Good morning. My name is Scott, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cheniere fourth quarter and full year 2016 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Randy Bhatia, Vice President of Investor Relations, you may begin your conference.
Good morning, everyone, and welcome to Cheniere Energy's fourth quarter and full year 2016 earnings conference call. The slide presentation and access to the webcast for today's call can be found on our website located at cheniere.com. On 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. 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 adjusted EBITDA, net loss as adjusted, and net loss per share as adjusted.
A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure can be found in the appendix of the slide deck. 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, and Cheniere Energy Partners LP Holdings or CQH. On this call, we do not intend to cover CQP or CQH's results separately from those of Cheniere Energy, Inc. After prepared remarks from each of the participating executives, we will open the call for Q&A. As shown on the agenda on slide three, Jack will begin with an overview of the quarter and year and then give an update on construction and operating progress at our liquefaction projects. Following Jack's comments, we will hear from Anatol on our commercial activities and then from Michael, who will review financial results.
I will now turn the call over to Jack.
Thank you, Randy, and good morning to everyone. I'm pleased to be here today for Cheniere's fourth quarter and full year 2016 earnings call. 2016 was an incredibly important year for Cheniere, with transition being the overarching theme across the entire company, including construction, operations, financing, and executive leadership. This transition took place against the backdrop of the start of LNG production at our liquefaction project at Sabine Pass. As I reflect on 2016, we have many accomplishments to be extremely proud of at Cheniere, and I personally want to thank the Cheniere professionals who have supported me throughout this endeavor. As 2016 will go down as the year of transition, 2017 will go down as a year of opportunity. As you will hear from Anatol, Michael, and myself, we have only just begun.
We have big plans. As we look forward to 2017, it is setting up to be a pivotal one for Cheniere and our stakeholders. Turn now to slide five for an overview of some key operational and financial highlights of the fourth quarter and full year 2016. I am pleased to report consolidated revenue at Cheniere was approximately $1.3 billion for 2016, with over $500 million in LNG revenues in the fourth quarter alone. Net income attributable to common stockholders for the fourth quarter was approximately $110 million, and net loss attributable to common stockholders for 2016 was $610 million. We generated over $150 million in adjusted EBITDA for the year, with approximately $134 million coming in the fourth quarter.
Growth in revenue and adjusted EBITDA is driven by our continued transition into operations at our Sabine Pass Liquefaction project. The fourth quarter reflects almost a full quarter of operations of both trains 1 and 2. During the quarter, we continued to execute on our goals to strengthen our balance sheet and increase liquidity. Michael will cover these items in more detail in a few minutes, but I did want to highlight a couple of important transactions we did during the fourth quarter that demonstrate our commitment to managing the balance sheet throughout our structure. In November, we repaid $2.1 billion of bonds at Sabine Pass LNG, which is our regas entity, with borrowings under the credit facility at CQP. Subsequent to the repayment of those bonds, there is now no long-term debt maturity anywhere in the Cheniere complex until 2020.
Over at our Corpus Christi project, we issued $1.5 billion of bonds to refinance a portion of that project's credit facility. That was the second bond issuance at Corpus in 2016. Investors should expect us to continue to refinance bank capacity into the bond market on an opportunistic basis. Also at Corpus, during the fourth quarter, we entered into a $350 million working capital facility for that project to provide support for gas procurement infrastructure initiatives. Finally, we're seeing the rating agencies recognize the construction and operational progress we've made and also the strength of the financings we've structured for our projects. You will recall in the third quarter, Sabine Pass Liquefaction received its first investment-grade credit rating when S&P upgraded it to a BBB-.
Subsequent to the end of the fourth quarter, in January, SPL received its second investment-grade rating, which Fitch assigned a BBB- rating to the debt. Having Sabine Pass rated an investment grade is a key achievement for the project, which we expect will yield benefits to us on multiple fronts for the years to come. On the operational front, in the fourth quarter, we produced 24 cargoes at SPL, none of which were commissioning cargoes. For the full year 2016, SPL produced and exported a total of 56 cargoes. Those cargoes aggregate to nearly 200 TBtu of gas, and that gas was taken to 17 different countries around the world. We have updated the map located in the appendix for more details. Certainly, we are pleased to be playing a pivotal role in supplying LNG to customers in markets across the globe.
In November, the date of the first commercial delivery, or DFCD, was reached under our fixed price 20-year sell and purchase agreement with BG Gulf Coast LNG relating to the first train at SPL. As we discussed on the last call, train 3 began commissioning during the third quarter last year. In December, train 3 began receiving what we would consider meaningful amounts of natural gas. In mid-January, first LNG production was achieved at train 3, and the first commissioning cargo was loaded and exported at the end of January. We continue to work together with Bechtel on the commissioning process with the goal of bringing the trains online faster and more efficiently.
Our collaboration with Bechtel and the application of lessons learned is resulting in a relatively smooth commissioning process on train 3 thus far, and we look forward to taking care, custody, and control from Bechtel by the end of the first quarter. Slide six provides an update on construction progress at our LNG projects at Sabine Pass and Corpus Christi. We remain very pleased with the overall progress of construction at Corpus Christi and construction and operations at Sabine Pass. As I have mentioned on both of our previous calls, our number one priority at the sites is to execute on the construction of the LNG platform safely, on time, and on budget. Highlighting the fourth quarter was the commencement of our first long-term fixed price SPA after DFCD was achieved for the first train in November.
