NGI The Weekly Gas Market Report / NGI All News Access

As Losses Climb, Cheniere Shares Spike on Financing Deal

Foundering liquefied natural gas (LNG) terminal developer Cheniere Energy Inc. continued to produce more red ink than regasified LNG in the second quarter as losses more than tripled from the year-ago period and more than doubled from the first quarter. However, investors took heart from the company's announcement that it had secured $250 million in financing.

Houston-based Cheniere reported a net loss of $132.3 million (-$2.81/share) for the second quarter compared with a net loss of $41.1 million (-76 cents) during the year-ago period. Not including the impact of restructuring charges in the second quarter the net loss would have been $53.7 million.

In May Cheniere said it chalked up a $50 million loss in the first quarter (see NGI, May 12).

Cheniere shares bounced more than 51% in trading last Monday on the financing news to close at $4.40, still a fraction of their 52-week high of $41.84. Trading volume was nearly double the average. By last Friday the share price was holding around $4.50.

Losses from operations in the second quarter were $103.5 million compared to $40.2 million for the second quarter of 2007. The increase of $63.3 million primarily resulted from restructuring charges of $78.6 million.

On June 30 Cheniere held restricted cash and cash equivalents and treasury securities totaling $296.2 million, of which $264.8 million was held at Cheniere Energy Partners with $69.4 million dedicated to the completion of the construction of the Sabine Pass LNG receiving terminal in Cameron Parish, LA; $141.3 million reserved for interest payments on Sabine Pass LNG LP senior secured notes; and $54.1 million as a reserve for distributions to Cheniere Partners common unit holders.

On June 30 the company had unrestricted cash and cash equivalents of $162.6 million compared to $296.5 million at Dec. 31, 2007. Creole Trail pipeline expenditures incurred through June 30 were $547.7 million. On a cash basis, the company spent $522.9 million through June 30 and expects to spend an additional $33.1 million from July 1 until completion of the pipeline.

On Aug. 6 the company accepted a commitment for $250 million of convertible security financing to repay a $95 million bridge loan and provide working capital. The financing, subject to conditions and approvals, is expected to be completed this month. Cheniere said this financing should keep it going for at least three years, even if it fails to exploit its 2 Bcf/d of reserved capacity at the Sabine Pass terminal.

As of June 30 the company had completed construction of the initial 2.6 Bcf/d of sendout capacity and 10.1 Bcf of storage capacity at Sabine Pas, which is operating and able to accept cargoes. The commissioning process began in April and is expected to be completed in the third or fourth quarter. Three LNG cargoes have been obtained for the commissioning process and the company expects to obtain one more to complete the process. Construction for the remaining 1.4 Bcf/d was approximately 79% complete as of the end of the second quarter.

The estimated aggregate cost of the Sabine Pass terminal is $1.46 billion, before operating expenses during construction, future commissioning costs and financing costs, an increase of approximately $36 million from the estimate of March 31. The estimated total construction, commissioning and operating cost budget through the achievement of full operability is approximately $1.56 billion.

As of June 30 the Creole Trail Pipeline, consisting of 94 miles of pipeline, had been placed into operation. This pipeline provides 2 Bcf/d capacity from the Sabine Pass terminal to Gillis, LA. The total cost, excluding financing, is expected to be approximately $556 million.

In February Cheniere said it was exploring strategic options, including optimizing the Sabine terminal and the regasification capacity at the facility held under a long-term terminal use agreement by Cheniere Marketing (see NGI, March 3). On April 15 Cheniere announced the downsizing of its gas marketing activities and said it was negotiating an an outsourcing arrangement with a major North American gas marketer to manage the throughput of LNG and the downstream gas marketing for LNG cargoes delivered for Cheniere Marketing's account at Sabine Pass (see NGI, April 21). And in June it announced a marketing deal with JPMorgan (see NGI, June 30).

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus