Participant
Anatoly Feygin; Executive VP and Commercial Director; Cheniere Energy, Inc.
Corey Grindal
Jack A Fusco; President, CEO and Director; Cheniere Energy, Inc.
Randy Bhatia; VP de RI; Cheniere Energy, Inc.
Zach Davis; Executive Vice President und CFO; Cheniere Energy, Inc.
Brian Patrick Reynolds; Analyst; UBS Investment Bank, Research department
Craig Kenneth Shere; Direktor de Pesquisa; Tuohy Brothers Investment Research, Inc.
Jean Ann Salisbury; Senior Analyst; Sanford C. Bernstein & Co., LLC., Research Division
Jeremy Bryan Tonet; Senior Analyst; JPMorgan Chase & Co, Research Division
John Ross Mackay; research analyst; Goldman Sachs Group, Inc., Research Division
Marc Joseph Solecitto; research analyst; Barclays Bank PLC, Research Department
Sean Edmund Morgan; Analyst; Evercore ISI Institutional Equities Research Division
Spiro Michael Dounis; research analyst; Citigroup Inc., Research Division
presentation
Operator
Good morning and welcome to the Cheniere Energy Q4 and FY 2022 conference call and webcast. This conference call will be recorded.
At this point I would like to hand over to Mr. Randy Bhatia. please continue
Randy Bhatia
Thank you operator. Good morning everyone and welcome to Cheniere's fourth quarter and full year 2022 results conference call. Slideshow and webcast access for today's conference call are available at cheniere.com.
Joining me this morning is Jack Fusco, President and CEO of Cheniere; Anatol Feygin, Executive Vice President and Commercial Director; Zach Davis, executive vice president and CFO; and other members of Cheniere's management team. Before we begin, I would like to remind all listeners that our observations, including the answers to your questions, may contain forward-looking statements and actual results could differ materially from those expressed in these statements.
Slide 2 of our presentation contains a discussion of these forward-looking statements and the risks involved. In addition, we may include references to certain non-GAAP financial measures such as consolidated adjusted EBITDA and distributable cash flow. For a reconciliation of these measures to the most comparable GAAP measure, see the attached slide show.
As part of our discussion of Cheniere's results, today's conference call may also include select financial information and results for Cheniere Energy Partners LP or CQP. We do not intend to separate CQP's results from those of Cheniere Energy.
For the conference call agenda, see slide 3. Jack begins with operational and financial highlights, Anatol provides updates on the LNG market, and Zach reviews our 2023 financial results and guidance. After prepared comments, we open the conference call Q&A.
I now hand over to Jack Fusco, President and CEO of Cheniere.
Jack A. Fusco
Thanks, Randy, and good morning everyone. Thank you for joining us this morning as we look back on an incredibly fulfilling and transformative 2022 and set out our perspectives for what we hope will be another very busy and prosperous 2023 for Cheniere.
To say that 2022 was an incredible year for Cheniere would be an understatement. Disruption and volatility dominated energy markets around the world as geopolitical tensions and the arming of energy supplies turbocharged the already volatile markets and suffered from years of infrastructure underinvestment. The importance of a reliable supply of natural gas and a normally functioning energy system in the vital world that natural gas plays in a developed economy became fully apparent as the world watched as some of the wealthiest nations in the developed world struggled to ensure a reliable supply energy for their populations and economies. And while it now appears that a severe winter energy crisis in Europe has just been averted, the situation only underscores the vital need for a reliable, affordable, secure and diverse energy mix.
At Cheniere, we were proud to play an important role in balancing global energy markets at a time when it was most needed. With the early completion and early departure of train 6 at the Sabine Pass, as well as the optimization of our maintenance schedule, we produced approximately 44 million tonnes of LNG in 2022, 72% of which was routed to Europe, further showing the value of destination flexibility. pioneered by Cheniere. And of course over the summer we achieved FID on Phase 3 of Corpus Christi, which will bring another 10 million tonnes of much-needed LNG to the global market and our long-time customers from 2025 onwards.
Throughout 2022, the global natural gas industry's focus on suppliers and consumers crystallized the trilemma of energy security, affordability and long-term environmental performance. At each of these pain points, Cheniere offers a market-leading solution that gives me confidence in our growth potential, which I will discuss in a moment.
Go to Slide 5 where I will review key operational and financial highlights for the fourth quarter and full year 2022 and present our 2023 financial guidance. We generated consolidated Adjusted EBITDA of approximately $3.1 billion in the fourth quarter, bringing our annual total to approximately $3.1 billion, which is $11.6 billion, above the upper limit of our guidance range. We generated approximately $2.3 billion in distributable cash flow in the fourth quarter, bringing our full year 2022 DCF total to approximately $8.7 billion, also above the upper limit of our guidance.
Looking back at the original November 2021 guidance, we have exceeded the midpoint of each of these guidance bands by more than $5 billion, reflecting the exceptional nature of the global gas markets and the value of our ability to be a reliable operator and supplier anywhere in the world, clarifies year. In the fourth quarter, we had net income of more than $3.9 billion and our total for the year is positive $1.4 billion. Our net income continues to be impacted by non-cash derivatives, which worked in our favor in the fourth quarter as global gas markets weakened.
During the fourth quarter, Zach and his team made excellent progress on our capital allocation plan, returning billions of dollars of capital through debt repayments, stock repurchases and dividend increases, as well as disciplined growth and ramp-up of Phase 3 Corpus Christi. I look forward to covering capital allocation in more detail. So I'll stop here before I steal too much of your thunder.