As I mentioned on the previous slide, train 3 commissioning continues to progress well, and four commissioning cargoes have been produced to date. On all trains, Bechtel continues to progress construction efforts against the contractual scheduled dates. We at Cheniere remain focused on transitioning the trains from construction management to operations management safely, efficiently, and effectively. From an operational perspective, we expect 2017 to be an eventful year as well. As in addition to the substantial completion of train 3, we expect to achieve substantial completion of train 4 in the second half of the year, and to achieve DFCD on the offtake contracts tied to both trains 2 and 3 during the course of the year.
Turning to slide seven, I'd like to update you on the progress we've made on the goals I've laid out on our previous calls and provide an overview of some of our goals for 2017. We've made significant progress each quarter thus far in achieving our set goals, and the fourth quarter was no exception. I'd like to walk you through some of the highlights since our last call. Operationally, our primary goal remains to ensure safe, reliable, and efficient LNG platform operations. We are pleased with the commissioning process, and we have worked with Bechtel to apply lessons learned from the first two trains. We look forward to completing commissioning of train three over the coming weeks and completing train four in the second half of 2017. There has been a considerable amount of questions, discussion, and speculation around our gas nominations in LNG production.
As we've stated in the past, we are pleased with the production and performance of the trains at Sabine Pass thus far. That said, we continue to work to identify operational bottlenecks and implement solutions to optimize production at the plant. We're optimistic that we'll have more precision on the train's performance capabilities in short order, and we expect to provide more information at the upcoming Analyst Day in April. Financially, we remain committed to strengthening our balance sheet. The refinancing of the SPLNG bonds, as well as the recent bond offerings at Corpus and SPL, were key accomplishments, and we will remain opportunistic in refinancing our remaining credit facilities in the bond market at attractive rates. Despite not completing the CQH fold-in offer we announced last year, we continue to explore opportunities to simplify our corporate structure in ways that are attractive to our stakeholders.
In addition, as I stated earlier, we continue to increase financial transparency, and we plan to provide the investment community with long-term financial guidance and capital allocation strategies at our Analyst Day. On the commercial front, we continue to successfully monetize commissioning cargoes and pursue incremental long-term contracts necessary to support financing of our next trains, Corpus Christi three, Sabine Pass train six. We're also pursuing a number of initiatives along the LNG value chain to leverage our core capabilities on the LNG platform that I'll touch upon those initiatives shortly. During the fourth quarter, we continued to make progress on organizational changes. While we will always look for ways to best align their structure and philosophy with our shareholders, the restructuring efforts started in late 2015 are now substantially complete.
We have implemented a new long-term share-based incentive compensation plan to align employees and our shareholders' interests following a successful proxy vote by our shareholders last month. We are pleased with the continued evolution of the company, and we remain guided by our defined vision and values, and we strive to be recognized as a premier global LNG company. Finally, I'd like to take this opportunity to express my appreciation to our shareholders for their overwhelming support on our recent shareholder vote regarding equity grants for our employees. The proposal was approved by approximately 85% of the shares present and entitled to vote on the matter. Designing and implementing a sustainable long-term incentive compensation structure for our employees is something I've been working on since joining Cheniere last year.
In order to achieve our goals, it is imperative that we are able to appropriately incentivize our employees to maximize long-term shareholder value. The overwhelming support the vote received helps ensure that we can do that for the years to come. Turning to slide eight, I'd like to update you on a few of our strategic initiatives in the process. We are dedicated to evaluating and investing in development opportunities along the LNG value chain to leverage our platform to grow our core LNG business. We are in various stages of developing liquefaction projects and other infrastructure projects in support of natural gas supply and LNG demand. As I outlined on our last call, at the heart of these development initiatives is our belief in the long-term demand growth profile for energy, and more specifically, LNG.
Long-term supply and demand fundamentals support our bullish view on the need for incremental liquefaction capacity. Our place on the cost curve positions us well to compete and win. We continue to pursue our evaluation of a mid-scale LNG solution that we introduced to you last quarter. Our consortium of Siemens, KBR, and Chart are progressing well on the FEED analysis. We are assessing the commercial, regulatory, and logistical feasibility and the full cycle cost profile of a potential project. We look forward to receiving some of the results for that effort over the next several months. We'll communicate more on that to you when appropriate. In that regard, we believe expansion of our existing facilities is far superior to new greenfield development based on the significant investment in site and gas procurement infrastructure.
Our focus is to leverage our people, our sites, our gas resourcing capability, and know-how to provide the next generation of competitively priced U.S. LNG. We're also progressing on our Midship Pipeline project to connect gas production in the SCOOP and STACK to the Gulf Coast markets and support long-term gas supply efforts for both Sabine Pass and Corpus Christi. Since our last call, we have made considerable progress along the three key critical paths: commercial, regulatory, and financing. Today, however, details of the progress remain commercially sensitive. We hope to be able to update the market on the project in more detail very soon. With regard to our pursuit of integrated FSRU to power projects, as many of you know, our El Campesino project in Chile suffered a setback recently with an unexpected and unfavorable ruling from the Chilean Supreme Court.
