Good morning, and welcome to the Cheniere Energy, Inc. fourth quarter 2018 earnings call and webcast. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Randy Bhatia, Vice President, Investor Relations. Please go ahead, sir.
Thanks, operator. Good morning, and welcome to Cheniere Energy's fourth quarter and full year 2018 earnings conference call. The slide presentation and access to the webcast for today's call are available at cheniere.com. Joining me for today's call are Jack Fusco, Cheniere's President and Chief Executive Officer; Anatol Feygin, Executive Vice President and Chief Commercial Officer; and Michael Wortley, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind all listeners that our remarks, including answers to your questions, may contain forward-looking statements, 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 non-GAAP financial measures, such as consolidated adjusted EBITDA and distributable cash flow.
A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in the appendix of 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 an overview of our 2018 operating and financial highlights and perspective on 2019 and beyond. Following Jack's comments, Anatol will provide an update on the LNG market, and Michael will review our financial results. 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 Chief Executive Officer.
Thank you, Randy, and good morning, everyone. I'm pleased to be here this morning to review our significant accomplishments from a very successful 2018 and share my optimism for the continued success as we look forward to 2019 and beyond. 2018 was a truly remarkable year for Cheniere. On last year's call, I described 2017 as our breakthrough year, which it certainly was. In 2018, we maintained our momentum, achieving excellence and reaching new heights in virtually all phases of our business, from commercial success achieved by signing over 7 million tons per year in new long-term SPAs to the FID of Corpus Christi Train 3 in May and the startup of Corpus Christi Train 1 a few months later to continued financial discipline and simplification of our corporate structure.
We've achieved those and much more, and in doing so have cemented our reputation as a reliable full-service LNG operator which delivers on its promises to its customers, employees, and stakeholders. In 2018, we executed on our strategic growth plans, operational plans, and financial plans, and the results of our execution are apparent in the financial results we reported earlier this morning. Slide five presents some key highlights of the fourth quarter 2018. There are a couple of achievements I'd like to highlight from this slide. We generated consolidated adjusted EBITDA of over $630 million and a distributable cash flow of approximately $130 million and produced and exported a record 80 cargos on the quarter, almost a cargo a day. In addition, we reached the commissioning milestone of our first cargo at both Train five at Sabine Pass and Train one at Corpus Christi.
As of year-end, we had exported four commissioning cargos from Train five at Sabine Pass and two from Train one at Corpus Christi. Our substantial commercial momentum continued in the fourth quarter as we signed long-term SPAs with both Polish Oil and Gas Company and PETRONAS for over 2.5 million tons per year in aggregate. We look forward to successful long-term relationships with our newest SPA customers and expect these SPAs to support our growth plans. The market for LNG contracting remains active, and we continue to pursue additional long-term commercial arrangements with new and existing counterparts worldwide. Turn now to slide six at a look of some of 2018's most notable highlights.
Financial results for the full year 2018 came in at the top end of our guidance ranges for both consolidated adjusted EBITDA and distributable cash flow as we generated more than $2.6 billion in consolidated adjusted EBITDA and approximately $600 million in distributable cash flow for the full year. Michael will cover these results in more detail, but our financial performance in 2018 improved throughout the year, and we are pleased to deliver full-year financial results at or above our upwardly revised guidance range. In 2018, we executed two important market transactions that I'll highlight briefly. First, we closed the merger with CQH, in which we opportunistically and economically simplified our corporate structure. Our corporate structure remains complex, and we would prefer it to be simpler. However, we will remain opportunistic and only pursue further simplification transactions to the extent they are economic to Cheniere shareholders.
In addition to the CQH transaction, in 2018, we also refinanced the remaining term loans at CQP into the bond market, economically addressing the nearest-term maturity in our complex and further demonstrating our commitment to managing our balance sheets throughout the corporate structure. Operationally, in 2018, we produced and exported a total of 273 cargos, which required over one quadrillion BTUs of gas at our terminals. Our teams in gas supply and operations made this significant operational and logistical achievement look easy, and their dedication and commitment to excellence are significant contributors to our reputation as a reliable operator.
Strategically, 2018 was an incredible success as we made a positive final investment decision on train 3 at Corpus Christi and originated over 7 million tons per year of new long-term SPAs, giving us sufficient visibility on train 6 at Sabine Pass that enable us to finalize the EPC contract and issue limited notices to proceed on that project late last year. Having that project underway via limited notice to proceed is strategically important for us as we have cost and date certainty on train 6 ahead of a formal FID, which is where our efforts are concentrated today. The FID of train 6 is one of my key priorities for 2019, which I'll address on slide seven. On this slide, I've included a few key priorities which highlight that our focus remains centered on growth, execution, and being disciplined stewards of capital.