Operationally, the fourth quarter and full year 2022 were exceptional, reinforcing Cheniere's status as a leading global operator producing LNG reliably, with safety at the heart of all our actions. During the quarter we exported a record 166 loads from our facilities, bringing our annual total to a record 638 loads. I would like to recognize the approximately 1,550 Cheniere professionals who have worked tirelessly throughout 2022 to demonstrate Cheniere's operational and execution leadership in the global marketplace and help enable the outstanding results we reported this morning while they... achieved record safety metrics throughout the year.
Now we are shifting our focus to 2023. I am pleased to extend our 2023 financial guidance of $8 billion to $8.5 billion in consolidated adjusted EBITDA, $5.5 billion to $6 billion in distributable cash flow and $4 billion to $4.25 - Present dollars in payouts per unit in CQP. I am pleased to present forecast figures for 2023, well above our normalized operating rate of 9 trains, and believe that price stabilization and volatility in international gas markets will support stronger and faster demand growth. Ultimately, this should support our long-term health belief and structural shift towards natural gas around the world.
Now turn to Slide 6, where I will address my top priorities for 2023. First, we have an established track record built over several years of delivering on our promises, and I expect that to continue into 2023. We have set ambitious but achievable guidance ranges for the year, and we will focus on building on that track record while meeting our financial guidance.
In 2023, with a lower CMI volume and excluding the variable of new capacity coming online, we have better insight into our metrics than a year ago to achieve our projected production estimates and continue to advance our vision capital allocation plan 2020 .
Second, we expect to lead with organic growth and currently have over 30 million tons in development or under construction. Our more than $40 billion in infrastructure investments are one of the greatest competitive advantages we have, enabling cost-effective capacity expansions like Corpus Christi Stage 3. The construction activities on Stage 3 are progressing. And while it's too early to tell, we're ahead of schedule as we're about 2% complete with construction. In fact, some aspects of the original construction started ahead of schedule.
On the growth front, beyond Phase 3, we are advancing the pre-registration process for mid-size trains 8 and 9 in Corpus Christi and expect to submit full registration to FERC before the end of Q1. In the Sabine Pass. I hope you saw our announcement this morning that we have just started the permitting process for a significant capacity expansion and have sent the pre-documents to FERC. I'll discuss this project in more detail on the next slide, but we're very excited about the development of this Sabine Pass extension, which could add approximately 20 million tonnes of additional capacity at the site. Taking this project through the engineering and construction process and permitting will be a top priority in 2023. Anatol, Ramzi and the team are actively marketing this potential new investment.
Third, we will continue to advance our climate and sustainability initiatives, which we like to describe as actionable rather than ambitious. Despite the industry-wide focus on energy security in 2022, improving environmental performance remains a long-term goal, and creating and maintaining environmental competitiveness is critical to further natural gas adoption and therefore LNG's long-term resilience. The programs we have discussed in recent calls such as our QMRV program, our Cargo Emission Labels and joining the UN Oil and Gas Methane Partnership are all efforts that I expect will continue to focus, improve and refine to further strengthen Cheniere's leadership position in these key areas.
Now moving to slide 7 where I will share some details about our next major capacity upgrade at Sabine Pass. We have just started the licensing process for this major project and submitted the previous documentation to FERC. We expect to submit full registration before the end of the year and look forward to working with FERC to enable this significant expansion of brownfield capacity. The Sabine Pass expansion project is designed for around 20 million tons of LNG. The project is expected to consist of up to 3 full scale liquefaction trains utilizing the same liquefaction process technology employed in the 6th operational train outside the SPL.
Each train is expected to have a nominal production capacity of around 6.5 million tons. The project is also expected to include a boiling gas reliquefaction plant that would increase production by almost 1 million tonnes and two LNG storage tanks with full containment.
You can see the rendering of the project on this slide. We have worked hard on the development in the early stages of this project and Bechtel is already involved in the front end engineering and design work and we look forward to bringing the construction drawing to reality on this slide at Sabine Pass.
We will develop the Sabine Pass expansion project with the same rigorous and financially disciplined approach, project development and capital investment that you have become accustomed to at Cheniere. SPL's expansion project is consistent with the significant growth plans outlined in our September capital allocation presentation. We show a potential 90 million ton platform at Sabine Pass in Corpus Christi. Our infrastructure platform is a tremendous competitive advantage that this project is expected to leverage to achieve brownfield economics.
As the world demands more LNG capacity, Cheniere is in an economically and environmentally advantageous position to provide this additional capacity. We look forward to keeping you updated on this large scale growth project at Sabine Pass as well as developments at Corpus as we go through this process.
Thank you again for your continued support of Cheniere. I now hand over the floor to Anatol, who will give an update on the LNG market.
Anatol Feygin
Thanks, Jack, and good morning everyone. Go to Slide 9. An accelerated post-pandemic recovery, followed by reduced Russian gas flows to Europe, led to a sharp increase in LNG demand in 2022. With limited new liquefaction capacity and several production shutdowns, the LNG market remained extremely tight throughout year we've seen prices hit all-time highs and stay high.
