Good morning, and welcome to the Cheniere Energy, Inc. third quarter 2019 earnings call and webcast. Today's conference is being recorded. At this time, I'd like to turn the conference over to Randy Bhatia, Vice President of Investor Relations.
Thanks, operator. Good morning, everyone, and welcome to Cheniere Energy's third quarter 2019 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 Michael Wortley, Executive 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 two 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 Energy, Inc.'s results, today's call may also include selected financial information and results for Cheniere Energy Partners, L.P., 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 three. Jack will begin with operating and financial highlights. Anatol will then provide an update on the LNG market, and Michael 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. Good morning, everyone. I'm pleased to be here today to discuss our results and accomplishments for the third quarter of 2019, as well as our outlook for 2020, which we expect to be a record-setting year for Cheniere. The third quarter was yet another quarter highlighted by achievements across multiple facets of our business and operations and across both of our world-scale LNG facilities. Please turn now to slide five. For the third quarter, we generated consolidated adjusted EBITDA of $694 million and distributable cash flow of approximately $200 million on revenue of approximately $2.2 billion. We reported a net loss attributable to common stockholders of $318 million for the quarter, which was impacted by non-cash derivative losses and an impairment to our investment in the Midship project and certain other items that Michael will discuss in a few minutes.
Looking forward to the rest of the year, we continue to expect our full-year 2019 consolidated adjusted EBITDA to be in the range of $2.9 billion-$3.2 billion, and we expect distributable cash flow to be between $600 million and $800 million. For 2020, we expect significant growth in our financial results as compared to 2019. Today we are introducing 2020 guidance for consolidated adjusted EBITDA of $3.8 billion-$4.1 billion, distributable cash flow of $1 billion-$1.3 billion, and a CQP distribution of $2.55-$2.65 per unit. Michael will cover our financial results and guidance in more detail in a few moments. During the third quarter, we signed our second integrated production marketing, or IPM, transaction, this time with EOG Resources, providing additional commercial support for Corpus Christi Stage 3.
Under the terms of this deal, Cheniere will purchase 140,000 MMBtu of natural gas per day from EOG for a price linked to JKM for a term of approximately 15 years. The LNG associated with this gas supply, approximately 0.85 million tons per year, will be marketed and sold by our marketing affiliate. This transaction represents further progress on the commercialization of Corpus Christi Stage 3 and supports our expectation of a positive final investment decision on that project during the first half of next year. The success of the IPM structure is another tangible example of Cheniere's market-leading commercial innovation and demonstrates the value the market places on our ability to tailor solutions to meet the needs of our customers. We continue to pursue additional IPM transactions, primarily in the Permian, given Corpus Christi's advantage location, with a focus on large investment-grade producers.
Train 2 at Corpus Christi reached substantial completion on August 28th, 6 months to the day after the completion of Train 1, and became the seventh operational Cheniere train. Train 2, like the 6 trains before it, was completed ahead of schedule and within budget. In the first 3 quarters of 2019, we reached substantial completion on 3 trains for approximately 15 million tons of liquefaction capacity, with each train an average of more than 9 months ahead of schedule. A product of years of development and the hard work of thousands of dedicated Cheniere and Bechtel professionals. This achievement further reinforces our global reputation for best-in-class project execution. I'll speak more about the continued progress on our liquefaction projects in a few minutes.
In September, the date of first commercial delivery, or DFCD, was reached under the 20-year contracts with both Centrica and Total associated with the Train 5 at Sabine Pass. The transformation of our cash flows continues as we have commenced 13 of our credit-worthy customers under their long-term take-or-pay style contracts. Also, during the third quarter, we achieved some significant milestones in the execution of our balance sheet and capital allocation strategies. We recently refinanced debt at both CQP in Corpus Christi, and the latter was upgraded to investment-grade credit ratings by both S&P and Fitch during the quarter, a milestone achievement for the Corpus Christi project. In addition, we commenced debt repayment, prepaying a portion of the Corpus Christi credit facility in support of our long-term balance sheet strategy to achieve consolidated investment-grade credit metrics at all rated entities over the next few years.
We also continued repurchasing shares in the market opportunistically, with approximately $2.5 million shares repurchased in the third quarter. We have now repurchased approximately 1% of our outstanding shares since the program commenced in late June. Operationally, we produced and exported 108 LNG cargoes during the third quarter, a new quarterly record. In October, we exported our 850th cargo. In addition, we completed additional successful maintenance turnarounds at Sabine Pass in support of our 2019 maintenance program. The turnarounds for Trains 3, 4, and 5 involved over 490,000 man-hours and 2,700 work orders, and like the turnaround for Trains 1 and 2 earlier this year, was accomplished ahead of schedule, on budget, and most importantly, with no safety incidents. Congratulations to Aaron Stephenson and the Sabine Pass team on further demonstrating the safety-first culture of Cheniere's operations.
Now turn to Slide six for an update on our liquefaction project operations and development. Since liquefaction operations began in early 2016, we have loaded and exported over 850 cargoes from our two projects, or approximately 60 million tons of LNG. As I mentioned earlier, our seven operating trains have all entered service early. On average, over seven months ahead of the guaranteed completion dates. As a result of the early completions and excellence in operations, our marketing affiliate has been able to sell over 200 cumulative cargoes of incremental LNG into the global market, a significant benefit to Cheniere and our shareholders. We remain laser-focused on maintaining excellence in execution as both Sabine Pass Train 6 and Corpus Christi Train 3 progress through construction. At Sabine Pass Train 6, Bechtel continues to progress construction efforts against an accelerated schedule.