The Supreme Court ruled that the Chilean government's Environmental Assessment Service breached certain administrative procedures in issuing the environmental permit for the LNG terminal portion of the project. As a result, we expect a delay in construction of the LNG terminal while a portion of the environmental impact assessment process is resumed. We and the other project sponsors remain fully committed to the project. We will continue to work diligently to deliver the assets under development, which will provide a much-needed, new, reliable source of supply for the Chilean power market. Before turning the call to Anatol, I did want to touch briefly on an additional topic to address some of the questions we have recently received from the investment community around the potential impact to our company under the new presidential administration.
In Washington, our team is actively working to ensure that our interests are represented and our voice is heard in relevant policy discussions. We have a strong relationship on both sides of the aisle on Capitol Hill and are building relationships with the new administration. We will continue on our nonpartisan engagement in Washington on key issues that may affect our company, such as tax reform and trade policy. Now Anatol is here to provide an update on our commercial activities.
Thanks, Jack. Good morning, everyone. Turning to slide 10, I'd like to provide an update on some global LNG fundamentals that Jack referred to earlier through the end of 2016 and look back at what was an encouraging year for LNG demand overall. An increase in demand during 2016 was to be expected because of the ramp-up of supply from projects entering service in Australia and, of course, our Sabine Pass. What was largely unexpected was the size and speed of the demand response to the new LNG supply. Global demand last year was up 6% year-on-year, a 15 million ton net increase. The more than 28 million tons of demand growth outweighed a 13 million ton decline, which came mostly from a slowdown in Latin America and Japan. China and India underscored their potential to quickly increase LNG demand and tighten global markets.
China, in particular, imported more than 7 million more tons versus 2015. That's equivalent to production from nearly two conventional-sized liquefaction trains. Demand from India was up more than 4 million tons year-on-year, with the bulk of its incremental increase coming in Q3. Strength also came from new market entrants, Egypt and Pakistan, as well as increases from longtime importers in Spain and France. LNG supply grew more in 2016 than it has on an annual basis since 2011. In addition to our own plant starting up, four projects in Australia were either beginning operations or ramping up during the year, adding the majority of the 17.5 million tons of incremental supply. Declines at legacy producers helped to keep the year-over-year increase from being even bigger.
Turning to slide 11. LNG consumption was expected to rise with the introduction of new supply, but there was a noticeable uptick in demand in the fourth quarter while prices increased. Asian spot prices during the quarter reached two-year highs, approaching $10 in MMBtu. The demand pull from Asia was headlined by China, which increased imports by more than 60%, about three and a half million tons in Q4. South Korea and Spain both imported 16% more LNG in Q4, while Taiwan was up double digits at 13%.
A cold snap in Asia helped underpin the increased demand. LNG was able to quickly fill in for nuclear outages, domestic gas shortages, and compete effectively with coal and liquid fuels. The first two trains were operating at Sabine Pass for most of Q4. The profile of delivery destinations from the plant showed the ability of U.S. LNG to be reactive to market conditions. Cargoes loaded from the plant during 2016 between Cheniere and our customers were sent to 17 countries. Asia grew as a destination for Sabine volumes in Q4 as price spreads between Henry Hub and Asia attracted U.S. supply into the Pacific Basin. 18 cargoes loaded at Sabine Pass during the quarter, including 10 in December alone, used the Panama Canal to reach customers in Asia or the West Coast of Mexico.
Turning now to slide 12, where I'll cover some details of our gas procurement activities, headed by Corey Grindal since starting production over a year ago. The underlying competitiveness of LNG from Sabine Pass, at least in part, comes from Cheniere's ability to manage the day-to-day operations of securing feed gas for the plant. Recall that unlike other projects under construction in the U.S., Cheniere's model is different in that our product and service offering includes gas procurement and transportation. During the fourth quarter, Cheniere emerged as one of the largest physical gas buyers in the U.S. market, taking in more than one and a half BCF a day. We've quickly increased our intake at the plant to more than two BCF a day to feed liquefaction on the third train, which, as Jack said, is deep into the commissioning process and has started LNG production.
Our gas supply team has done a tremendous job matching up gas supply with the daily needs of the plant during commissioning, ramp-up, and commercial operation, which can be challenging even for the smooth start-up process at Sabine Pass, which we have seen thus far with train three. Our gas supply team has been a big part of the LNG production reliability we've seen at Sabine Pass throughout the start-up process. This is going to serve us well as we continue to bring our liquefaction trains online and as the leading full-service U.S. LNG provider. A critical and frankly, costly part of building and maintaining a highly effective gas supply function has been securing a diverse range of transportation and supply options around North America, tapping into every major basin for supply.
Together, our two projects are one of the largest pipeline capacity holders in the country, with more than five BCF a day of firm capacity on eight pipeline systems. This capacity represents an annual expenditure of approximately $400 million in capacity payments between our two project companies, but will ensure our ability to effectively manage intra-day volume variances, price volatility, and effectively operate as one of the largest gas buyers in the U.S. With that diverse capacity, we're able to build a portfolio supply from domestic gas producers and take full advantage of the cost-competitive basins across the U.S. In fact, it doesn't stop at the U.S., as we recently entered into our first supply deal to receive Montney gas on a Henry Hub Index from a Canadian producer. Turning now to slide 13.
Cheniere's strength in U.S. natural gas markets is just one piece of our full-service LNG offering that stretches from feed gas procurement all the way to delivered LNG sales and downstream development of LNG to power projects. With two trains operational and a third commissioning, we have begun to build operational best practices that are helping us maximize production as we transition to our fourth train at Sabine Pass, which is on track to be operational later this year. Increased efficiency at Sabine Pass and then at Corpus Christi is also expected to allow us to seamlessly expand through already permitted liquefaction capacity at both our sites. The strong performance at the two and soon to be three trains at Sabine have provided our LNG marketing group with cargoes to sell in the short-term market.
