yet to contract. And so the return profile for Plaquemines even with extra costs are extremely attractive and probably among the best that have been achieved in the LNG industry and will still allow us to come out of construction and take COD and have, on a relative net basis, historically low levels of net debt. And when I say net debt, it's just debt less what we've earned and reinvested again in LNG investments.

Our next question today comes from Chris Robertson from Deutsche Bank.

Yes. Just on CP2 Phase 2 and then with the expansion projects, what are you guys thinking about now in terms of contracting strategy, either as it relates to just overall strategy with the company or as it relates to lender requirements in terms of a percentage of nameplate capacity that you look to put away?

The -- as we've demonstrated, the much higher than expected production -- total production capacity at Plaquemines, which we've designed into, and I think, I hope, even more production capacity at CP2 currently and in future phases. We've guided previously to doing a little bit more percentage of our nameplate capacity on a long-term contracted basis. So we are a little over 13 MTPA of the 14.4 nameplate capacity of Phase 1. We will -- so we ended up around a little over 13 out of around 20, I think, we'll be able to do at Phase 1 of CP2. So we're going to be roughly similar to that for the second and third phases of CP2 and -- which results in us being close to the 50% equity that we've been guiding to. We're not required by the banks by any means to do the 50% level. But at that level, we're still getting great returns. It's much more conservative, which we like. It allows us to carry more uncontracted on a long-term basis in the financing. Again, we're going to contract all the capacity, but we're not going to do all of it on a 20-year basis. And -- but we are going to contract all our -- all of our production capacity. And right now, we're a little over 43 MTPA of capacity out of nameplate capacity of 50 on an average term of close to 19 years. And so we have a very long portfolio right now, and it's going to continue on a total portfolio basis to be a long-term contract portfolio.

Got it. As a follow-up, just looking at total CP2 construction costs here, how much of that included in the total amount is related to pipeline construction costs, so that we can better compare project costs apples-to-apples versus other projects?

We've broken that out separately. I'm not sure we have.

So no, we -- I don't believe we have. But as Mike mentioned, the Blackfin pipe that we have been constructing with our partner, WhiteWater, that is outside of the CP2 forecasted budget. That's a 193-mile pipe, 48 inches in diameter. It's a very substantive project that links us to Permian gas and provides attractively priced gas that's sitting outside. The CPX pipe is also a 48-inch pipe. It's substantive in nature, and that is roughly 85 to 90 miles in length. And that's incorporated in our forecast.

Yes. I, mean also, there's a lot of components of projects that are different with us than others. For example, CP2 has got 2 large power plants inside the fence. We, in Phase 2, have a nitrogen removal unit and associated equipment that's very substantial. That enables us uniquely to take enormous volumes of Permian gas that has a lot of extra nitrogen content into it. And so there are lots of things beyond just pipelines that are not apples-to-apples with other projects. But on a net basis, we're -- meaning net of commissioning cargoes on a cost basis, we're confident that we're well ahead of the rest of the market on cost.

Our next question today comes from Elvira Scotto, RBC Capital Markets.

Just a question on demand. How have you seen demand since the tariff negotiations and the EU's commitment to buy $750 billion of energy from the U.S. over the next 3 years? I think you're uniquely positioned to capitalize on that.

We think so, too. Demand has been fantastic and maybe the best we've seen in 10 years on both a long-term contract basis and last 20 years, but also less than that as well. And given that, that demand is current, being able to build projects and bring them online fast is extremely attractive to customers. Combined with our ability, we think to offer the best price liquefaction fee as well and our proven execution on schedule and the advantages of our configuration. So it makes us very optimistic that we're going to be able to sell the incremental contracts for our capacity for the second phase of CP2 Phase 3, a CP2 and the expansion for Plaquemines as well. That will enable us to build those projects. And really at this point, our view is that with just brownfield expansions at CP2 and CP3 -- or Plaquemines, we will be able to build and bring capacity to the market with high returns and very efficient in excess of 100 million tonnes approximately around 2030.

And then for CP2, it sounds like the pace of construction activity is progressing in line, which is slightly ahead of your other 2 projects. What are some of the factors that can drive an acceleration in that time line, so that you can get to first LNG faster?

So we're -- we -- at FID, we're approximately 98% complete on engineering, which supports very rapid remaining procurement and fabrication. And a good place to be for a high-performing project at FID is, let's say, 25% to 30% engineered. And so being 98% is an outlier in a good way. And combined with that, we did massive scale, we think the most ever, for an LNG project prior to FID of procurement. And as we said in the recorded script, we already have 2 trains, shrink wrapped and stored at Baker Hughes in Italy. And I think we have our next 2 trains finishing up there as well. So to be just a few weeks past FID and to have that stage of fabrication complete and in storage, particularly for our configuration where so much of our facility is performed offsite, is a huge advantage. So I would say the data points to really focus on as it relates to schedule is how quickly we're able to get out of the ground. So it's soil stabilization, piling, foundations, completion of our perimeter walls and all the logistics around that. So those are the things that are key for us. And one of the big benefits -- differentiators of our approach is as soon as those foundations are coming up out of the ground, we're going to have several years of procurement and fabricated equipment ready to go immediately on the foundations, which opens up enormous work fronts, so that we can start interconnecting equipment at a massive scale faster than it's been done before. This is also -- this is the -- our third project in our fourth phase with a lot of the team having been with us from the Phase 1 at Calcasieu Pass. And so we have tremendous experience in interconnecting and commissioning the equipment. The first 2 trains at CP2 are trains #55 and 56. And so there's been enormous repetition and troubleshooting and problem solving and mistakes that we work really hard as a company to learn from.

This concludes our question-and-answer session. I will now turn the call over to Mike Sabel. Please continue.

Thank you, everybody. We're grateful for everybody's time this morning and consideration as they think about investments in Venture Global. We will continue to work really hard this quarter and the rest of the year to build our facilities for the long term. So we look forward to meeting many of you in coming weeks and months, and thank you for your time. Have a great rest of the summer.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.