Despite supply-side challenges, global LNG trade grew by about 5% compared to 2021, or about 19 million additional tons. Overall, U.S. exports are up 9% year-on-year, rising 6.3 million tons to 76.5 million tons per year in 2022, despite the Freeport outage in the second half of the year. US LNG has accounted for nearly 40% of the growth in global LNG supply, and the early completion of our ninth train contributed significantly to that growth. As Jack noted, our increase in production has enabled Cheniere to meet Europe's need for a reliable and flexible supply of natural gas. After Russia lost Russia as a major supplier, Europe has become a major demand center for LNG, attracting about 70% of all US LNG in 2022 as prices hit record levels and flexible US LNG volumes are diverted to accommodate the compensate for the deficit.
Monthly TTF settlement prices averaged $40 per MMBtu in 2022, more than 180% above the average of $14.42 per MMBtu in 2021, or 46% higher than last year, but well below the peak of nearly $100 per MMBtu end of August. Likewise, the JKM 2022 average settlement price rose more than 125% year over year to average $34 per MMBtu, with the fourth quarter average price up 38% year over year to average $38, but was well below the summer peak of nearly 70% .
In the US, the median price for Henry Hub was nearly $7.22, but it has weakened significantly since its September peak and is now trading well below $3 per MMBtu. This quick correction, driven by US manufacturing growth, once again demonstrates the relative attractiveness of long-dated FOB and SDR contracts dubbed Henry Hub de Cheniere and underpins producers' desire to diversify beyond purely domestic indices. Despite the decline in global gas prices to pre-war levels from the fourth quarter and into 2023 due to a mild winter and efforts to reduce demand in Europe, the overall market remains volatile and we expect volatility to remain high while Europe resolves its issues . Short- and long-term gas supply strategies and the impact of a post-COVID China on the market are becoming clearer.
Now let's move to slide 10 to discuss the regional dynamics in more detail. As mentioned earlier, much of the flexible LNG on the market was routed to Europe and offset a large part, around 84%, of the 74 billion cubic meters or 55 million tons reduction in Russian gas supplies. LNG imports from Europe totaled over 120 million tonnes, of which 110 million tonnes went to the EU and UK, a 69% increase on the previous year. LNG from the US to the block plus UK totaled 48 million tonnes, up 165% year-on-year. Clearly, USA Destination Flexible LNG was able to respond to Europe's call for natural gas supply in 2022.
During the year, the EU took several exceptional measures to mitigate the potential impact of a full Russian gas shutdown and a potentially cold winter with low nuclear and hydropower production. As Jack noted, the challenges facing European countries were significant, but these measures, along with the mild weather and demand price response, allowed Europe to replenish its supplies and avoid a potentially crippling energy crisis in the near future.
Some of the coordinated initiatives included a regulatory push to immediately expand LNG import infrastructure, diversify supply sources and reduce natural gas demand. To date, 5 new regasification terminals have started operations in Europe since September, a key factor in Europe's ability to boost LNG imports to record levels in the fourth quarter.
Efforts to reduce demand were also made across Europe. Residential, commercial and industrial customers were able to reduce aggregate demand by around 12% over the year as power generation turned to increased use of coal, a trend we believe will moderate in 2023 due to high gas storage and a renewed climates will reverse. For now, it looks like the European gas system will get through this winter without the supply restrictions that many feared will be imposed.
Amid historically high LNG prices, the global inflationary environment, lower economic activity and reduced market liquidity, some of the most price-sensitive Asian buyers have exited the spot LNG market. Imports to Asia fell by 20 million tons, or 7%, year-on-year, with nearly 16 million tons of the drop attributable to China. This was the first significant annual decline in LNG imports since the country began importing in 2006. The decline in 2022 was led by the industrial and power generation sectors.
Similar to parts of Europe, low hydropower production and high gas prices supported the rise in coal production in the second half of 2022. However, with JKM and TTF prices softening, we expect Asian demand for price-sensitive LNG to pick up and signs of increased industrial activity in China as COVID restrictions are lifted. The latter, of course, could have a potentially significant impact on next winter's global balance sheet.
Let's go to slide 11. Europe's move away from Russia has created an immediate supply gap of about 70 bcm in 2022, likely to widen to about 110 bcm in 2023. Assuming that Russia's pipeline supply is fully reduced, the 100 mtpa gap is about 1/4 of the current global LNG market. The magnitude of the supply shock weighed on the global LNG market in 2022, leading to some declines in demand in certain regions over the course of the year. More importantly, however, as Jack noted, 22's market dynamics underscored the critical role of LNG in ensuring energy security and underscored the importance of a reliable supply of long-term contracted LNG in the global energy mix.
While short-term dynamics have dominated headlines and narratives over the past year, longer-term fundamentals are central to our planning and strategic positioning, and the need for continued investment in LNG capacity has been highlighted once again over the past year. In the coming decades, both supply and demand will support new liquefaction infrastructure, in addition to high project development barriers, capital intensity and long construction times for new LNG plants. Due to outages, resource constraints and fleet inefficiencies, as well as fiercely competitive domestic demand in some markets, legacy asset utilization rates continued to decline globally.
Since 2010, the volume produced from these legacy projects has decreased by 23%, or more than 25 million tonnes, further contributing to the need for more capacity. While these plants produced about 1/4 of the total volume last year, their contribution is likely to diminish over time. When raw material resources are exhausted, its export ability will decrease and its performance may decrease.
Meanwhile, investments in downstream LNG infrastructure continue to grow not only in Europe but also in other parts of the world. More than 370 million tonnes of irrigation capacity is under development, accounting for approximately 80% of global LNG trade today. In addition, 9 new markets are expected to enter the LNG trade in the next 2 years, including Vietnam, the Philippines and Ghana to name a few. Investments in new LNG supplies are urgently needed, not only to address current market imbalances and meet expected long-term demand growth, but also to offset declining production from certain aging manufacturing assets.