By the end of Q4, the group had sold and delivered 28 cargoes from Sabine Pass. The team has also been successfully managing an LNG shipping portfolio needed to handle the volume coming from Sabine Pass and have chartered more than 20 tankers since the plant came into operation. This winter, our shipping portfolio peaked at nine tankers, making Cheniere one of the top five holders of shipping capacity in the market. Cheniere's growing success in U.S. gas supply management LNG operations, LNG marketing and shipping is putting us in a better position to leverage our DES LNG offering. Cheniere has the uncontracted capacity of LNG from Sabine and Corpus ready to sell now on either FOB or DES terms, which allows us to be more flexible and creative with what we can offer buyers.
Our global origination team continues to target customers with contracts on a range of terms, quantities, and lengths, including LNG to power projects that are facilitated by floating regasification. We believe that as our operational capabilities continue to grow, our full-service LNG portfolio supply model will be as competitive as any LNG in the market today. With that, I will now turn the call over to Michael to review our financial results.
Thanks, Anatol, and good morning, everyone. I'm pleased to announce our financial results for the fourth quarter and full year 2016, a summary of which begins on slide 15. Trains One and Two at Sabine Pass were in commercial operations for most of the full fourth quarter. The previously announced flare work was completed during October, and the outcome was a significant improvement on our financial results again this quarter. We continue to be pleased with the positive transition in our financial results as trains at Sabine Pass enter into commercial service. We're also moving the company closer to articulating our long-term financial strategy and providing financial guidance. As Jack mentioned earlier, we anticipate releasing strategy and guidance at our Analyst Day in April of this year.
As a reminder, as we go through these results, Cheniere Energy consolidates the results of CQP and CQH. For the fourth quarter of 2016, we reported consolidated revenue of $572 million compared to $68 million in the corresponding 2015 period. For the full year 2016, we report a consolidated revenue of $1.3 billion compared to $271 million in 2015. Revenue recognized from LNG sales was approximately $500 million in the fourth quarter and more than $1 billion for the full year 2016. During the fourth quarter, we loaded 24 cargoes, none of which were commissioning cargoes. Therefore, these cargoes either have been or will be reflected on the income statement. Note that for cargoes that are sold delivered ex ship or DES, revenues are not recognized until the volumes are offloaded at the point of destination.
For the full year, we loaded and exported 56 cargoes, of which 13 were classified as commissioning cargoes, which are recorded as an offset to construction in process on the balance sheet. As a reminder, proceeds from the sale of commissioning cargoes are recorded as such because these amounts are earned prior to our taking over care, custody, and control of a respective train. Accordingly, it may continue to be difficult to model our revenue accurately and tie out our reported revenue to production in upcoming quarters as we continue to commission trains at Sabine Pass. We can also recognize revenue on the income statement without corresponding production at SPL, as Cheniere Marketing can sell cargoes purchased from other supply sources.
The 24 cargoes loaded at SPL during the fourth quarter included early volumes lifted by BG Gulf Coast LNG and Gas Natural Fenosa under their respective contracts prior to the date of first commercial delivery of those contracts. Volumes lifted by BG after DFCD under its contract and volumes lifted by CMI. Of the 24 cargoes, 11 were lifted by our foundation customers and 13 were lifted by CMI. Total operating costs and expenses increased during the fourth quarter and full year 2016 as compared to the corresponding 2015 periods, generally as a result of the commencement of operations of SPL Trains 1 and 2 in May and September of 2016 respectively. Additionally, certain operating expense line items previously capitalized during construction have begun to be expensed. Depreciation and amortization expense increased in the fourth quarter due to a full quarter depreciation of assets related to Trains 1 and 2.
SG&A expense decreased by approximately 37% in fourth quarter 2016 as compared to the fourth quarter of 2015, and decreased 28% for full year 2016 as compared to prior year. The decrease in SG&A expense was primarily due to timing of stock-based compensation recognition and recognition of certain employee-related costs within restructuring expense, which were historically reported in SG&A, a reduction in certain professional service fees, and reallocation of certain costs from SG&A to O&M following commencement of operations at SPL. Included in the SG&A line item are aggregate share-based compensation expenses for the three and 12 months ended December 31, 2016 of approximately $7 million and $38.2 million respectively. As indicated on the last quarter call, amounts under these legacy grants will be recognized over the next approximately year and a half.
As stated on the last call, we expect long-term run rate SG&A to total approximately $200 million per year prior to any stock-based compensation expense. During the fourth quarter, we recognized approximately $12 million in restructuring expenses. These expenses totaled $61 million for the year. These expenses are primarily related to share-based compensation, severance, and employee-related costs under restructuring and operational efficiency initiatives initiated in late 2015. These initiatives were substantially complete at year-end 2016. Net income attributable to common stockholders was $109.7 million or $0.48 per share for fourth quarter 2016 compared to a net loss of $291.1 million or $1.28 per share for the corresponding 2015 period. Net loss attributable to common stockholders for full year 2016 was $610 million or $2.67 per share, compared to $975.1 million or $4.30 per share for 2015. Impacting earnings during the fourth quarter were significant items totaling approximately $216 million.