Project completion for Train 6 is over 38% as of the end of September. Construction is ramping up with headcount now over 500, and activities focused on foundation and column work and commencing structural steel. Bechtel is currently projecting substantial completion of Train 6 in the first half of 2023. At Corpus Christi Train 3, Bechtel also continues to progress construction efforts against an accelerated timeline. There are over 2,000 workers currently on site for Train 3, and the project is over two-thirds complete as of the end of September. Construction activities are focused on structural steel, above-ground piping installations, mechanical and instrumentation activities, and recently, the concrete roof pour was completed on the third LNG storage tank. Bechtel now projects substantial completion of Train 3 in the first half of 2021, an acceleration from the previously projected target for the second half of 2021.
Our development efforts on Corpus Christi Stage 3 continue, and that project remains on the expected timeline we have previously communicated. We continue to expect to reach FID for Stage 3 in 2020. We are currently in the process of evaluating EPC bids, and we intend to have a cost-competitive, fully wrapped, lump-sum turnkey EPC contract in place over the next few months. On the regulatory front, we continue to expect full regulatory approvals for Stage 3 by the end of the year. On the commercial side, significant progress has been made already with our IPM transactions with Apache and EOG, and Anatol will speak in a minute on what we see in the market today that gives us confidence in commercial momentum to enable an FID of Stage 3 next year.
Before turning the call over, I'll briefly outline what I see as some of Cheniere's key priorities for 2020. First and foremost, we plan to deliver on the 2020 financial guidance we rolled out today. We have good visibility into next year, and 2020 should feature less volatility than 2019, given that much more of our overall production next year will be under long-term contracts, and there are no new trains scheduled to enter service next year. Another key priority for 2020 is to maintain our reputation for operational excellence. Our track record in LNG development, execution, and operations is a key differentiator and a key competitive advantage, and it is imperative that we keep our eyes on the ball.
In May of 2020, we expect to reach DFCD with respect to Train 2 at Corpus Christi and commence the long-term SPAs tied to Train 2. In 2019, our teams have done a tremendous job of onboarding new SPA customers with the DFCDs of contracts tied to Corpus Christi Train 1 and Sabine Pass Train 5, as well as some of our marketing SPAs. We expect that performance to continue next year. As I've already mentioned, we expect to reach FID for Corpus Christi Stage 3 next year. Stage 3 is an attractive growth project which will leverage a significant amount of infrastructure we've built in Corpus. We look forward to receiving our FERC permit later this year, and finishing the remaining steps of commercialization and financing ahead of a full FID. Finally, in 2020, we will continue to pursue additional development opportunities to maintain our growth momentum.
We have an incredible infrastructure and land position in Corpus Christi, which we expect to enable further brownfield expansion economics for future liquefaction projects. In addition to our own infrastructure, this location is proximate to significant new pipeline development and natural gas resources. Our Corpus Christi project is by far the closest LNG project, either in operations or development, to the Permian Basin. Our site is an ideal location to match new gas supply with global LNG demand over the long term. Our project development focus in 2020 is on leveraging those advantages to expand our LNG footprint in Corpus Christi beyond Stage 3. Now I'll turn the call over to Anatol.
Thanks, Jack. Good morning, everyone. Please turn to Slide nine. 2019 has continued to be a year of substantial global LNG supply growth. After adding a record 12 million tons of supply in the second quarter, another 10 million tons of supply was added in the third quarter. Full year 2019 is on pace to add about 40 million tons of supply, which will be a new yearly record. This year's supply growth has been driven largely by U.S. projects, including our projects, with substantial completion achieved for Corpus Christi Train 1 and Sabine Pass Train 5 in the first quarter, and for Corpus Christi Train 2 in August. Other U.S. projects have also reached recent milestones, as Freeport Train 1 exported its first cargo in September, and the first train at Elba Island recently entered commercial service. Incremental supply during the third quarter was absorbed primarily by Europe.
The region continued its global balancing role, as we also saw in the first half of the year. Europe imported a record 18.4 million tons during the third quarter, nearly double the import level as compared to a year ago. As this year's rapid supply growth has outpaced Asian demand growth, pushing incremental supplies to Europe and driving down spot prices, we have also seen a convergence of European and Asian spot gas prices. The spot price markers most commonly used in Asia and Europe, JKM and TTF respectively, have occasionally shown some deviations, but generally spreads between the two have narrowed as compared to previous years. In contrast to the decrease in TTF and JKM prices, Brent equivalent pricing continued to diverge and generally traded above the $10 MMBtu level during the third quarter, more than three times higher than Henry Hub and almost double TTF and JKM levels.
Please turn to Slide 10. European imports were lower quarter-on-quarter, remained well above prior years' levels. The quarter-on-quarter slowdown in imports was driven by strong storage levels and low gas prices in Europe, by an increase in imports into traditional counter-seasonal markets and emerging Asian markets. European gas storage levels have continued to be above the five-year range, storage was reported to be close to 100% full in the middle of October. These storage levels have allowed spot LNG prices to remain low and the European markets to remain comfortable with supply and demand dynamics heading into the winter withdrawal season. Though negative news flow on Groningen, French nuclear facilities, and lack of progress on the Ukraine transit agreement during the quarter are potential tailwinds. Pipeline flows into Europe also fell off during the third quarter, helping to balance the market.
All three regional flows into Europe from Russia, Algeria, and Norway were lower quarter on quarter, and Norway had the largest decline, flowing 22% less than in the third quarter of last year. Low gas prices and strong LNG imports have also incentivized increased gas fire power generation. Spain has had the most noticeable response, increasing its gas power generation by 58% in the third quarter as compared to last year. It's a similar story in Germany, where gas power generation rose by 39% year on year in the third quarter. While hydro and renewables have oscillated in both countries, natural gas, supported by low prices and a strong carbon price, is taking market share away from coal. Please turn to Slide 11. Asian LNG imports in the third quarter were slightly higher than 2018 and continued to trend above the five-year range.