We're focused on completing the remaining steps necessary to achieve FID of train 6, which we expect to occur over the coming months. As we have previously communicated, we expect to finance train 6 with approximately 50% debt, 50% equity, which is consistent with our strategy of de-leveraging through growth. Ahead of that FID, Bechtel is hard at work on train 6 and making excellent progress on its scope of work. Bechtel now estimates that train 6 is approximately 14% complete, highlighted by over the 3,300 piles already driven as part of the site preparation. Beyond train 6, we're focused on progressing stage 3 at Corpus Christi through the permitting process, which we are permitting for approximately 9.5 million tons of additional LNG capacity. This project is moving through the process very well. We expect to have all the required regulatory approvals in place by the end of 2019.
We expect to bring 3 trains into commercial operation during 2019. Train 5 at Sabine Pass, and the first 2 trains at Corpus Christi. As we have done with all the trains to date, we expect these 3 to be brought online safely, ahead of schedule, and within budget. Completing commissioning and startup, as well as commencing long-term contracts associated with new trains, is a significant undertaking and requires a tremendous amount of work and coordination among Cheniere, our EPC partner, Bechtel, and our foundation customers. These efforts are especially critical for 2019, as we will be starting up 3 trains and commencing long-term SPAs for train 5 at Sabine Pass, train 1 at Corpus Christi, and I'm focused on maintaining our track record for seamless transitions from construction to operations.
The performance test for train 1 at Corpus Christi has been successfully completed, and we expect substantial completion to occur in the next few days. The last priority I'd like to highlight is our plan to communicate a capital allocation policy. This is a high priority for the executive team. We're working closely with our advisors and our board of directors to ensure we develop a durable, flexible policy that enables us to allocate capital in the most effective, impactful way for our shareholders. We look forward to communicating it to the investment community in the coming months. As I said earlier, 2018 was a remarkable year for Cheniere, and we are proud of the accomplishments we achieved throughout the year.
We have many more successes we're pursuing, both in 2019 and beyond, my confidence in our ability to continue delivering on our promises is underscored by our people and the relentless focus on execution that continues to define Cheniere. Now I'll turn it over to Anatol, who'll provide an update on the market.
Thanks, Jack. Good morning, everyone. Please turn to slide nine. 2018 was a banner year for LNG in many regards. Globally, nine trains started service, increasing global supply by roughly 30 million tons, the largest year-on-year increase since 2009, when Qatar began to bring its mega trains online. New and expansion trains in Australia, Russia, and the U.S. pushed total global supplies over the 320-million-ton mark, according to preliminary data. In the U.S., exports from our facilities totaled nearly 19 million tons during the year, a 33% increase over 2017. Sabine Pass train 4 started commercial deliveries in March, and train 5, which is currently undergoing commissioning, exported its first cargo in November.
Also in November, we saw startup of the first greenfield LNG terminal in the lower 48 U.S. as train 1 at our Corpus Christi facility started producing LNG and exported two commissioning cargoes before the end of the year. We expect LNG production from our facilities and others in the U.S. to continue ramping up in the coming months and contribute to further enhancing the reliability, flexibility, and liquidity of the global LNG market. Strong global LNG supply growth was met with robust demand in 2018 and led to some late-year market rebalancing.
Demand growth in Asia absorbed virtually all of the incremental supply. The step-up in global production, especially in the fourth quarter when the global complex added more than 10.5 million tons year-on-year, ensured adequate supply availability for Asia and the rest of the world as mild winter temperatures kept price spikes in check and supported an uptick in imports into Europe, which added over 4 million tons year-on-year in 2018. The graph on the top right displays the fourth quarter of 2018 demand compared to that what we saw in fourth quarter of 2017. As you can see, China, along with the rest of Asia, had strong year-on-year increases in imports. For the month of November, China overtook Japan as the world's top importer, though the position went back to Japan in December.
Total European demand increased nearly 7 million tons in the quarter, which as I mentioned, was partially supported by mild weather in Asia, new LNG supply coming online, and high shipping rates that incentivized Atlantic-sourced cargos to target Europe. I will come back to weather in Europe in just a minute. Global gas price benchmarks in the fourth quarter saw higher levels and increased volatility compared to the same period in 2016 and 2017. Even with the brief spike in Henry Hub prices in December, the U.S. benchmark continued to trade at a heavy discount compared to other global gas price indices. Despite a mild winter and a reduction in the storage deficit seen earlier in the year, TTF prices traded more than $1.50 higher than levels seen during the same time a year ago.