These significant items had an impact of $170 million for full year 2016. These items related to derivative gains, primarily due to changes in LIBOR over the period, loss on early extinguishment of debt related to refinancings at SPL, Corpus, SPL NG, and Creole Trail. Changes in the fair value of our commodity derivatives, restructuring expense, amortization of the beneficial conversion feature related to certain Class B units of CQP, and impairment expense. The management of our consolidated balance sheet continues to drive much of the impact to EPS, and investors should expect EPS results to continue to be influenced by such financing-related items for the foreseeable future. As such, we also report adjusted EBITDA and net loss as adjusted, which exclude these items. Additional detail on the impact of these items can be found in the reconciliation tables in the appendix of the slide deck.
Adjusted EBITDA for the three and 12 months ended December 31, 2016, was $134.2 million and $153.6 million compared to a loss of $90.6 million and $228.6 million for the comparable 2015 periods. With regard to liquidity as of December 31, 2016, we had unrestricted cash and cash equivalents at Cheniere of approximately $875 million. On slide 17, I'd like to discuss some recent highlights from key finance initiatives that are underway. These have all been touched on already, but I'd like to provide a bit more insight into each. First, in January, SPL received an investment-grade rating of BBB- from Fitch Ratings. This second investment-grade rating at SPL enables SPL to access the investment-grade market, which features significantly more depth than the high-yield market and fixed income products, which can better match the tenor of our long-term foundation customer LNG contracts.
As Jack mentioned earlier, the investment-grade rating is expected to yield benefits to us on multiple fronts, maintaining that rating is central to our long-term financing strategy at SPL. Corpus Christi project financing was structured with similar investment-grade metrics as Sabine Pass, and we expect the ratings of that project to progress toward investment grade over time. The achievement of two investment-grade ratings at SPL allowed us to launch a private placement bond offering at SPL, and we were able to place $800 million aggregate principal amount of senior secured notes due 2037, which priced at par to yield 5%. These bonds begin to amortize in year nine and have a weighted average life of just over 15 years and a final maturity of 20.5 years. After this issuance, there's approximately $1.2 billion remaining on the SPL bank facilities.
It's our goal to complete the refinancing of the SPL bank facility in the near future. In December, we launched a bond offering at Corpus and placed $1.5 billion principal amount of senior secured notes due 2025, which priced at par to yield 5.875%, our lowest coupon at Corpus thus far. There's approximately $6 billion remaining on the Corpus bank facility. We'll continue to be opportunistic in terming out the bank facility at Corpus to better align our maturity profile with projected annual EBITDA levels. In December, we also entered into a $350 million working capital facility at Corpus to be used for loans and letters of credit for certain working capital requirements related to development and placing into operation CCL's liquefaction facilities and the Corpus Christi pipeline and related facilities.
Initially, this facility will be used primarily for gas procurement and transportation infrastructure credit support, as well as funding of debt service reserves, payment of transaction fees and expenses, and other general corporate purposes. In November, we repaid the full $2.1 billion principal outstanding SPL NG senior secured notes due 2016 and 2020 using borrowings under the CQP bank facility arranged last year. There are now no long-term debt maturities in the Cheniere complex until 2020. Summary of our current consolidated debt maturity profile can be found in the appendix. Finally, in the fourth quarter, Cheniere terminated its previously announced offer made to the board of CQH to acquire those shares of CQH not already owned by Cheniere in a stock-for-stock exchange. Subsequent to the termination announcement, Cheniere acquired approximately 5.8 million shares of CQH through individually negotiated transaction with CQH shareholders.
We remain focused on evaluating opportunities to simplify our corporate structure to reduce complexity for debt and equity investors. As has been mentioned previously, we are preparing long-term guidance regarding our expected financial results and long-term financial strategy, which we look forward to presenting at Analyst Day in April. With that, we'd like to thank you for your time today and your interest in Cheniere. We look forward to seeing you at Analyst Day and updating you on our next call. Operator, we are now ready to open the line for questions.
At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.
Good morning.
Good morning.
Morning, Jeremy.
I was wondering if you might be able to touch on some of the marketing deals that were signed prior to 2015. Would you be able to provide any color on what's possibly shipping in 2017 or any thoughts on pricing? Just trying to figure out what our expectations should be there.
Yeah, go ahead.
Thanks, Jeremy. We've released those numbers to you guys in the aggregate in the past. Those are transactions that were entered into substantially in 2014 and will flow through the income statement. It started flowing through in 2016, but will substantially come through by the first half of 2018.
We've given you numbers on what that looks like in the aggregate. Over time, I will say you will be able to triangulate some of that by looking at both the export numbers on our side and the import numbers in terms of the countries of destination. At this point, they're pretty commercially sensitive, and other than the kind of lump sum and the term of those deals, we're not going to provide much more color.
Okay, fair enough. Then maybe just turning to the LNG market in the fourth quarter. As noted, there was some really good strength that emerged there as demand really picked up. Some of that has faded into the first quarter here. Just wondering if you could provide any more color, in addition to what you said on the call, as far as the potential for demand to pick up again, any more pockets of strength in 2017. Anything forward-looking you could provide there?