Strong nuclear generation from legacy LNG consumers in Japan, South Korea, and Taiwan has placed downward pressure on LNG imports this year. Lower imports from Japan and South Korea were offset by strong imports in the third quarter from China, India, Bangladesh, Pakistan, and Malaysia, all of which have experienced double-digit growth from last year. Looking ahead, there are several developments and themes we're following that are expected to be favorable to Asian LNG demand growth. In Japan, there have been challenges in complying with anti-terrorism retrofits on time at nuclear facilities, resulting in the potential closure of 12 gigawatts of nuclear capacity. In South Korea, there are plans for more temporary closures of coal-fired power plants during winter.
A proposal was submitted to the president of South Korea to close 14 coal-fired plants from December to February, and another 22 in March, in addition to the five currently scheduled to be closed from March to June. China recently announced a target to replace dispersed coal with clean heating options this year. 5.2 million households across 28 cities are targeted to switch to cleaner-burning options, 45% higher than in 2018. While the impact on gas demand based on this policy is not yet known, it's a good example of China continuing to implement environmentally driven policies, which should incentivize stronger gas demand going forward. As we look toward winter and 2020, the market will continue to absorb the recent amounts of new supply that have come online. At 40 million tons, the LNG supply growth this year has been unprecedented.
However, this wave is well over 80% behind us, with only 24 million tons, or about 17% of incremental supply forecast to come online between now and the end of next year. Asian demand has continued to grow. Europe has largely balanced the market, in part, by rebuilding the muscle memory of natural gas imports and consumption. The forward margin curve remains in steep contango. Margins, while not what I would characterize as robust, are fairly healthy only a couple quarters out on the curve. We continue to expect that the prospects for global natural gas demand growth, our commercial momentum, and our advantaged position of U.S. Gulf Coast LNG exports will enable us to capture significant additional term economics. We remain confident that these efforts should aggregate sufficient commercial support for Corpus Christi Stage 3 to move forward next year. Thank you for your time and attention.
I'll turn it over to Michael, who will review our financial results.
Thanks, Anatol, and good morning, everyone. Turning to slide 13. For the third quarter, we reported a net loss of $318 million, consolidated adjusted EBITDA of $694 million, and distributable cash flow of approximately $200 million. For the nine months ended September 30th, we reported a net loss of $291 million, consolidated adjusted EBITDA of approximately $2 billion, and distributable cash flow of approximately $520 million. As Jack mentioned, during the third quarter, net loss was negatively impacted by an impairment of approximately $80 million to our equity investment in the Midship project. This is due to cost overruns and extended construction timelines at the Midship project, resulting in a reduction of the expected fair value of our equity interest.
Net loss for the quarter also included an approximately $140 million non-cash loss from changes in the fair value of commodity derivatives, primarily related to our gas supply contracts, and an approximately $80 million non-cash loss related to interest rate derivatives. We exported 383 TBtu of LNG from our liquefaction projects during the third quarter, an increase of 22 TBtu over the second quarter, primarily due to incremental commissioning and operational volumes from Corpus Christi Train 2, which was completed and placed into service in August. We exported 20 TBtu of commissioning volumes during the third quarter related to Train 2. For the nine months ended September 30th, we exported over 1,050 TBtu from our liquefaction projects.
For the third quarter, we recognized an income 364 TBtu of LNG produced at our liquefaction projects, consisting of 364 TBtu loaded during the quarter, plus 36 TBtu loaded in the second quarter, but delivered and recognized in the third quarter, less 36 TBtu sold on a delivered basis and in transit at the end of the third quarter. We also recognized an income eight TBtu of LNG that was sourced from third parties. Approximately 73% of the 364 TBtu recognized in income from our projects during the quarter was sold under long-term SPAs, the remaining 27% was sold by our marketing affiliate, either into the spot market or under short- and medium-term contracts.
Volumes sold under long-term SPAs increased by 38 TBtu compared to the 2nd quarter, driven by a full quarter of volumes under the SPAs related to Corpus Christi Train 1, which reached DFCD on June 1st, and by volumes under the SPAs related to Sabine Pass Train 5, which reached DFCD on September 1st. For the nine months ended September 30th, we recognized an income 998 TBtu of LNG produced at our liquefaction projects, of which 73% was sold under long-term SPAs. We also recognized an income 31 TBtu of LNG sourced from third parties. Operating income for the 3rd quarter was $307 million, a decrease of $125 million compared to the 2nd quarter.
The decrease in operating income was primarily due to decreased total margins and a slight increase in total operating costs and expenses, primarily related to Corpus Christi Train 2, for which revenue and costs began to be recognized in income after substantial completion in late August. Total margins or total revenues less cost of sales decreased by $112 million in the third quarter as compared to the second quarter due to increased mark-to-market loss from changes in fair value of commodity and FX derivatives, partially offset by an increase in LNG volumes recognized in income. Margins for MMBtu of LNG recognized in income were materially consistent between quarters as lower LNG market pricing was largely offset by lower natural gas feedstock costs.
Regarding the net loss from changes in fair value of commodity and FX derivatives, the impact is primarily related to changes in the fair value of agreements for the future purchase of natural gas. Certain of our gas supply agreements, including our IPM agreements, qualify as derivatives and require mark-to-market accounting. From period to period, we will experience non-cash gains and losses as price or basis movements occur in the underlying commodities related to these forward contracts for purchase of natural gas. While operationally, we seek to eliminate commodity risk by matching our gas purchases and LNG sales on the same pricing index, our long-term LNG SPAs do not currently qualify for mark-to-market accounting, meaning that the fair value impact of only one side of the transaction is recognized until the delivery of natural gas and sale of our LNG occurs.