Similarly, fourth quarter Asian spot prices settled at more than $3 higher on average year-on-year, though the premium decreased over the course of the quarter. Please now turn to slide ten. More than 20 countries, almost half of all LNG importing countries, had record annual LNG import levels in 2018, including China, South Korea, India, and Pakistan. In addition to record import levels, China and Pakistan also set records for LNG demand growth rates in 2018. The graph to the far left highlights how remarkable China's demand has been over the past two years. China alone absorbed more than 50% of the worldwide incremental supplies in 2018, adding 16 million tons above the 2017 level. China remains an important demand center for our product, and the country's need for natural gas and LNG is expected to continue to rise as the country balances its economic growth needs and environmental commitments.
South Korea's steady demand over the last two years has also been impressive. Demand growth was largely due to low nuclear utilization, as well as low coal-fired power generation resulting from policies intended to improve air quality. Looking ahead to 2019 for South Korea, LNG consumption taxes are set to decrease while coal taxes are set to increase, which of course is expected to be supportive of LNG demand. Pakistan, which began importing LNG in 2015, has shown consistent and growing demand, and regasification build-out in the early 2020s could make Pakistan a significantly larger importer than it is today. The middle graph shows the total accumulation of population-weighted heating degree days for the heating season in Asia. Populous areas of East Asia have seen mostly minor cold spells this winter, and the month of January finished on an extremely mild note.
Asia's heating degree days, an indicative factor of weather-driven demand, ran close to average at best for much of the early part of the winter. Nonetheless, prices remained fairly robust compared to last year. The graph on the far right shows spot prices in relation to crude oil for the past three years. Price levels in the first half of 2018 were higher than in 2017, and particularly more bullish from June to November, partly due to China's early buying ahead of the winter in order to secure more LNG and avoid shortages and price spikes in the winter. High Asian LNG storage levels, combined with the arrival of new supply in the fourth quarter and a fairly mild winter, resulted in more moderate prices in the fourth quarter. Please turn to slide 11, where I will highlight the European market. LNG imports to Europe reached record levels in December.
European LNG imports during the first three quarters of 2018 were actually lower year-on-year. The fourth quarter showed very strong levels for a number of reasons. Storage levels were at a 17-year low after the 2017-2018 winter in Europe, leaving the region to play catch-up throughout the year. The relative tightness in the global LNG market through the first three quarters left limited opportunities for storage replenishment. Early buying and mild temperatures in Asia left that region adequately supplied and elevated shipping rates. High coal and carbon prices and an uptick in global LNG production incentivized flows into Europe in the fourth quarter. Nuclear maintenance and domestic supply declines also supported imports. The middle graph shows the total accumulation of population-weighted heating degree days for the heating season in Europe through January 24th.
Europe has also seen mild weather this winter, particularly in December, making the region's heating degree days below average in the fourth quarter. Cooler temps in the back half of January have helped bring Europe's temperatures closer to average for the season, which should help with the weather-sensitive demand. Given all of the factors encouraging LNG flows into Europe, we do not view the increase as entirely weather-driven. The graph on the far right displays storage levels on the left and TTF prices on the right axis. As mentioned earlier, the storage situation Europe faced coming out of the winter of 2017 exerted upward pressure on TTF prices. Europe entered the third quarter with storage levels near the bottom of the five-year range, which contributed to upward pressure on TTF prices.
In the fourth quarter, prices were still more than $3 in MMBtu higher than levels seen in the fourth quarter of 2017, although they have moderated, particularly after October settlement. Europe is undergoing a structural shift in the overall dynamics of its gas market, which makes it an increasingly attractive region for both our long-term and shorter-term LNG strategies. There is debate in Europe, heightened in recent weeks, about limiting coal use and achieving climate targets that could have a significant positive impact on Europe's appetite for LNG in the longer term. In the near term, a number of the issues that were in play in the fourth quarter could remain in 2019, potentially resulting in continued robust European LNG imports again this year. I'll now turn the call over to Michael to review our financial results.
Thanks, Anatol, and good morning, everyone. Turning to Slide 13, for the fourth quarter, we generated net income of $67 million, consolidated adjusted EBITDA of $634 million, and distributable cash flow of approximately $130 million. Our results for the quarter were positively impacted by higher than forecast LNG volumes in revenue and lifting margin, as well as lower than forecast O&M expenses. For the full year, we generated net income of $471 million, consolidated adjusted EBITDA of over $2.6 billion, and distributable cash flow of approximately $600 million. As Jack mentioned, consolidated adjusted EBITDA and distributable cash flow for the full year were both at the top of the revised guidance ranges we provided on our third quarter call. We exported 285 TBTU of LNG from our liquefaction projects during the fourth quarter, of which 21 TBTU were commissioning volumes.
Total volumes exported were higher than exports in the third quarter due to commissioning volumes from Sabine Pass Train 5 and Corpus Christi Train 1, and higher seasonal production from the 4 trains in operation at Sabine Pass. Approximately 72% of the volumes exported during the quarter, or 206 TBTU, were lifted by our third-party long-term SPA customers, and the remaining 79 TBTU were lifted by our marketing function. Long-term SPA customer volumes were consistent with prior quarter, and marketing volumes were higher due to increased production and commissioning volumes. For the full year, we exported 976 TBTU from our liquefaction projects, of which 21 TBTU were commissioning volumes. Approximately 77% of total volumes, 756 TBTU, were lifted by our third-party long-term SPA customers, and 220 TBTU were lifted by our marketing function.
For the fourth quarter, we recognized an income 242 TBTU of LNG produced at Sabine Pass, consisting of 263 TBTU loaded during this quarter, plus 3 TBTU or 1 cargo loaded in the prior quarter, but delivered and recognized in the current quarter, less 25 TBTU or 7 cargoes sold on a delivered basis that were in transit as of the end of the fourth quarter. We also recognized an income 40 TBTU or 12 cargoes of LNG that was sourced from third parties. For the full year, we recognized an income 973 TBTU of LNG produced at Sabine Pass and 84 TBTU of LNG that was sourced from third parties.
5 commissioning cargoes from Sabine Pass Train 5 and Corpus Christi Train 1, totaling 17 TBTU of LNG, were recognized on our balance sheet as an offset of $140 million to LNG terminal construction in progress during the fourth quarter. 1 commissioning cargo exported during the fourth quarter was on the water at year-end and will be recognized as an offset to construction in progress during the first quarter of 2019. Net income attributable to common stockholders for the fourth quarter was $67 million, or $0.26 per share, consistent with the third quarter. Increased operating income due to additional LNG volumes recognized in revenue was offset by increased derivative loss related to interest rate swaps.
Full year 2018, we generated net income attributable to common stockholders of $471 million or $1.90 per share on a diluted basis, an increase of more than $860 million from a net loss of $393 million in 2017. The increase in net income was primarily due to increased income from operations as a result of additional trains in operation at Sabine Pass, decreased loss on modification or extinguishment of debt, increased derivative gain, and decreased net income attributable to non-controlling interests, partially offset by increased interest expense, net of amounts capitalized. During the fourth quarter, we amended our existing revolving credit facility, increasing total commitments to $1.25 billion and extending the maturity date to December of 2022. This undrawn revolving facility enhances our liquidity position and provides a backstop for our Corpus equity funding obligations.
Turn now to Slide 14, where I'll review our 2019 guidance and touch on my highest priorities for 2019. Jack mentioned earlier we remain focused on delivering results, and today we are reiterating our full-year 2019 consolidated adjusted EBITDA guidance of $2.9 billion-$3.2 billion and distributable cash flow guidance of $0.6 billion-$0.8 billion. We're also reconfirming our full-year 2019 CQP distribution guidance of $2.35-$2.55 per unit. Our actual results could be impacted by changes to train completion timing or LNG market pricing. Before turning the call over to Q&A, I'd like to briefly review our top three financial priorities for 2019. The first is to achieve financial results within these guidance ranges. Our second priority is to complete a debt financing transaction for 50% of the total cost of Sabine Pass Train six.
We've kicked off that process, and it is an essential step prior to reaching FID. Jack also mentioned this, but our final key priority for this year is to develop and communicate capital allocation strategy, a process which has been underway for several months now. As we have previously indicated, we expect our capital allocation plan to support our ability to invest in growth, enable us to maintain investment-grade credit metrics at the projects, and ensure that consolidated leverage is at an appropriate level.
Return capital to shareholders in a way most appropriate for Cheniere and our shareholders. We expect to communicate this policy to the investment community in the coming months. That concludes our prepared remarks. Thank you for your time and your interest in Cheniere. Operator, we are ready to open the line for questions.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We ask that participants please limit themselves to one question and one follow-up question. Should you have more questions, please press star one again and rejoin the queue. Again, that's star one to ask a question. We'll now take our first question from Theresa Chen from Barclays. Please go ahead.
Good morning, everyone.
Good morning, Christine.
I know it's early for Corpus Christi stage 3, and it depends on the contract, but how are you thinking about targeted financing for it, especially as you are in the process of developing your capital allocation policy? Should we also think of it as 50/50 debt equity similar to Train 6?
Yeah, Christine, it's Michael. That's how we're thinking about it. Continue to deleverage through growth with no more than 50% debt on all incremental projects and maybe even bring that down over time.
Okay. I think on the last quarter call you said that 2.5-3 MTPA, with the assumption for early cargoes this year. Has the contracting for this book increased since last quarter? How should we think about your strategy around this as we move through the year? Should we still think $5 margin for the uncontracted portion, is what we should assume?