Yeah, I guess, the overarching message is we continue to be pleasantly surprised by the speed and magnitude of the demand response. The world, when it sees attractive prices and the ability to bring these volumes with destination flexibility and timely and reliable deliveries, put solutions in place that allow underutilized infrastructure to be more utilized, right? That's the issue in a lot of the Asian markets. As we've talked about in the past, the FSRUs continue to help us and other LNG providers place these attractive BTUs into the market. Historically, during these periods of supply additions, the market tends to overestimate the LNG that's going to come to market and underestimate how quickly the demand will materialize. We saw that in 2010, 2011, when the Qatari volumes ramped up, and we're seeing that today, right?
We're on time, ahead of schedule, on budget, et cetera, lots of other projects, as you know, have had some teething problems. We've mentioned, in a number of occasions, a lot of the legacy projects that don't have the name plate capacities that the market has gotten used to. At the same time, this somewhat stealth demand that is harder to handicap because these projects are not nearly as visible as a multimillion ton train that everyone sees and knows chapter and verse about. We're optimistic that there is a very substantial structural component to this demand response. You will see some seasonality, as you pointed out. We're clearly seeing that today. A year ago, nobody had dialed in the kind of strength that we saw in Q4 and continued into Q1.
Jeremy, I would just add, this is Jack, that nat gas at $2.76 today, we're going to be extremely competitive, and you should expect us to be competitive and aggressive in the market to get our product to market.
That makes sense. Maybe one last one, if I could, and I don't know if you're going to save this for Analyst Day, but just wondering, as far as we think about CQP in lifting the distribution higher, would you look for a DFCD to be fully online for Trains 1, 2, 3 before you would look to do that? Any other broad strokes that you could provide around how you're thinking about when is the right time to raise the distribution?
Yeah, sure. This is Michael. The first thing that will happen, right, is the B units will convert from a PIK-ing instrument to a common. That is kind of a stealth distribution increase. They will start getting the MQD $0.425 here probably in the third quarter. That will take our distributions from $25 million a quarter to well north of $100 million. That will be the first thing that happens. The question will be, when do we start actually paying on the subunits? Yeah, we will talk more about how we think that cadence looks in April. Certainly with KOGAS coming on, we will be in a position to start paying on those, I would say, in the near future, but talk more specifically about that in April.
Thank you, Jeremy. Thank you.
As a courtesy, please limit your time to one question and one follow-up question. Your next question comes from the line of Theodore Durbin with Goldman Sachs. Your line is open.
Thanks. Good morning. It looks like Train 3 is coming in service a little earlier than expected. Can you just walk us through the cash flow impact of that?
The cash flow impact. On Train 3, right, DFCD on KOGAS. If the train comes on in March as we expect.
June 1.
June 1. You can assume that in between, when it comes on in March as we expect, and June 1, that our marketing affiliate will have to put those volumes away at market prices, whatever those are. They'll be in a position to do that.
Okay. That's great. That's helpful. Maybe just coming back to the market itself. The big move up in the spot price this winter, has that changed the conversations with some of the offtakers? Are you talking about longer-term contracts, maybe the size there? The types of buyers that might be out there whether portfolio or utility-like buyers?
Thanks, Ted. This is Anatol again. I would say that the mood of the community overall changed pretty dramatically in the fall of 2016. If you comp it sort of on a year-on-year basis, certainly a much different swagger in the step of the LNG community.
I wouldn't say that our discussions have changed materially. We are talking to largely the same cadre of customers. We don't discriminate. We will transact with credit-worthy counterparties, be they portfolio players, load-serving entities, et cetera. We continue those conversations. There are a number of them that are in advanced stages. I will say that I could've said exactly the same thing six months and 12 months ago. Yes, the attitudes and the mood is much better. Everybody agrees that this dearth of FIDs that we've experienced over the last really 18 months is going to be an issue next decade. Everyone agrees that there's no fairy dust to bring liquefaction online dramatically faster than this four-year period. As time moves on, the sense of urgency is increasing as well.
We are in very healthy advanced discussions with a large cadre of counterparties, and it's our number one priority to deliver term offtake to underwrite more liquefaction.
Okay, great. I'll leave it at that. Thank you.
Thanks, Ted.
Your next question comes from the line of Faisel Khan with Citigroup. Your line is open.
Thanks. Good morning. Just one question. Jack and Michael, I think you mentioned in your prepared comments about sort of the simplified structure and make it more streamlined. Is it your guys' opinion that the structure itself right now is holding valuation back? Or is there something that's more difficult to manage the structure the way it is that it impacts your guys' ability to run the organization?
Yeah, Faisel, this is Michael. On holding valuation back, it's possible, right? You go to some of these more traditional long-only holders, you put an org chart in front of them that's got seven or eight boxes on it and have to explain that money moves from the MLP to a CQH-type entity, then it makes a distribution decision. Yeah, I think that gets a little tedious. It's not that complicated, but for some of these larger investors who don't have the time to spend their whole day figuring out our structure, I think they throw it in the too hard pile. It's possible. It's possible, I think to the extent some of those boxes aren't useful from a financing standpoint going forward, it's our duty to kind of clean them up if it makes sense from a shareholder value perspective.
That remains a priority for us, I'll just say.
Got you. Great. Thank you.
Thanks.
Your next question comes from the line of Craig Shere with Tuohy Brothers. Your line is open.
Good morning. You've got a lot of results already complete. You've refinanced pretty much all the SPL debt. You've accelerated Train 3 as far as the timing, and you have a lot of commissioning cargoes under your belt. With all that known, do you have any feedback about this original guidance of $2 billion-$2.5 billion of back-end equity funding needed for completion of Trains 4 and 5?