We anticipate that this accounting treatment mismatch will cause some volatility in our financial statements over time in the form of non-cash gains and losses, which will be reflected primarily in cost of sales. For the third quarter, the net non-cash impact of changes in fair value of commodity and FX derivatives was a loss of approximately $140 million. Year to date, September 30th, the impact was a gain of approximately $40 million. Net loss attributable to common stockholders for the third quarter was $318 million, or $1.25 per share, compared to net loss of $114 million, or $0.44 per share for the second quarter.
The increase in net loss was driven primarily by decreased operating income, increased other expense related to the impairment of our equity investment in Midship, increased interest expense, and increased loss on extinguishment of debt, partially offset by decreased net income attributable to non-controlling interests. Net income attributable to non-controlling interests decreased compared to the second quarter due to a decrease in net income recognized by CQP, in which the non-controlling interests are held. Please turn to slide 14, where I will discuss 2019 and 2020 guidance. Looking forward to the remainder of 2019, as Jack and Anatol discussed, we continue to see a relatively soft short-term LNG market environment. We have continued to have strong operating performance and have effectively hedged most expected production volumes for the remainder of the year.
We remain on track to deliver consolidated adjusted EBITDA for the full year within our guidance range of $2.9 billion-$3.2 billion and distributable cash flow within our guidance range of $0.6 billion-$0.8 billion. Today, we are issuing 2020 consolidated adjusted EBITDA guidance of $3.8 billion-$4.1 billion and distributable cash flow guidance of $1 billion-$1.3 billion, and a CQP distribution of $2.55-$2.65 per unit. We expect stable operations during 2020, with 7 trains in service throughout the whole year, and with the SPAs related to 6 of those trains already in effect, and the SPAs for Corpus Christi Train 2 expected to reach DFCD in May 2020.
The total volume produced at our facilities in 2020, we expect approximately 7.5 million tons to be available to our marketing affiliate, down from over 9.5 million tons in 2019, and a significant portion of that capacity is already been hedged either physically or financially. This forecast considers production efficiencies as well as maintenance optimization de-bottlenecking efforts, which have been implemented throughout this year. Our marketing volume forecast for next year is weighted toward the first half of the year due to the timing of DFCD for Corpus Train 2 SPAs, and we have been actively pre-selling some of these volumes in both the physical and financial markets. We currently forecast that a $1 change in market margin would impact EBITDA by approximately $100 million for full year 2020. Turn now to slide 15.
During the third quarter, we completed several transactions which advanced key initiatives related to our long-term balance sheet management and capital allocation strategies. In September, CQP issued $1.5 billion of 4.5% senior notes due 2029 to prepay all of the outstanding term loans under the CQP credit facilities and to fund future capital expenditures related to construction of Sabine Pass Train 6. Financing Train 6 at the CQP level has allowed us to bolster the resilience of SPL's investment-grade credit rating and is a step towards our longer-term goals of desecuritizing our balance sheets and achieving investment-grade credit metrics throughout our corporate structure. In September, Corpus received investment-grade senior secured debt ratings from S&P and Fitch, and in October, received an investment-grade issuer default rating from Fitch.
Subsequent to Corpus receiving these IG ratings, we issued $727 million of 4.8% senior notes due 2039 pursuant to the previously announced private placement transaction with Allianz, the closing and funding of which was contingent upon Corpus receiving the IG rating. In October, we entered into another private placement transaction with accounts managed by BlackRock and MetLife and issued $475 million of 3.925% senior notes due 2039. The proceeds of these two private placements were used to prepay outstanding amounts under the Corpus credit facility. Both sets of notes are fully amortizing with a weighted average life of 15 years. They help us achieve our broader balance sheet goals of strengthening project-level credit metrics and reducing consolidated leverage over time.
Finally, in support of our capital allocation framework, during the third quarter, we repurchased approximately 2.5 million shares of our common stock for a total of $156 million under our share repurchase program. We commenced de-leveraging by prepaying approximately $70 million of outstanding borrowings under the Corpus credit facility. That concludes our prepared remarks. Thank you for your time and your interest in Cheniere. Operator, we're ready to open the line for questions.
Thank you. If you do have a question at this time, please press star one on your touch-tone phone. Just a reminder, if you're joining us via speakerphone today, make sure your mute function is turned off to allow the signal to reach our equipment. We ask that you limit yourself initially to one question and one follow-up question, you may re-queue if you have additional questions. We will go first to Jeremy Tonet at JPMorgan.
Good morning.
Morning, Jeremy.
Thanks. Wanted to start off with the 2020 EBITDA guidance. A very strong number it looks like there. I was wondering if you could share any more behind what assumptions are embedded there. You talk about a lot being hedged or being sold forward, and you talk about the sensitivity $1 versus $100 million, but just trying to see, does that price deck being employed there, is that the same as the 2019 levels, or is that where the strip's at now? Anything else that you could share us as far as the sensitivities that would drive the top versus bottom of that range?
Sure, Jeremy. Hey, it's Michael. I'll start with production. I guess for 2020, it'll be a big production year for us. Obviously, we'll end up probably in the mid-30s in terms of MTPA for the year. We've guided to 4.7-5.0 per train. SPL will be at the top end of that range. That range is supposed to be a 20-year average, building in all of the maintenance plans. Next year is going to be certainly a low-planned maintenance year for Sabine, that'll drive a lot of production out of that facility. Corpus will be at the lower end of the range, just given where it is in its ramp-up. We have some debottlenecking efforts underway that should bear fruit over the next couple of years. For next year, kind of at the lower end of the range.
In terms of % contracted and kind of EBITDA margin sensitivities, as we said in the remarks, 2020 will be about 7.5 million tons left in the CMI book, down from 9.5, almost 10 this year. Down about 20%. Out of that 7.5, as we said, we've been actively putting that away. Of course, CMI has a fair amount of long-term contracts in its book right now. If you back that off and then back off all of the shorter-term stuff that we've already put in place for next year, back off the financial hedges we have in place, that's down to something like 100 TBtu left or about 2 million tons of unsold. In terms of margin certainty for us next year, it's kind of in the mid-90s % range.