Chêniere contributes to this. With more than 10 million tons under construction and more than 20 million tons in the licensing process, we intend to leverage our many strengths to economically contribute to the overall reliability, safety, affordability and size of the global LNG market. With commercial support for capacity beyond Phase 3 of Corpus Christi, the team is well positioned to capitalize on this success in the development and commercialization of the SPL expansion project.
With that, I turn the call over to Zach to review our results and financial projections.
Zach Davis
Thank you Anatol and good morning everyone. I am pleased to be here today to review our fourth quarter and full year 2022 results, key financial achievements and financial guidance for 2023. As Jack and Anatol noted, 2022 has been quite a year for our company, our stakeholders and our industry as a whole, and the financial results reported today once again reflect the Cheniere team's unwavering commitment to operational excellence, execution and financial discipline, resulting in this period of sustained volatility in the global energy market is particularly important.
Go to slide 13. For the fourth quarter and full year, we generated Adjusted EBITDA of approximately $3.1 billion and $11.6 billion, respectively, and distributable cash flow of approximately $2.3 billion and 8 $.7 billion, or approximately $35, in annual cash flow per share, with full-year results exceeding the upper limit of our most recent guidance ranges published in September.
With these full-year results, nearly $5.5 billion above our original 2022 guidance, we have now been able to transform our capital allocation goals as an investment grade company with fully ongoing Stage 3 construction and a keen focus on continued robust shareholder returns in the form of our $4 billion buyback program and our competitive growing dividend.
For the fourth quarter and full year, we booked 591 and 2,317 TBtu of physical LNG revenues, respectively, including 581 and 2,288 TBtu from our projects and 10 and 29 TBtu from third parties, respectively. Approximately 80% of these LNG volumes generated revenue and both periods were sold under long-term SPA or IPM contracts with terms in excess of 10 years.
Our fourth quarter and full year results were again supported by higher margins realized on our LNG shipments primarily driven by high market prices throughout the year and higher production levels at both sites thanks to the expected completion and ramp-up of SPL Train 6 were driven and maintenance optimization announced in May.
Our overall margins benefited from portfolio optimization activities in addition to Chevron TUA's early exit resources. Also, I would like to point out that we had net income of $3.9 billion and $1.4 billion for the fourth quarter and for the full year, respectively. As noted in previous earnings calls, our net income line is impacted by the unrealized impact of non-cash derivatives, primarily due to the accounting policy mismatch for the purchase of natural gas and the corresponding sale of LNG under our long-term IPM contracts are attributable to .
Whilst this resulted in unfavorable moves throughout most of 2022 as international gas prices rose, the softening of international gas price curves in the fourth quarter provided a significant benefit, allowing us to reach an inflection point with positive net revenues compared to the previous ones 12 months have been accumulated for the first time in a few years.
Before we dive into our financial guidance and priorities for 2023, I would like to summarize some of our key financial achievements for 2022 and how we have been effective in allocating capital to the company and our shareholders.
First, I am pleased to highlight that our commitment to achieving and maintaining a sustainable track record has been recognized by rating agencies with 13 significant credit rating upgrades across our corporate structure over the past year, including the achievement of 2 investment ratings by each of our parent companies, Cheniere as officially investment grade. In November, S&P upgraded Cheniere and CQP by 2 notches to BBB with a stable outlook, which is Cheniere's first rating and CQP's second investor grade rating. Not long after, Fitch started covering Cheniere with a BBB rating and a stable outlook. As everyone knows, achieving investment grade is a long-standing goal of ours as we believe it best positions Cheniere for the future and validates the long-term value and sustainability of our platform.
During the quarter, we prepaid approximately $2.2 billion of consolidated long-term debt, reducing our total debt payment to just over $6.6 billion through the fourth quarter since the initiation of our original cash allocation plan for the year alone 2022. Since our third quarter call option in November, we have also issued $500 million of senior notes due 2037 on the public and private capital markets, the proceeds of which, along with existing cash, were used to redeem the Notes.SPL 2023 remaining. In December, we also repurchased more than $750 million of outstanding 2024 Notes on CCH in a tender offer. And in January, we repaid the remaining nearly $500 million in cash. We continue to leverage our open market repurchase program and purchased more than $400 million of outstanding CCH notes maturing in 2025 through 2039 during the fourth quarter.
After all, today we have nearly $10 billion in consolidated cash, including our lines of credit, investment grade balance sheets throughout the Cheniere structure, and our earliest maturity is not until next year. I am extremely proud of what our team has accomplished at such an accelerated pace, as each of these transactions reflects our focus on opportunistic and strategic long-term management of our debt across the corporate structure.
As we mentioned in November, having strengthened our balance sheet and achieved our initial investment grade goals, we have now balanced our priorities by recalibrating our debt repayment to share buybacks from 4:1 to 1:1, like Set out in our revised capital allocation last September. In fact, we repurchased approximately 4.4 million shares for over $700 million during the fourth quarter, bringing our total number of shares repurchased in 2022 to $9.3 million for approximately $1.4 billion. Given our 1:1 cumulative target over time, expect us to continue sharing buyback momentum with increasing relative buyback allocations for 2023 to meet our 1:1 cumulative target with debt repayment.