It's Michael again. I think the number is more like 6 million tons, I think, of post-COD volumes with another 1.5 million on top of that of commissioning volumes, which won't hit the P&L. I don't know exactly how the portfolio's evolved over the past few months, but certainly we've been selling. One thing to keep in mind is we don't like to sell volumes until we know we have them, right? As we go through this commissioning process, there's always uncertainty about exactly when the train is gonna come on. We don't wanna get out over our skis, having placed a lot of that volume prior to getting the train. With that starting to become behind us, as Jack mentioned, Corpus passed the performance test recently, we have more certainty there.
The guys will definitely be more active in putting those volumes away. In terms of market, you guys can all see the screen like we can. I told you, for the unsold piece of our portfolio, we were assuming $4.50-$5.50 margins when we did our budget three or four months ago. Clearly, that has come in probably almost $2. We gave you that sensitivity on the last call that said for every dollar move in margin, it'd affect our EBITDA by $130 million. You can do that math. If we were in the upper half of our guidance range, three or four months ago, certainly we're lower in that range today, but still within it.
Okay. Thank you so much.
We'll now take our next question from Jeremy Tonet from JPMorgan.
Good morning. Just want to build on SPL 6 a little bit more here and see what else is needed for positive FID. Seems like the contractual support is largely there. Is it just lining up the financing? Also, it looks like the EPC contract price, two and a half billion, is a bit lower than what you had for SPL 5. I was just wondering what drives the delta there.
Hi, Jeremy. Thanks. SPL 6, we're extremely excited about. As I mentioned on my talking points, we've released Bechtel with limited notice to proceed. We've locked in the price, we've locked in the schedule, in regards to that. Bechtel is making extremely good progress. As you know, there's a lot of synergies with having the workforce just roll off of 5 into 6. Additionally, what you're seeing with the cost of 6, we think it's extremely competitive, just like Corpus Christi Train 3. We were able to utilize, one, not only the synergies of having the workforce already mobilized and the equipment already there to move right into Train 6, but also into utilizing some of the existing infrastructure that it affords us, having the brownfield site.
We've got the infrastructure that was already built for the first 5 trains, that we've rolled into Train 6, and that's part of the cost reduction. Michael, I don't know if you have anything to add. On the financing that we're progressing that as we speak. As Jack said, we have Bechtel working, right? They're full speed ahead. We know price, we know schedule. We don't owe them a full NTP until, call it the summer. As I said on the last call, we're just kind of waiting to see what contracts come in and what the best portfolio is to really attach to that train for financing purposes. Since the last call, you saw PETRONAS come in, which is a very clean FOB deal, which we like to put down at the project.
We have three or four months to see what else comes in and then decide the optimum mix and close that financing. That's not slowing us down in any way because we're underway on Train 6. Yeah, I'd add to Jack's comments on, remember when we built Train 5, the first four trains leveraged a lot of infrastructure that we had at the regas facility, all the utilities and things like that. With Train 5, we had to really add all of that, and we did that in anticipation of Train 6. Train 5 was always gonna be the higher cost train. Train 6 is far more attractive on a cost perspective because so much infrastructure is in place from the Train 5 build. Yeah, just like Train 3.
That's helpful. Thanks. Just want to switch gears over to ESG. Seems like this is a greater focal point for the marketplace for investors going forward here. Was just wondering if you could tell us how Cheniere thinks about these issues, how you're positioning yourself, and how you guys see yourself stacking up versus other energy infrastructure companies.
Yeah. We're very excited. Here recently, organizationally, we were able to bring on Fiji George, who is from Southwest, who's got a lot of experience in ESG-type programs, and he's been spearheading our effort. As well as Christopher Smith, who is our Senior Vice President of External Affairs in Washington, D.C. You all may know Chris, he was Assistant Secretary of Energy under the previous administrations. We think we need to be a leader in it. As you know, we feel like we're on the right side of the equation when it comes to ESG. We think natural gas is a solution. It's economic, it's secure, and it's sustainable. What you see around the world is a policy shift. I think it's going to be a secular shift in the way energy is utilized worldwide.
I think you're going to see natural gas and liquefied natural gas take a much more prominent role in that. We will be rolling out our ESG methodology and program here very soon. Anatol, do you have anything to add?
No, just exactly as you said, we are focused. We are looking to leverage our position on the gas procurement side as well as our ability to supply this clean, reliable fuel to the rest of the world, and have the rest of the world achieve the type of carbon dioxide reductions that the U.S. has enjoyed over the last decade.
That's all for me. Thanks for taking my question.
We'll take our next question from Michael Weber from Wells Fargo Securities. Mr. Weber, please go ahead. Your line is open.
Thank you. Thanks. Hey, good morning, guys. How are you?
Good morning.