We feel like 2020 is generally put to bed on the margin side. Don't expect really much sensitivity next year. We say a dollar move is $100 million. To the extent we get into the year, probably be in a position to tighten our EBITDA guidance range down once we get some of that behind us. That's really the big driver for us at this point, and of course, it's not very big.
mid-90s, that's great to hear. Jack, I just want a second question here as far as the stock price. I know that you've talked before as far as frustration and holders of the stock frustrated with the market seeming to not kind of recognize the stability in your cash flows. I'm just wondering how you think about that now, what levers do you have to pull to try to address that or any thoughts you could share there?
Well, Jeremy, over the long term, I think our capital allocation strategy is the right one. When we see weakness in the stock price, as you can tell from the Q, we're pretty aggressively buying out there. We don't need to sell stock to raise capital. Our plans call for us to generate cash that we can reinvest into the business for our expansion plans, and we'll pay down our debt to get our balance sheet, and we're going to continue to be very opportunistic about buying back our stock.
That's helpful. That's it for me. Thanks.
Thanks.
We'll move next to Christine Cho at Barclays.
Good morning, everyone. The $1 change in market margin changing your 2020 EBITDA by $100 million was helpful. Are you willing to share with us what the average marketing margin is assumed in your guidance after factoring in all the long-term and short-term and financial hedges you've put in? I ask because the 2020 guidance that you gave is the same as the seven-train run rate guidance that you gave at your analyst day a couple of years ago, which obviously makes sense because you're running seven trains. I think in that analysis, you had assumed 250 as your CMI margin. I'm just trying to get a sense of how far off we're from that initial metric.
Yeah. Hey, Christine, it's Michael. You got it. We're not getting 250. Obviously, the book's more like a little under two next year. That's a headwind versus the guidance we put out. Of course, that's offset by the fact that production is much higher than we thought it was going to be back when we put out that guidance in 2017 and updated it in 2018. The other thing I'll point out, and it's kind of along the same lines, the run rate guidance assumed a full year of train 2, whereas next year, obviously, we only have it till starting in May in terms of DFCD. All those puts and takes equal out to us being able to stay in that guidance.
Okay, great. That's helpful. Earlier this year, I saw that CMI entered into an agreement with SPL for up to 20 cargoes this year at the standard 115% of Henry Hub plus $2 per MMBtu. My guess is this was driven by trying to create more stability for CQP versus the standard 80-20 sharing agreement you have. Should we think that these sorts of agreements might continue into the future if spot prices are low or volatile, or did it just make more sense for 2019 because you had higher than normal spot exposure?
Christine, this is Jack. There's two reasons, and you've touched upon all of them. One is, we feel that CQP gets rewarded on its share price for having stability in its cash flows. This helped deliver that. It also helps us at CMI cover some of our positions and have some certainty on that price of what that is. You should expect us to continue to try to work closely and collaboratively with our board at CQP as well as CMI to make sure that those deals are a win-win for both parties.
Okay. We shouldn't be surprised if we see this kind of continue going forward?
No, you shouldn't be surprised.
Okay. Thank you.
Our next question comes from Ben Nolan at Stifel.
Great. Thanks. My first question relates to something that came up on the BP conference call earlier this week, where they indicated that they thought the global gas market was oversupplied, and that there was a pretty strong chance that some of the U.S. capacity might actually need to be backed off a little bit or operate at lower utilizations to help balance the market. I'm curious if you guys see the same thing or how that might play out if there are other locations around the world that might come off first, perhaps.
Ben, this is Jack. I'll start off, and then I'll ask Anatol to give his opinion. It never ceases to amaze me that we keep getting this or having a conversation of U.S. LNG and the part that customers won't lift because we are extremely competitive worldwide. As Anatol mentioned, there's a lot of infrastructure that continues to be built in support of natural gas consumption worldwide. We feel very, very good about our position in the world market and our customers' position on how they are utilizing nat gas and that overall cost of production. Anatol, what?
Thanks, Ben. Yeah, just to follow on Jack's comments. Number one, this supply wave from 2016 through next year is about 150 million tons, as we said in the prepared remarks, a little over 20 million tons left to go. The global LNG market today is about 360, 370 million tons, sort of current monthly run rate. That's 50 Bcf a day or so. Our gas supply team, Corey, takes about 5.5 Bcf of gas to our plants alone. The U.S. is 7.5 Bcf. Number one, I think we're much closer to the end of this supply wave, obviously. The question of how quickly the world absorbs that is in part weather, but certainly we fully expect the emerging markets and actually Old World Europe to continue to grow and have fundamental demand growth.
Number 2, you switch off 15% of global supply, it's going to have quite an impact on Henry Hub here and LNG prices globally. We don't expect that to happen. We think it's very rapidly self-correcting. Of course the LNG world does not run off the spot spread, right? Neither physically nor financially. We think there is a good chance that we're in another nine to 12 months of a steep contango. As Michael discussed and Jack discussed earlier, we'll take advantage of that contango and secure margins for ourselves.
Great. I appreciate that color. I thought that's what you might say. The other question is about the guidance for 2020. The EBITDA guidance just came up earlier as you laid out in terms of the absolute numbers for 7-train run rate. The DCF guidance was a bit different, which I thought was odd given EBITDA being the same. Any color as to what is happening on the DCF side relative to the EBITDA guidance?