Not yet. That will be a function of the ultimate cost of the 5-train project. You've asked this before, Craig, and it's a fair question, Train 5 is 13% complete as of today. I think we have substantial contingency in releasing all of that today and saying, well, now the back end of equity is $2 billion. I just still think it's too early. A fair question. We got to get into Train 5 a little bit further before we're ready to start making those pronouncements.
Fair enough. Just a quick follow-up. Train 4 has been described for a long time in your monthly board filings as an August target subject to monitoring. You kind of have described in your recent releases as second half 2017. In terms of falling one way or the other from that August timetable, are you able to give us some probability that it would be more likely to be earlier than later or vice versa?
I think it's a little too early for us to tell. As you can see from Train 3, our relationship with Bechtel continues to get stronger. We continue to learn and conduct our work more safely and more efficiently. We're guardedly optimistic. We're expecting big things in 2017.
Okay. Thank you very much.
Your next question comes from the line of Alex Kania with Wolfe Research. Your line is open.
Hi, good morning. A couple questions. First on marketing. I saw this in the 10-K, and I think Michael, you know this as well. You took a decent amount of marketing based on third-party derived LNG. I was just kind of curious, how do you see remarketing cargoes going forward as a piece of the marketing business versus selling cargoes that are originated at Sabine or Corpus?
Yeah, I think the ultimate goal is to sell volumes from SPL. There's a lot of uncertainty on production, particularly when in the commissioning periods. From time to time, our marketing guys will have placed the cargo out three or four months, and then the delivery window from the plant shifts, or we had to take the plant down for maintenance or something, and then we end up having to go cover that position in the market. It's flexibility and a key competency of our marketing guys that we can have that flexibility and manage that, but it's not something we want to do with regularity, right? The goal is just to sell SPL volumes. Would you add anything?
Alex, thanks. It's Anatol. I would just say that as you look at, even in the deck, we kind of try to highlight the pull into the Pacific Basin that we saw from Atlantic. Clearly, we have a tremendous team on the optimization side that can take advantage of these dynamics and optimize our portfolio. To Michael's point, no question that job one is getting the volumes sold out of SPL as profitably as possible. There is a large and very effective optimization function that the team performs on a daily basis.
Got it. Okay. Just a question on the commercialization and just the expansion trains. Obviously, it's a little sensitive right now on progress there, but do you expect the Chilean project delay to have any direct impact on, say, being able to move forward with the Corpus 3? Or would it be kind of independent that something that marketing could handle either way?
Yeah. More the latter. The way that that project was set up, financed, structured, it's an attractive project as we said on the prepared remarks. We're committed to getting it across the finish line. It's in very good shape other than this one major setback. It was not a meaningful contributor to our decision on Corpus Train 3.
Thanks very much.
Your next question comes from the line of Jean Ann Salisbury with Bernstein. Your line is open.
Good morning. Is Cheniere Marketing still paying a $3 fixed fee to CQP for cargoes, or is that being renegotiated?
There's an informal agreement in place that to the extent a trade doesn't clear $3, that we have a committee of CQP that really sets up a profit-sharing mechanism, and you can assume that the terminal gets the lion's share of the profit for volumes below $3. I'll tell you, this winter, we didn't have to use that committee much because the trades were clearing $3. We don't have a document in place, but we have a committee in place to deal with them on a one-off basis, and that's been working fine.
Okay, thanks. As a follow-up, I know that a border adjustment tax is somewhat speculative but probably something that you have discussed. Just what are your thoughts on how it could impact Cheniere?
Yeah, just as you say. To the extent exports are favored, we're in a pretty good spot. I guess we'd leave it at that. We're in communication with the Ways and Means guys and trying to get our business treated favorably if they want to treat exports favorably.
Okay. Thank you.
Your next question comes from the line of Michael Webber with Wells Fargo. Your line is open.
Hey, good morning, guys. How are you?
Doing well, Michael.
Okay. First one is just on the recent refi activity, and you put some color on slide 21, which is helpful. Just curious, when we think about obstacles towards revisiting distribution growth guidance at CQP, is it fair to say that with the removal of the maturity streams before 2019, any remaining hurdles are effectively blocking and tackling around delivery of Trains 3 and 4 at this point? Do you think you need to actually address those maturities and the maturity stacks in 2020 and 2022 as well?
No, the key was getting the bank facility out of the way, and that is not out of the way yet, but we're in the market on a transaction now that if it's successful, would get that credit facility out of the way. It has more restrictive distribution covenants in it than our bonds. The distribution growth pathway has really always been dependent on getting that bank facility out of the way. That's the key milestone that we hope to achieve there pretty soon. The bond maturities are less important out in 2020, 2021. I think Trains 3 and 4 and getting those up and running are really what matter.
Gotcha. Okay. That's helpful. Then Anatol, you mentioned the kind of the diversity of cargo destinations, I think 17 countries and 60 different shipments. The midstream aspect of this trade has proven to be a bit more inefficient than we would've thought on paper, and we've actually seen transportation costs rise a bit over the winter, just on the back of the fact that the trading of those assets and the merchant reaction has been a bit slower than we would've expected, and the kind of laden days has been much wider than we would expect given the destinations. I'm just curious, how do you think about managing your transportation portfolio against that kind of a backdrop? Do you get longer on tonnage than you would've initially thought, just given the inefficiencies that have kind of popped up here?