We also paid $1.385 per common share in dividends last year, including a 20% increase in the third quarter, and declared and paid our sixth quarterly dividend of $0.395 in the fourth quarter last month. We intend to follow our previous guidance of growing our dividend by about 10% annually through the mid-2020s through the construction of Stage 3.
Now move to slide 14 where I will discuss our guidance for 2023 and update you on our open capacity for the rest of the year. For 2023, our guidance is consolidated adjusted EBITDA of $8 billion to $8.5 billion and distributable cash flow of $5.5 billion to $6 billion, or more than $20 cash flow per year. These ranges reflect the current international gas price curves as well as our significantly lower open position compared to 2022 given the start of several long-term contracts this year and our planned maintenance at the Sabine Pass.
2022 was an unprecedented year, with EBITDA and DCF approaching double and triple our respective 9-train run rate benchmarks for these metrics. 2023 is shaping up to be another amazing year, with multi-billion dollar forecasts above normal levels for both, thanks to proactive management of our open capacity, despite a higher contribution from long-term contracts in 2023. Our focus remains on that to achieve our goals Our vision for 2020 of generating more than $20 billion in cash and more than 20 DCF per share and our expectation of achieving this plan has not faltered despite moderation in near-term pricing, which underscores the stability and visibility of our long-term cash flow profile.
In terms of open capacity, we have less than 70 TBtu of unsold LNG, of which 20 are reserved for long-term procurement, and we currently expect a $1 change in market margin to add approximately $50 million to EBITDA. dollars by 2023 The marketing team has done a great job of proactively selling our open capacity of 150 TBtu since November, which has enabled us to reach that $8 billion+ target area today and aligned with our vision for Keeping 2020 on track.
In addition, our results may be impacted by the timing of certain year-end charges going into 2024. Our distributable cash flow for 2023 may also be impacted by certain changes proposed in tax legislation under the IRA. However, the guidance provided today is based on the current guidance in the IRA Tax Act that we would not qualify for the 15% minimum corporate tax rate this year. However, these two dynamics would primarily be timing issues and would not materially impact our cumulative cash flow generation through the mid-2020s when we think of overall capital allocation deployment.
Looking back at 2022, the year was filled with uncertainty in global energy markets, but the Cheniere team remained focused on what we could control, the reliable, safe and ongoing operations of Sabine Pass and Corpus Christi that enabled us to achieve exceptional results Accelerate our commitment to capital allocation in our business by investing more than $8 billion in all of the above plans, including our Stage 3 growth targets.
Our belief in the critical long-term role of natural gas around the world in addressing the trilemma of energy security, affordability and long-term environmental sustainability has been reinforced following last year's energy market volatility. We position Cheniere for the future in everything we do, including our value-added growth projects, our investment-grade balance sheet and our long-term commitment to generating significant and sustainable returns for shareholders.
This concludes our prepared observations. Thank you for your time and interest in Cheniere. Operator, we are available to open the line for questions.
question round
Operator
(User Guide) And our first question comes from Brian Reynolds' line at UBS.
Brian Patrick Reynolds
Congratulations on your S&P 500 qualification. For starters, just in macro, we might see a very different TTF bond and JKM price compared to our time together on the last conference call. However, we see the first signs of a recovery in demand in Europe and Asia. And I was wondering if you could maybe discuss in detail what you're seeing in terms of near-term demand coming back and supporting the spot market. And then as a follow-up do you see, perhaps on a longer term basis with a more normalized overall price, an upturn in counterparty contract activity?
Jack A. Fusco
Thank you Brian I move on to Anatol and he can talk about the growing demand we are seeing around the world.
Anatol Feygin
thank you We had a very good engagement over 22 as you can imagine as we discussed in the prepared comments. And over the past few years the value of that long term contract, the stability, the reliability, and getting those volumes at 1/4 or 1/3 of that grand prize has never been clearer than it was at 22. So we're very encouraged by what we're doing see. We – although we've obviously seen near-term demand destruction peaking, most countries remain very committed to gas; continue to invest heavily in infrastructure, be it China, India, other Southeast Asian markets, etc., Europe of course; and we are very encouraged by a broad mix of committed interest in our product. So I'm very optimistic about the hand that we've been dealt and obviously very excited that the SPL expansion is here now so we can really start racing.
Brian Patrick Reynolds
Excellent. And, just as a follow-up to capital allocation, the recent investment-grade upgrades from 2 agencies and CapEx and dividend growth should be talked about for the next several years. Should we look at Cheniere through the lens of a cashback-through-buyback story? Or are there any moving parts we should be thinking about to take advantage of the excess cash flow and balance sheet capacity you have now?
Zach Davis
This is Zach. And I think you got it right, but the over $700 million buybacks in the fourth quarter were the best thing we've ever done strategically as we think about late last year and early this year , we're just trying to care about the ratings, and then we overloaded the debt payment to get there with Fitch and S&P once and for all.
So even though the guidance is 1:1, we repaid slightly more debt in the last quarter. So it's time to catch up this year and get back to 1:1 cumulatively. And if you think about how much debt we paid off last year, it was over $5 billion in 2022 alone, there's probably about $2 billion in buybacks relative to the debt repayment that's going to have to happen next year focus heavily on it. And obviously it's not a bad time to buy back, we are at lower levels than we anticipated at the time and that will only help us solidify the vision for 2020 which we remain on track for.
Operator
And we take our next question from Jeremy Tonet's line with JPMorgan.