Ben, it's Michael. Thanks for asking that. I should've clarified that in the last question. The only difference there is some of the same things I mentioned, 250 margin, not a full year of DFCD on train 2, but the big one is train 6 equity down at CQP. Remember, we're 50/50 financing that train at CQP. That results in slower distribution growth. We're foregoing some distributions today, which is impacting our DCF, right? We only count what comes out of CQP to us and CEI DCF. We're foregoing that today for a much larger distribution later. That's the reconciling item.
Got it. Appreciate it. Thanks, guys.
Moving next to Julien Dumoulin-Smith at Bank of America.
Hey, good morning, team.
Morning, Julien.
Hey. Perhaps just to follow up a little bit more on Christine's question, can you talk about some of the sort of let's call it like this normalized guidance for the multi-train scenarios that you've released in the past? Obviously, it was a little bit of sort of largely in line, but a little bit of a discrepancy relative to that guidance, more on the cash flow side than the EBITDA side. Can you talk about some of those, the puts and takes again a little bit more discreetly, and then kind of apply that if you can for the other guidance levels that you've articulated for the future trains?
Yeah. I mean, it's Michael again. Sticking with all of the future train guidance, whether it's the nine we rolled out and even the stage 3 preliminary guidance we gave. On this year, again, it's those three items for EBITDA. I mean, we're not getting $250, which is what's in there, we have higher production, which is offsetting that. We don't have a full year of the $350 contracts, which will come with the DFCD of Train 2. Those are both impacting 2019, leaving us in the same place as the guidance we said in 2017. DCF has the added difference of Train 6 equity being funded by withholding distributions from us, which will ultimately come.
Got it. Nothing else different on cost, et cetera. If I can pivot a little bit a different direction, maybe more of a Jack question. We've seen Dominion out there selling down a stake in their business of late, obviously more discreet to them and their long-term financing decisions. I know that folks, and you all just talked about CQP, but I'd be curious, could we potentially go back the other way with respect to Corpus Christi? I know you guys are trying to simplify things, but at the same time, if you find these particularly attractive costs of capital out there that we've seen with some of your peers, is there anything out there on that? Any thoughts?
Well, Julien, I have to tell you, congrats to Dominion. When we look at that, it looks like they got 12 times EBITDA for a non-controlling piece of a LNG facility, which is fantastic for our complex overall. I think different owners of these LNG terminals will have different needs for cash. We're pretty pleased with our capital structure and our performance year to date. We're happy to give guidance that is relatively consistent with what we told you we were going to do years ago. We're just going to keep plugging away at our business.
No, fair enough. All right. Thanks, guys. I'll leave it there.
Moving next to Webber Research and Michael Webber.
Hey, good morning, guys. How are you?
Hey, Mike.
Hey, Mike.
Hey. Jack, I just wanted to come back to the question around Dominion and maybe kind of think about that from a different angle. Maybe not in the sense that you guys need to offload CapEx to a financial buyer, but I guess I don't think there's a great way to put this indirectly, but if you just think about the multiple there that's implied for Dominion at 12x. You mentioned that for a non-controlling stake. Jack, I'm just curious in terms of how you think about that multiple relative to CQP and kind of the different aspects of it and how it's applicable to obviously what's happening with Corpus or with Sabine and a block that's getting shopped now. There's no great indirect way to ask that. I'm just going to go in now.
Look, we like both of our businesses. There is a significant spread, as we all know, between how CQP trades and how LNG trades. At some point, the market will figure out which one's right, and we'll see what happens there. You can tell from our buyback program that we continue to like buying back our LNG stock at these prices and levels. I'm not going to get into trying to anticipate what one shareholder may do as far as their stock or their stock position. It really does not matter for us strategically. We continue to perform and execute on our business. That's where we're going to stay focused on, is making sure that we hit all of our targets and we meet our commitments to all of you.
Gotcha. Appreciate that. A follow-up, just more on the market in general, good one, I guess, for Jack or for Anatol, but just within the context of your ongoing conversations with the Chinese, it's been a while now. I'm just curious, one, how have those conversations changed since the trade war started? I know we've probably picked at this in each earnings call, but at any given point, the demand for LNG is going to be a zero-sum game. Over time, you can definitely see value leakage. I'm just wondering, is there a point in time? We've already seen the Chinese help underwrite Arctic 2. I'm sure they're being pitched aggressively out of West Africa. At what point do you think you start to see permanent market share loss from the U.S. Gulf as a result of tariffs?
Specifically within the context of the Chinese bid.
Yeah. I'm going to take that in a couple of different ways. You just saw from Anatol's presentation that they've had over 20 million tons of growth year-over-year. 10.
20%.
20%.
20%, sorry. Mm-hmm.
10 million tons of growth this year. They continue to use more and more LNG. We continue to work very closely with our counterparts that are in China. They're very interested in securing more Henry Hub. The trade tensions have gone on a little longer than I think any of us have anticipated. We continue to work with the administration and our counterparts in China to make sure that we're on the right side of the relationship when things get better. That's been our position from day one, and it's the way we've conducted our business with China. Anatol, do you have anything else?
No, just to echo Jack's comments, and Mike, as you know, we're continuing to be very committed. We think it's a great opportunity. We want to support China and its ambitions to grow gas to 15% of its economy, and to clean its skies, and have affordable, reliable solutions. We are as engaged as ever and are looking forward to the right opportunities to consummate those.
Yeah. Maybe the best way to ask is, do you think that Chinese bid getting directed elsewhere has helped underwrite any projects that wouldn't have gotten done anyway?
No.
No. I don't think any that wouldn't have gotten done. I think everything that's been dispatched to date that has China's involvement are projects that we fully expected to be dispatched, whether that's pipe or LNG.
Okay, great. Got you. That's helpful. All right, guys. Thanks for your time.
Thanks.
We'll go next to Michael Lapides at Goldman Sachs.