Jack, just wanted to start off with maybe a market-based question. Overnight we saw tensions escalate in Pakistan and India. You guys obviously have some exposure there to India. I'm just curious, around the risks and the impact to your business, can you maybe walk us through the impact, theoretically, of a force majeure there on your import contracts if we saw a replay of 1999 or a broader conflict? Maybe, I guess within the context of kind of walking through that, do those volumes just get put into the spot market and make them up on the back end? I know it's early, but it seems pretty pressing.
Yeah. There's no force majeure, Michael, right? It's FOB. Our contract with GAIL, they pick up at the flange at Sabine Pass, and they can take it wherever they want to take it. That's one of the benefits of U.S. LNG and the Cheniere model. From that perspective, we don't see anything meaningful one way or the other.
Okay. Listen, it wouldn't be applicable to an FOB-based contract basically, is what you're saying?
It's not, no.
Okay.
We would expect them to honor their contract, we would enforce our contract. So far, our relationship with GAIL is extremely strong and we continue to try to meet their needs.
Okay. No, that's helpful. I appreciate that. Maybe just around the competitive dynamics in and around the U.S. Gulf. It's been getting a bit more crowded in the last quarter or two with FID at Golden Pass and BG kind of knocking on the door. With, maybe a little bit more insight, within the industry in terms of where those deals are getting done, do you have a better sense yet around whether you've been able to price or are able to command a premium for your volumes relative to your peers in the U.S. Gulf? If so, maybe kind of a vague sense on where you think that is?
A couple of things. One, I think when you see a lot of other folks that want to have a position like Cheniere's, then it just reconfirms that our business model, our position is second to none, worldwide. I'm very excited about that. As you know, we were a first mover. We've executed extremely well, right? You can compare us to just about everybody else in the U.S. and see that our construction effort has been second to none. Our operating ability in the handoff from construction to operations has been second to none. Our ability to produce real volume in a growing demand market has been second to none.
I feel very good about our ability to execute, and I do think our full-service model and our ability to deliver anywhere around the world has afforded us a slight premium to where the spot market is clearing today.
Okay. Thanks for the time, guys. I appreciate it.
Going to take the next question from Craig Shere from Tuohy Brothers. Please go ahead.
Hey, Craig.
Hi. Michael, in May 2018, in your mini Analyst Day, I think you guided that on a 9-train program, that you wouldn't be required to think about debt amortization out of operating cash flows at both the MLP SPL level and also at the LNG Corpus Christi level to the late 2020s. Can you share what maybe the all-equity funding of $300 a ton upsizing of all the liquefaction trains and the possible successful addition of a 50/50 Corpus Christi phase 3 would do to that? Would it push amortization requirements into the 2030s?
Absolutely. I don't know what the exact date is, we'd look to get into the details on that when we hit the road, probably after our next call to roll out capital allocation and the train 6 numbers, and probably add some stage 3 numbers into the whole model. Absolutely. Every piece of equity defers that amortization date.
Speaking of phase 3, since Corpus train 3, you signed four agreements with a total of five and a quarter MTPA, which obviously is more than you could possibly need for four and a half without Sabine 6. How much do you feel like you already have in the bag, so to speak, towards Corpus phase 3? What minimum percentage of the nine and a half MTPA would you like to see contracted before perhaps an FID next year?
We definitely have more contracts than we need for train 6, for sure. We've drawn down some of our CMI inventory to service some of that. We think that piece of our business is a competitive advantage, so to keep some capacity there. How much do we need on stage 3? I think we're running a couple cases, one where we build the whole thing and one where we build half of it. Certainly, we're making our way towards at least building half of it, not quite there yet.
I would say, Greg, we are extremely excited about Corpus Christi and our ability to expand. We think there are no constraints with the site. There's no constraints with nat gas pipeline capacity coming into the site. The amount of infrastructure is there, then our location to the Permian should be a real advantage to us all the way around. We're not going to slow down on the growth side. I think I've got some of the best originators in this industry, and we're going to capitalize upon that.
That sounds great. Jack, if I can dovetail on those comments. Do you see prospects related to Corpus phase 3 for signing both supply and offtake agreements linked to Brent or perhaps a Texas-based gas hub like Waha or Agua Dulce?
Anatol, you want to take.
Thanks, Jack. Thanks, Greg. I think one of the things that was surprising and in some sense amazing in the LNG market in 2018 was that the majority of the contracts that were executed were Henry Hub linked. Obviously, it was us and our neighbors at VG that had that success. The world has gotten comfortable with this as an attractive model. It offers liquidity, price transparency, and it has seen a number of times now when if Henry Hub has a quick excursion to prices above $3, it comes down very rapidly and continues to be very competitive with Brent linked and other contracts. We continue to think that that is the right flag to fly. Your question about alternative indices, that's a very long putt, and in our view, the world isn't ready to price meaningful volume.