Jeremy Bryan Tonet
I just want to get started here at the Sabine Pass. At the risk of putting the cart before the horse here, I'm just wondering if we could get more information on what this commercialization process might look like in the future. And specifically, if you're looking for gas supply, that would probably come from the Permian, a new line there? Thinking of financing with TQP, is it a share issue? What kind of contract trading schedule are we going to think about? Any information you can provide on what this might look like would be very helpful.
Jack A. Fusco
Thank you Jeremiah As you can see from our prepared comments, we are very excited about the Sabine Pass expansion. I'm - if you're looking - trying to see what the slide number was, Randy, 7? With us you can see Bechtel's version of what it would look like. This property is now used as a bed. So it's – it's prepared and ready to go, which is one of the advantages that we have as a brownfield location. The infrastructure is available on site. And there is a huge customer base around the world.
So you all remember back in 2016 when I started we had 13 endowment clients. Today we have more than 33. These are customers who collect at least one load per month and have a portfolio of over 20 years. And that customer diversity has grown dramatically as our contract structures have grown between FOB, DES, IPMs etc. and who knows what's next, what Anatol and Ramzi have in the bag. But I'll turn it over to Zach to talk about some of the details.
Zach Davis
Clear. And then I'll pass it on to Anatol who can give a little update on how he sees sourcing the project going forward. But basically we are just beginning the licensing process and engineering work with Bechtel. And it will take time for us to spend more than $100 million to develop this next year. But since it's brownfield, of course it has to be a cost benefit, but it's 20 million tons. So you can imagine that we're going to approach this the way we've approached everything, probably even incrementally like we've done in previous projects, just to be more efficient with the banks' leverage increases and spread the equity over time .
But the key component for us when we thought about the funding was the fact that we now have that base plus the variable payout policy in the CQP. So we can greatly expand Sabine, keep the base distribution, which is above $3, at $3.10 and live within our cash flows and the same amount of 50%, give or take, keep leverage and make it work what is a really cool place. Therefore, CQP works unchanged. And – well, it goes without saying that we stick to our investment parameters, making sure it's value-added not only on a value basis but also on a credit basis and has all the other bells and whistles you're used to having with us when we have [idea] projects. Anatole?
Anatol Feygin
Yes. Just to answer your question a little, I think. As you know, the integration of upstream infrastructure and gas supply solutions was key to -- one of our success factors; and b, one of our main types of structural advantages. So we take this very seriously and will have robust solutions for that.
And the customer mix, the crystal ball, is pretty similar to what we've seen over the last 3-4 years in a very healthy credit mix that includes producer customers that, in part to your question, include not just the liquefaction rate but the gas utility component and the possibility of flexibly optimizing these quantities downstream. So you're going to see manufacturers on the business side, you're going to see European buyers and Asian buyers, and I think they're all excited about this opportunity to continue serving the market with this growth.
Jeremy Bryan Tonet
I have understood. That's very helpful. And I just wanted to address some of the other points that you made on this slide. With regard to vaporization gas reliquefaction and absorption unit for waste heat removal in CCS. I was just wondering if you could tell us a little more about these projects. What kind of savings for these CapEx do these projects have? Does it compete with the facilities themselves and things like 45Q which I think could help the economy here?
Jack A. Fusco
Yes, Jeremiah. So in the boiling gas, now the boiling gas is routed back to the trains in the plant and reprocessed. And it takes up space on the train. So our production numbers are the same or look the same, but our feed gas flows are not as high as they would be. And we did the math and concluded that the evaporative gas reliquefaction unit would help us significantly increase production at the rest of the plant. So that's an added benefit that we don't currently have on any of the sites.
Second, you mentioned some of the heat recovery units. As you know, I've been in power all my life and I think being able to capture the hot flue gas at the end of gas turbines, run them, make steam and use that to make electricity does the whole thing process more efficient. im makes it much more competitive overall. So we have to use this waste heat. And it helps our environmental profile. So you would expect us to do the right thing, which is to harness that waste heat and efficiently reintroduce or sequester the AGRU stream that exits the gas stream.
Jeremy Bryan Tonet
I have understood. It's great to hear about more optimization and squeezing out every penny, Jack.
Operator
We'll answer our next question from Marc Solecitto's line with Barclays.
Marc Joseph Solecitto
With the formal upgrade to IG, can you talk about some of the benefits associated with this, commercially and/or operationally in terms of working capital management or collateral requirements related to hedging or forward sales?
Zach Davis
Clear. So the path to IG is more than symbolic. In fact, we now have lower prices on our working capital and turret facilities, and both corporate turrets are now officially unsecured, giving us even more flexibility going forward. So all this is useful.
Also all the optimizations that CMI does, sometimes even outsourcing, we don't post as much as we used to with LCs and stuff like that. We can only use parental guarantee as CMI is fully owned by CEI. That's very helpful.
And as far as open credit goes, we get more. This is work in progress as we speak. But fundamentally, financial derivatives and hedging are still about liquidity. Yes, we may have a little spare capacity. But as we saw with volatility over the past year, it's still a matter of liquidity. And what I mentioned on the conference call, we have literally $10 billion in total liquidity with the term loan available and the guns and the cash available. So we've fallen a bit behind on financial coverage and that helped in part because we only have 50 TBtu open going forward.
Marc Joseph Solecitto
Excellent. That's helpful. And then, right after a potential expansion into the SPL, how should we think about the potential key frequency there? Could you do this 1 move at a time? And then, for the 20 million tons of added capacity, is there potential for additional debottlenecking of existing capacity with some of the investment in add-on infrastructure?