Hey, guys. Thank you for taking my question. One operational one. Do you think, and if you do, can you talk about what it would take to achieve this, to be able to get above five million tons per year per train? Meaning, is there incremental operational upside potential that may exist over the longer term, and if so, how do you achieve it?
I do think. Having worked closely with the operational team recently on our debottlenecking initiatives, I think the debottlenecking plan that they've put before us for some additional capital, we could achieve over 5 million tons if necessary. I think what you're hearing from Michael is we're trying to do all of the low-hanging fruit first, do the debottlenecking that gets us as much LNG as we possibly can without having to invest large quantities of capital. Michael, I do think we can achieve numbers above that.
Is that something you think is in the next three to four years, three to five-year horizon, or are you thinking that's a longer-term target?
I think we will guide you appropriately when we get to that point. For now, we're sticking with our original 20-year guidance.
Okay. One follow-up, and this may be more of a Michael question. How are you thinking about the balance, like when you think about your debt capital structure between wanting to have bullet debt versus having amortizing debt, and how you would go about changing that balance over time?
Yeah, that's a good question. This 4(a)(2) private placement market's an amortizing market, and we like it. It helps us achieve some of our deleveraging goals and commits us to it by entering into this self-amortizing debt. The rating agencies like that as well. The issue is that's not a giant market, so we're going to be a big bullet issuer for a long period of time, and we'll opportunistically do these private placements when we can. I think the larger part of our debt payout is just going to be paying down debt when we have bonds mature. It'll be a mix, but I couldn't give you a target.
Okay. Thanks, guys. Much appreciated.
Thank you.
We'll go next to Craig Shere at Tuohy Brothers.
Good morning.
Morning, Craig.
With respect to the unhedged equity cargoes, as we add up availability given the really good performance with Train 3 Corpus Christi construction, do any of your EDP, Trafigura, or PetroChina contracts have automatic step-ups at Train 3 completion? A couple other quick ones. Would any ultimately finalized Chilean LNG to power agreement be deployed for the first 3 trains at Corpus Christi, or more for Stage 3? How much aggregate capacity upside do you have on debottlenecking heading from 2020 to 2021? Because you said most of those efforts aren't going to be hitting next year, it's just that you have low maintenance.
Okay, there were three questions into one, right, Craig Shere? The first one I'll take, which was with the accelerated schedule for Train 3 and our performance, which, as we all know, is really our Train 8. We should be getting better and better at it as we get more and more of these behind us. Do the contracts start up or have the right to start up early? The answer to that is no. Those early cargoes would be treated the same way we've treated them in the past, which would be marketed by our CMI affiliate. The second part of that was Cheniere, et cetera, all the other contracts for stage 3, I'll turn that one over to Anatol Feygin.
Thanks, Jack. Just to follow on Jack's answer. Nothing steps up as a function of the trains coming on earlier. As you know, there are bridging volume components to some of the transactions, and those do ramp until we get to the ratable volume stage in the contract. They're just not train-dependent. In terms of your question on Chile, we're finalizing that agreement. It's relatively modest in size. It'll be something that is at CMI. It's on a delivered basis, as you know, and will contribute to supporting our investment portfolio and has the flexibility for us to do withIn essence, as we please, with the contract being at CMI, but it's very modest in size.
For all of those additional contracts, whether they're the two IPMs, which is Apache and EOG, or the CPC contract in Taiwan, we're trying to put a portfolio of contracts together that support the expansion of our facilities, and that next expansion is stage 3. I think there was one more question you had, Craig, in that long list.
Yeah.
Pass the question.
Sorry. Yeah. The guidance was that you were looking good in 2020 on capacity because it's a low maintenance year, but that you're actually also working on active debottlenecking efforts that weren't really going to hit mostly next year. I was just asking about the trend of capacity uplift from debottlenecking from 2020 to 2021.
Yeah. I don't know yet. We've raised our production range per train three times, and hopefully we can continue to do that over time. For now, we're at 4.7-5 MTPA.
Okay. Perhaps with a little more year-over-year turnarounds or maintenance, that might offset the debottlenecking. We just assume that 2021 is about the same per train as 2020.
That's fine for now. Yeah. We'll see. 2022 is a ways away, but I think it's fine for now.
You also have another train starting up in 2021, which is train 3 at Corpus.
Right.
Yeah.
On a per train basis, just for now, we'll keep it static.
Yes.
Okay. Thank you.
We'll move next to Spiro Dounis at Credit Suisse.
Hey, good morning, everyone. Maybe just starting off on stage 3. Can you just remind us again how you're thinking about the size of that FID? I believe at one point you kind of left the door open to maybe a partial FID. Just wanted an update on maybe your current thinking around that, and if you could, maybe tie it to Anatol's confidence here and maybe what that next set of contracts looks like as we go forward.
Thanks, Spiro. It's Michael. I think we're still open to the possibility of different kinds of FIDs for that project. It's a 7-train project of mid-scale. It could probably be 5, as we look through the numbers, ultimately the market will dictate that, as you mentioned. I'll turn it over to Anatol.
Yeah. Thanks, Spiro. Michael. Yes. As you guys know, and Jack mentioned, between EOG, Apache and some of the things we have in the portfolio, each one of these trains is ballpark 1.5 million tons. There's no reason to even discuss a 3-train solution, but it's possible, as Michael said, that it's 5 at 7.
Okay. Fair enough. Appreciate that. Second one, you talked about it a little bit, but just maybe getting more specific around Europe and the storage situation there. What do you ultimately think sort of resolves that issue going into next year? Is it pretty much close to capacity again as we sort of go through the seasonality? I know, Anatol, you mentioned some tailwinds, but is that kind of enough to help that market absorb another year of U.S. imports? What does that ultimately mean for the ARB in 2020?