Agua Dulce, while it's something that you and we know well, just does not have the liquidity, transparency, term structure that would make it marketable internationally.
That's very helpful. Very quick last one for Michael. I think May last year at mini Analyst Day, you said $1.9 billion of incremental forecast equity funding for Corpus Christi trains 1 through 3. With things progressing seemingly better than expected, any range of how much that might come under?
No, I don't think we're ready to. Train 3 obviously has a long way to go, so I would stick with that number for now. Train 6, we're going to end up with probably close to $300 million of contingency, though. That'll get rolled into Train 6 to help meet our 50/50 debt equity. Train 5, we had excess contingency, which we'll roll into Train 6 to achieve our 50/50 debt equity. On Corpus, I'd stick with the numbers we put out in May.
Great. Thank you.
We'll now take our next question from Danilo Juvane from BMO Capital Markets.
Thanks, good morning. My first question is for Michael. You have pretty clear visibility to the contracted portion of your cash flow profile. Just curious, with that in mind, how are you evaluating the various capital allocation decisions going forward?
Yeah, we do have a lot of visibility. Again, we'll roll that out in a few months, probably after our next call. We'll hit the road and talk about it. But it's pretty straightforward for us. There's three buckets, right? There's the growth bucket, the balance sheet bucket, and the shareholder returns bucket. I can tell you, we're really excited about the growth. That's going to be a big number as we look at not only Train 6, but Stage 3. Reinvesting in the business is the best use of our money at the returns we think we can generate. Then we'll have to decide if we want to do something else on the balance sheet, relative to what we've already said publicly. We're thinking through that. Then there's probably some money left over for some kind of shareholder return.
Flexibility is going to be key for us, we'll keep that in mind as we think about bucket number 3. Look to put some real numbers to that here in the coming months.
As you think about bucket number 3, is that something that you think you'd be able to actually implement this year or farther out, assuming some sort of a run rate within your plan?
Yeah, we'll see. Probably both, but we'll see.
Okay. Thank you for that. My other question is for Jack. You spoke earlier in your prepared remarks about being opportunistic to a CQP simplification. It seems that would be a little bit more difficult to achieve versus what you were able to do with CQH. How should we think about how you ultimately end up rolling out the MLP? Thanks.
No, I think I said it fairly clearly. We're going to be very opportunistic. The math doesn't work, and we're going to have a complicated structure for the foreseeable future until we convince all of you that our growth really is there. I think we'll hopefully get you all comfortable that we can actually execute what we say and that we're a conservative bunch overall. Right now the exchange ratios just don't work.
Got you. Last question from me. With respect to Stage 3, have we ultimately just abandoned mid-scale? That seems to be less talked about now. There seems to be a shift in tone in terms of just having sort of conventional trains going forward. How should we think about that?
No. We're moving full speed ahead with our mid-scale solution right now, which is our Corpus Christi Train 3, Stage 3. Sorry, not Train 3, Stage 3. That filing, which we have in front of FERC right now.
Those are my questions. Thank you.
Thanks.
As a reminder, ladies and gentlemen, please limit yourself to one question with one follow-up and rejoin the queue for additional questions. Our next question now comes from Jean Ann Salisbury from Bernstein. Please go ahead.
Hi, good morning. How much advance locking in is there of pricing for spot cargoes? Have we seen the full effect of the fourth quarter winter gas spike on margins, or will some appear next quarter?
Well, thank you. It's Anatol. It's really a mix. As Michael said, we have three trains coming on with a fair amount of timing uncertainty on cargoes, and we're not in the business of going short in the market. As we've said to you before, we do have some tranches. Obviously, we have early cargoes associated with some term deals that we've executed over the last year as well as some medium-term deals for 2019 and 2020. For competitive reasons, we're not going to get into the specifics of the volumes quarter by quarter.
Okay, fair enough. Do you see a risk in 2019 that if everything starts up as scheduled, some U.S. LNG facilities won't be running at full capacity for parts of the year?
It's Anatol again. I really cannot envision that scenario. Actually, I have to say I can't envision the first premise of that scenario either.
All right.
Even if that did play out, the probability that on a marginal basis, there is no value in exporting a $2.5 Henry Hub molecule to a strong global market is pretty close to zero to me.
Okay. That's all for me. Thank you.
Thank you.
Our next question comes from Fotis Giannakoulis from Morgan Stanley. Please go ahead, sir.
Yes, hi, thank you. Anatol, I have one question for you. The last three FIDs, they have been reached without long-term SPAs from the respective parties. Is this a new trend, and how does this change the long-term dynamics of the market and your potential margins and growth initiatives beyond Stage 3 of Corpus Christi?