Jack A. Fusco
My operations team never ceases to amaze me with what they can do in relation to our debottlenecking and optimization efforts. So I would say yes and yes. It is our intention to market these trains as we have in the past and as Zach said we could build them individually or in stages.
Operator
(Operator Instructions) Let's take our next question from Jean Ann Salisbury's line with Amber.
Jean-Ann Salisbury
Just another continuation of the commercialization of the Sabine Pass expansion. Anatol, can you imagine how much of a disadvantage it is to not have a FERC certification in hand when you are trying to trade against all these other licensed but untested traders in the market today? Maybe it doesn't matter because Cheniere's reputation is so strong, but I'm just wondering.
Anatol Feygin
Yes, what you said Jean Ann. So we - a very, very fair question, and as you know, we've given it a lot of thought. And we've discussed over the years what this opportunity could bring us. And as you saw last year when we traded Corpus Stage 3, we ended up trading things way beyond Stage 3 and we're in an enviable position to have this offtake portfolio in our hands at almost 3 million tons convert for SPA.
So it's great to have that. Maps and renderings help, of course. But as you said, that reputation and what the Cheniere platform has armed us with on the commercial side is this excellent track record and execution that is truly unparalleled in the LNG market. So it's great to have that in hand, but it's not a disadvantage - we don't see it as a disadvantage not having the 20 million tonnes approved today.
Jean-Ann Salisbury
Excellent. And can you discuss the pros and cons that weighed in on your decision to go back to full-size trains, rather than mid-size, for your next project?
Jack A. Fusco
Yes. So we - Jean Ann, now we have all the tools in our toolbox. And if we look at the Sabine Pass and look at various potential energy solutions, the most economical trains are the full-size ConocoPhillips trains compared to the smaller mid-size units. And as you know, when looking at life cycle analysis from start to finish, you have to consider what the energy mix is and what it could be. And unfortunately in Sabine Pass the power would be coming from Texas, which as you know is mostly coal-fired power generation for most of the year, and moreover -- not as clean as gas in a life cycle analysis -- it's powered by high-density turbines there for us. This prompted us to opt for larger trains. It just made sense to Sabine.
Operator
And let's take our next question from Spiro Dounis' lineage with Citi.
Spiro Michael Dounis
The first question only concerns the EPC costs. I think seeing an escalation just because of all the inflation, also seeing labor shortages, an ongoing theme here and really in the rest of the energy. In the past, you and Bechtel have an excellent track record of cost and schedule management. But just out of curiosity, as you contemplate these challenges in some of your upcoming projects, how do you manage to deliver a competitive liquefaction rate while maintaining your desired returns on those future projects?
Jack A. Fusco
No, you see, we have a very strong relationship with Bechtel. It was built in the last decade. They joined us. We use limited hints to proceed. We pay risk money upfront to secure materials and supplies and we manage to manage inflation and escalation very effectively to achieve our returns that we've all talked about in the past. Hopefully we can do the same here.
As for the labor shortage, we haven't seen it. We allude to Bechtel being ahead of schedule on Corpus Stage 3. I assume that they will continue to deliver well ahead of the contractually guaranteed dates. And I see that again as we look at Phase 3. So I think the right employer at the right cost and Bechtel is a great employer on the Gulf Coast, they are able to attract and retain some very productive workers on the Gulf Coast.. off the coast.
Spiro Michael Dounis
Excellent. The second question is only about spot volume. You've saved quite a bit on this page since the last update. So I'm curious to know if this level of activity has continued. And if you're thinking about freeing up the remaining 50 TBtu for the site, do you see the value in waiting a little longer with just some of those green shoots you mentioned? Or could we actually see you close the remaining book before the next earnings call?
Jack A. Fusco
Spiro, that's a great question, and sitting next to me is Corey Grindal, Corey and the team. As you know, starting this year, Corey is our new Director of Operations. But before that he was in London. And Corey and the London team did a great job of holding some of those loads. So I'll let Corey answer the question.
Corey Grindal
I think the simplest answer Spiro is we'll have to wait for some of them because with our history of operations and the reputation we're trying to uphold, we'll have to keep some through the end of the year. , potential activity such as hurricanes, as well as some planned maintenance that we will be doing this summer that we were very aware of. We keep some in case our maintenance work takes a little longer. So as we have opportunities and loads solidify, we will continue to sell. But what we're selling now is pretty much all of our festival loads, and we'll be placing them all year round.
Zach Davis
And I just want to add, Spiro, as people think about the guidance, and obviously people have been quite focused on how much we're proactively selling on this call. The CMI team did a great job selling probably over $20 last year and even over $10 this year. And when you think of the $8 billion to $8.5 billion in EBITDA with only 50 TBtu actually outstanding, the price on the curve is now under $10, so less than $0.5 billion at large Entire. So it just goes to show how closed off things are at the moment. And I imagine Corey and the team will sell that as efficiently as possible and we'll get down to less than 50 on the next call and the next call.
Operator
Let's take our next question from Sean Morgan's line with Evercore.
Sean Edmund Morgan
So - and I think one thing - obviously the market has been a little surprised by the size and scope of Sabine Pass and I think it's going to be a positive surprise as we go over the next few weeks in terms of people driving the growth reassess by CQP. But CQP has historically been very investor-focused. They are tailored to the type of distribution. It looks like with the instructions now you're basically keeping most of this variable distribution component along with your base distribution type. So how do you think about how to balance future capital expenditures to build and grow Sabine Pass with the nature of your sales mandate?