Yeah. A great question. A fair point, right? We don't reset to zero and have Europe able to grow from this base by another 20 million tons plus. That's a very fair point. One of the things that has played out is fewer lower volumes on pipes as a function of North African and European supply. Norway's been down pretty significantly. A winter cleans this up faster. We have had very robust demand growth on the power gen side, that is something that is not dependent on seasonality and is back half of 2019 weighted as everything was put in place and as Europe continues to grow that demand function. All those help. Again, 2020 will be a very big supply year, right? There's no question. A big supply year on a run rate basis.
Of course, you get the full year effect of the 40 million tons coming on in 2019. As you can tell, we're not that optimistic on 2020. Hence, as Michael said, we've got more or less everything we can have put away, put away. My point is that beyond 2020, there really is no meaningful supply. It's literally a couple trains for a number of years, with most of those being our trains. Fairly confident that 2020 is the transition year and 2021 through 2023 look much better.
Understood. Appreciate the color. Thank you, gentlemen.
We'll hear next from Shneur Gershuni at UBS.
Hi. Good afternoon, everyone. Just wanted to touch on a couple of quick questions here since most of my questions have been asked and answered. I was wondering if you can talk about the path to investment grade at the LNG level. I noticed you've had a lot of positive rating actions at the subs. Is it 2020 a reasonable timeframe to think towards the end of 2020 that you can see IG across the board? Is 2021 a more realistic target?
Thank you. Michael, to you.
Yeah. No, it's not going to be next year. Look, we've said it's a multi-year progression. It's going to take us a while to get down to this high 4s number that we're targeting. I think the agencies are going to give us credit for getting there before we get there, but that's not next year. The two-pronged deleveraging strategy, doing Stage 3 at 50% debt equity is highly deleveraging for us, so we got to get that done. Then the balance is just straight debt pay down, which will happen as the money comes in. It's not next year, and we'll see if it's the following year or even the year after that. But that's the best we know right now.
Okay. That makes total sense. One other question. Appreciate the fact that you've pre-sold the marketing for next year, and you're effectively at 95% sold out, and trying to upgrade the quality of the earnings from an investor perspective. Just wondering if that's going to be the strategy going forward that, when we have this call next year, you'll also be in a 95% sold-out position, and we can sort of think of it as a more ratable business than it's historically been treated.
Absolutely. You should expect us to manage the business appropriately and not take a lot of commodity risk if we don't have to. I won't say that 95% is our target, but you should expect us to be prudent and disciplined.
Perfect. Really appreciate the color, guys. Have a great weekend.
Thanks.
Thank you.
We'll go next to Evercore and Jonathan Chappell.
Thank you. Good morning, guys. Michael, one of the key tidbits you gave on the last conference call was the cadence around the buyback up until that point. There was only $3 million in the 6/30 financials, but you had said that you'd bought up to $100 million at that point in August. Is there any clarity you can give on what you've done since the end of the third quarter? I know we're only on November first, but first 31 days.
Yeah. I think we're going to get out of the habit of giving those updates and just wait for the Q to come out. I think it was our first report after starting the program, and so we made an exception last time. I think from here on out, we'll rely on the Q.
Okay. That makes sense. Just to follow up to one a couple ago, maybe to Anatol, on how you're thinking about CC3. Jack's confident as ever. FERC EPC sounds like we may even have an update on that by the time we speak to you next. Is there a percentage threshold on SPA that you're thinking about before you actually trigger FID? Also a part B to that, do you view IPMs as exactly similar to an SPA, or are they not quite the long-term contracts in your view?
Hey, it's Michael. Yeah, on the second question, for us, they're very similar. I think they count as underwriting an investment. Then the first question was how much do we need to be sold. We never have really targeted a number. We're trying to underwrite our economics on a contracted basis to underwrite our downside case. That's always how we've looked at it. Having said that, it'll be similar to our previous projects of 2/3 to 85% contracted, just depending on the economics.
If we could sell one molecule for a couple billion dollars, we'd be done.
I'm sure you're on that, Anatol. Michael, just to be clear, though, you said you view them similarly. The discussions you've had with banks as far as underwriting the projects too, I assume they view them exactly similarly as well.
I think for us, yeah. I'm not sure that's the case if we were in six, seven years ago. For now, and I just think where we are, yeah, that is the case.
Okay. That's helpful. Thanks, Michael. Thanks, Anatol.
We'll take our last question today from Alex Kania at Wolfe Research.
Thanks. At risk of, I guess, getting ahead of myself here a little bit. Jack, you just mentioned expanding a little bit more upon longer-term growth opportunities, presumably beyond phase 3 at Corpus. I'm just wondering if that's arising from just broader commercial discussions you're having with people right now in terms of what the opportunity set is over the very long term. Or is it just, "Hey, we're pretty close to getting phase 3 in the next, let's say, six to nine months, and so we're thinking about what's further on." I'm just curious how real you see that right now.
Yeah. Thank you. No, I think it's a combination of things. One is we are very close to securing another close to 500 acres of property contiguous to our Corpus site. That'll give us more land and berthing capacity because it happens to be waterfront. That transaction should get done early next year. That really opens up the possibility for quite a bit of additional expansion at Corpus. The second part of that is the commercialization efforts. As we've said, there's just a lot of interest in that site and its location to the Permian and trying to evacuate some of this associated gas that's going to be coming in greater and greater quantities from the Permian. Thirdly, with the infrastructure that we already have there, our additional expansion plans should be extremely competitive worldwide with any other options that utility customers have.
We're very focused on Corpus. We do feel like stage 3 is going extremely well, and we're looking for stage 4 and beyond.
Great. Thanks very much.
Thank you, Alex. Thank all of you for your support of Cheniere.
Ladies and gentlemen, once again, that does conclude today's conference. Again, I would like to thank everyone for joining us today.