On the shipping side, as we touched on, we are as close to being an 800-pound gorilla there as anybody and have a tremendous team that has been very effective at managing that fleet. That is one of the places where, as we touched on, optimization comes into play, and we've had a lot of opportunities to take advantage of that and take advantage of the very inefficiencies that I guess you speak to. In terms of our portfolio, I've actually been very pleasantly surprised by the utilization rate on those chartered vessels. As you know, we have three on a five-year charter and augment that with medium and short-term positions to service the volumes that we see coming out of SPL.
I would say from our vantage point, that's been very effectively done at pretty attractive economics and has allowed us to capture some meaningful incremental optimization margin.
I would say, Michael, as you know, all of our foundation customers and contracts are FOB Louisiana. We're not taking any of that shipping risk or cost.
Right. I guess the idea is that the market has tightened up for transportation a bit more quickly than everyone would have thought, just given how young that kind of merchant trade is. I'm just curious, on a forward basis, has it changed the way you think about your transportation needs, just given the fact that it's tightened up a bit more quickly?
Marginally, yes. We evaluate that obviously on a regular basis. We have our own view and analysis of how the shipping markets will play out. To your point, one of the side effects of this stealth or surprisingly strong demand is that it did absorb some incremental shipping capacity. The other side of that is true as well, as we've seen prices come off here, and as we move into the shoulder season, the shipping rates have come off as well. We're actively managing that on a real-time basis. Our views do moderate from time to time as we reassess.
Got it. Yeah, that's a good problem to have. All right, I'll stop there and turn it over. Thanks, guys.
Your next question comes from the line of Fotis Giannakoulis with Morgan Stanley. Your line is open.
Yes. Hello, gentlemen. Give me an overview about the offtake market. We haven't seen, the last 18 months, a lot of activity in terms of offtake agreements. What needs to happen in order to see more long-term contracts that will lead to additional liquefaction trains for Corpus Christi and Sabine Pass?
Yes. Thanks, Fotis. Again, it's something that I don't think there is a silver bullet. I do think if you go back to the two kind of big surges in activity for contracting for U.S. LNG, they happened in fall of 2011, which to some extent was catalyzed by the tragedy of Fukushima, and in spring of 2014, which was somewhat affected by Russia's activity in Crimea and Ukraine. We have a very attractive offering. We're on the low end of the cost curve from a liquefaction standpoint. The world has been, I think, very pleasantly surprised by what this Henry Hub thing is and how attractively priced it is. We think that as potential offtakers move through time, see this gap opening up early next decade with a lack of FIDs, and look at our portfolio that continues to deliver.
The team continues to perform exceptionally through the value chain. We offer a very attractively priced LNG molecule. That's our sales brochure, and it certainly resonates. The question of timing, I can't give you a very specific date on, obviously, but we have very productive advanced discussions, and the world of LNG is getting more and more comfortable with what Henry Hub is and how Cheniere can perform in delivering that.
Thank you, Anatol Feygin. Last follow-up. There are some discussions about projects reaching FID in North America. For example, in Golden Pass. There are a number of other projects that they are seeking financing or taking FIDs. How do these projects compare to your expansion plans in terms of cost, and what is the advantage that Cheniere offers?
Well, I guess all we would say is that Corpus Train 3 is very attractive. It's a brownfield expansion. It's fully permitted. As you know, partially commercialized, and is a very attractive offering both in terms of cost as well as in terms of time to market. You'd have to ask the other guys how their cost structure compares to that. We've been pretty transparent about ours, and really don't see any reason why Corpus Train 3 isn't the next project that reaches FID.
Yeah, I would say, Fotis, you're going to hear a lot more about our strategy and our opportunities in April. We believe that with our investment not only in our people but in our sites, in our berths, in our tanks, in our pipeline infrastructure, that we're going to be extremely competitive for many, many years to come.
Thank you, Jack. Thank you, Anatol.
Your last question comes from the line of Pavel Molchanov with Raymond James. Your line is open.
Thanks for taking the question, guys. I haven't heard anybody ask about Corpus, let me try this one. As you've been operating Sabine for the past year, are there any operational learnings that are going to be relevant as you start up Corpus about two years from now? Bearing in mind, of course, one's greenfield, one's not.
Yeah. Pavel, the interesting thing, Doug Shanda and his team have done a fantastic job at recruiting and hiring operators and maintenance folks and having them report to Sabine Pass to go through not only our simulator training but also hands-on training with existing trains at Sabine. We're in the process now of relocating those folks to Corpus, so they will be on the ground early and be very comfortable and familiar with that site.
At the beginning, you guys mentioned that at the Analyst Day in April, you will be offering some guidance. Historically, of course, you've kind of held away from giving any specific targets on cargoes in particular. Are you going to be getting that granular in actually guiding to specific cargoes as part of the guidance?
We broke out today CMI listings versus third-party offtaker listings. I don't see any problem pointing that out in the future. I think the ultimate number we're going to be showing is the free cash flow generative ability of the company and how much EBITDA we can generate both this year and on a run rate basis. If cargo count is important to people, we could probably provide that.
Yeah. In some sense, we will be providing that through the DOE disclosure on a monthly basis.
Okay, understood. Appreciate it.
Thank you very much.
Thanks, Pavel.
Thanks, everybody. We appreciate your interest in Cheniere and all of your support.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.