Zach Davis
Clear. So I mentioned that a bit earlier, but the fact that we came out with the more variable base DPU last year served that purpose. To give us the flexibility that at some point - at some point down the line - we can go back to the baseline spread and decide how much of a variable we want to spread and keep the rest while creating designs that truly meet all of our investment parameters.
So now we're talking about a 4 to 4.25 DPU for '23. Our base distribution is [310]. So there is at least $1 or more in variable distribution. That's because during development we're not going to spend that much money on this project, maybe over $100 million, and if you factor in a few hundred million dollars in debt, yes we could pay over $4. If it matters a few years from now, let's say '25, '26, '27, yes, we've reduced that $1 of incremental variable distribution so we can live with the cash flows and steadily fund the projects over time with that cash flow and debt.
Sean Edmund Morgan
That's very helpful. And then on to the expansion, I think that's going to be very exciting for LNG investors as well, and it kind of brings the catalyst for growth back to the table, maybe that's been a bit missing since Stage 3 got into everyone's model. So are you asking about the existing CMI marketing agreement between SPL and CMI? Does this also apply to the 20M Sabine Pass extension? And if that's the case, what are we seeing in terms of incremental volumes for CMI based on run rate? Will it be around 3 to 5 mtpa per year once marketed and invested?
Zach Davis
A few things in this question. But the agreement between CMI and the two projects is consistent, and it would be the same for the Sabine extensions and the Corpus extensions, which would pay $3 to get the volumes around the world. That's answer number one. And then the second question was...
Sean Edmund Morgan
What is the volume of the CMI?
Zach Davis
Yes, in terms of quantity we are sticking to our parameters. Like we wouldn't go to the FID if we didn't keep the same parameters as in the past. So we're talking 90% contract when it's all done and cleaned up, which means, yes, there's going to be a few million tons, say 2 to 3 million tons, of open capacity added to the CMI tills to put them in the manage over time. But that's it.
Sean Edmund Morgan
OK. And, yes, I think of course we don't want to promise too much, but the bottleneck going forward is where I've achieved this higher reach. But I understand that you don't like to promise too much. So let's leave it at that.
Jack A. Fusco
Thank you Sean
Operator
And let's take our next question from John Mackay's line with Goldman Sachs.
John Ross Mackay
Maybe you're just thinking about what I think is a new type of vaporization unit that's being proposed for this expansion, and also the CCS that you're going to associate with it. Is that - are those two options in Corpus in the existing footprint and somehow once stage 3 is online? Or - and if not, why not? Maybe a difference between 2 sides or something?
Jack A. Fusco
You are in Corpus. Body is slightly different. It's not currently in our plans. Neither the CCS nor the evaporative gas unit now. But – that would require us to apply to FERC and get approval for that. But we're hoping to get the technology in Sabine, get comfortable with all aspects of it, and then roll it out to the rest of our facility, and Corpus would then be the - would be our next choice.
John Ross Mackay
Everything's ok. And you addressed that a little earlier, but come back. Getting all that gas to Sabine will take more time - better access to the pipelines. It's just your customers, and I know it's early days, but are your customers looking at your ability to secure that feed gas before they're ready to commit? Or is this new background enough?
Jack A. Fusco
John, today we bought 7.5 Bcf from 70 different producers across North America including Canada and we shipped it to our facility and it's being [processed] and loaded into 2 tankers and shipped. So this is an anomaly in the grand scheme of things. As you know, we are the largest buyer of physical gas in the US and the largest owner of transportation pipelines. We like to play in all pools because we have to deliver the molecule. So expect a creative solution from us.
Operator
And the last question comes from Craig Shere's line with Tuohy Brothers.
Craig Kenneth Shere
I only have one. Because we are thinking about this 1:1 ratio for capital allocation in the long term. If you're a FID project with maybe 3x EBITDA, what should stabilize the balance sheet further, does that -- especially when dealing with large projects, does that change the long-term need for the 1:1 ratio?
Zach Davis
I just want to fix the 3x EBITDA first. Most - it's about 3x, more or less, if we can build a CapEx to EBITDA ratio of 6x, and we're doing 50-50. But again, that in and of itself is very helpful in unraveling the story over time as we progress through the build. But look, the build is going to take 4 to 5 years where we're going to have the debt before the EBITDA shows up. So we're going to be very careful to continue looking as good on a Bloomberg screen as we do today when creating these projects. So the 1:1 continues.
Of course we need to track the buyback over the next few quarters and one more year to get back to 1:1. And then you can see how we follow this rhythm until the year 2026. That was September's capital allocation policy. And we will go from there. That way we can build these multi-billion dollar projects value adding and still look pretty good on an LTM basis.
Craig Kenneth Shere
I have understood. And I think as a follow-up, you mentioned, Zach, about 4 to 5 years. Given that these are bigger trains than you've built before, even if it's a brownfield site, could we see the first liquefaction plant in less than 4 years? Or would it take longer of course?
Jack A. Fusco
I assume the technology is the same, Craig. It's just a little bigger. So I can imagine the E&C team can deliver as they have in the past. And where warranty dates can be 4 years, the first real LNG will be significantly faster.
Randy Bhatia
And thank you all. We appreciate any support and hope to see you soon.
Operator
That concludes today's conference. Thank you for your participation and you can now disconnect.