Thanks, Fotis. It's not a surprise to you or to us. It's a global and competitive market, lots of places have attractive molecules that they want to monetize with a different capital allocation algorithm and different risk tolerance than we do. We're always expecting what in the U.S. we may have called a producer push component. The LNG market calls it the equity lifting model. Those are projects that we always believed would be able to get off the ground, whether that's East Africa, Western Canada, Arctic Russia, et cetera. We're fully expecting to compete with them. We have been competing with them, They weren't a surprise to anyone in 2018, where we had pretty close to a record year. We love the hand that we're dealt.
We love, as Jack said, the business model and the track record that we've built, We're confident that we'll be able to leverage that into continued success. It is a competitive market.
From your answer, shall I take that your strategy of backing every new expansion with long-term SPAs will remain intact? Or these new FIDs might change your risk appetite?
Well, look, we told you a couple of years ago our model. We've continued to refine that. We think that the range of CMI having this warehoused 5%-20%, sort of as the sideboards of volume in it, is a very good number, and we're still comfortable with that. We've had good success. As Michael mentioned, we've, in essence, drawn down that inventory. We'll look to reallocate volumes to that in order to continue to prosecute the type of bridging volume and secure, reliable, attractive value proposition that we've been successful with. There's no reason to change what's been working and is expected to continue working for the foreseeable future.
Thank you very much, Anatol. Congratulations on the great year.
Thanks, Fotis.
Our next question comes from Michael Lapides from Goldman Sachs.
Hey, guys. Two questions. One, on the last quarterly call, you kind of updated the range of potential output or capacity for each train and kind of raised the high end. Can you talk to us about kind of how you get comfortable with hitting that high end and is there even upside to that level? I'd love a response on that, and then I've got a follow on about the balance sheet.
Hi, Michael, it's Jack. Yeah, from an operating perspective, I would say that we are very comfortable now with the upper end of the range that we gave all of you. We have some debottlenecking initiatives that we have plans of achieving this year with some of our turnaround and maintenance schedules, and you should expect us to revise our output. I think most of you are probably on Genscape and can see our gas flows into our facility and know that we're very close to 5 BCF a day right now. We're very pleased with the way our trains have been performing.
Got it. One quick one on the balance sheet. Just curious, how do you think about, let's say, once you get train 6 online, and I know we're talking a couple of years down the road, what you think about as a normal credit metric that you'd like to achieve, kind of a long run target or a long run goal, and whether that's measured on an FFO to debt or a debt to EBITDA perspective?
Michael, before Michael Wortley answers that question, I just want to make sure. I read your note this morning. You know with the LNTP of train 6 that the price and the schedule are fixed and not a risk for us. We haven't had any cost overruns yet. We don't expect to start now on our trains number 8 and 9. I just wanted to make sure I got that clear with you.
Understood. I've known you for a long time. I've not seen you have very many cost overruns in the 12-15 years.
Okay. Go ahead, Michael.
The balance sheet, the rating agencies look at it several different ways. The projects that care about debt service coverage ratios and then deconsolidated numbers, consolidated numbers. I think for us, I think we need to keep it simple and just communicate like everybody else, which is just a consolidated debt to EBITDA number. That, over the long run, I think that's what we'll start to look at more and more, though the rating agencies are more nuanced given our multiple levels of debt.
Do you have a kind of a mental target in mind of where you'd like that debt to EBITDA number to be once Train 6 is up and running?
That's fine.
That'll be part of our grand rollout in a few months. Currently we're at five to six times consolidated, probably on the upper end of that range, from what we said last time. That's what we'll stick with for now.
Got it. Thank you, Michael. Much appreciated, guys.
Our final question today will come from Alex Kania from Wolfe Research. Please go ahead.
Thanks. I just wanted to touch on the commentary related to maybe the financing package for Sabine Pass 6. Michael, I think you talked about thinking about optimizing what contracts you want to attach to that facility. Are you talking mainly about the CMI contracts that you've already got secured, or maybe is there kind of discussions far enough along on another FOB type contract that you may want to wait to see play out before you finalize that?
Yeah. I mean, we have a free option right now, which is that we don't have to give full NTP till summer. Yeah, I think we just wait and see what happens. I mean, I like our position now. If we had to make a decision tomorrow, I don't think we'd have any problem with that. Given that we have free time to wait, Bechtel's working hard. Yeah, I think we'll wait and see if anything else comes down the pipe between now and then. We have Vitol and PETRONAS, which are FOB deals, and then we have a fair amount of DES deals. Yeah, we'll just wait.
Great. Thanks very much.
Thanks, Alex. Thank you all for your support of Cheniere.
Ladies and gentlemen, we'll now turn it back to management for additional or closing remarks.
Thanks, everyone, for joining us today. We look forward to speaking to you next quarter.
This will conclude today's call. Thank you for your participation. You may now disconnect.