Posts for Ticker ‘CQP’

Some Good News for Cheniere Energy, Finally (LNG, CQP, JPM)

For the past two months, all the news from Cheniere Energy (AMEX:LNG) has been bad. First, there was the triple whammy. Then there was an awful earnings report for Cheniere and its spin-off, Cheniere Energy Partners (AMEX:CQP). Last, the company’s stock hit a 52-week low on May 9th, and has dropped as low as $3.65/share since then.

Cheniere shares hit a high of $5.05 today on the company’s announcement that it has reached a marketing agreement for its re-gasified LNG at the Sabine Pass terminal. Cheniere Partners reached $9.42 earlier today, before backing off to $9.12 currently. A subsidiary of J.P. Morgan (NYSE:JPM), J.P. Morgan Ventures Energy Corporation, will purchase LNG cargoes from Cheniere as soon as the LNG gets to Sabine Pass. In return, the JPM energy group acquires some storage and re-gasification capacity from Cheniere. The mother ship, JPM, guarantees all the energy group’s financial obligations.

This is the first good news the Cheniere companies have had in some time. It does reduce their earnings potential, but the companies were so short of cash that their ability to pay for LNG cargoes was questionable. Now, however, the deal with Morgan frees Cheniere from life support. The agreement probably won’t have any impact in the second quarter, where analysts are estimating Cheniere’s loss at $1.12/share. But estimated third quarter losses of $1.29/share will almost certainly be revised downward.

Paul Ausick
June 27, 2008

Posted on: June 27, 2008 – 10:43 am in Oil & Gas, , ,

Cheniere(s) Still Facing Issues After Earnings (LNG, CQP)

Last month we reported on a triple whammy that hit Cheniere Energy Inc. (AMEX: LNG).  Today, both Cheniere and its spin-off, Cheniere Energy Partners, LP (AMEX: CQP) gave their earnings report.

Cheniere Energy Inc. reported a net loss of $49.9 million, or ($1.06) EPS, for the first quarter of 2008, compared with a loss of $34.6 million, ($0.63) share, for the same period in 2007. Revenue for the quarter totaled $1.48 million. The company attributed the higher loss to operations at the Sabine Pass LNG terminal and to higher operating, G&A, and non-cash compensation costs. Analysts had been expecting a loss of $1.08/share on revenue of $250,000. The stock is down about 5% to $7.51 after 90-minutes of trading.

Cheniere Energy Partners LP (AMEX: CQP) reported a net loss of $14.5 million, or ($0.09) EPS.  The company had no revenues of the cut-off date.  The company went public on March 26, 2007, so comparisons with a year ago are based on results from predecessor companies. On that basis, for the first quarter of 2007, the company loss totaled $12.9 million, again with no revenue. The stock is flat today at $11.26 after 90-minutes of trading.

One important thing now for both companies is unrestricted cash stated on the books. Cheniere Inc. reported $141.5 million in unrestricted cash, while Cheniere Partners reported just $10,000 in unrestricted cash.  This one is not without controversy and not without risk.  But the operating prospects for both companies are good, if they can just weather the cash crunch.  That is not an assured event as of today, although the prospects may now be slightly better than last month. 

Cheniere Inc. just recently obtained an 18-month secured credit deal with Credit Suisse for $82.3 million at 16.458% interest. While that is a solid flow of operating capital that has been secured as its plant comes on-line, that interest rate is bitter medicine indeed.

Paul Ausick
May 9, 2008

Posted on: May 9, 2008 – 10:25 am in Earnings, Oil & Gas, ,

Cheniere Energy Sees The Triple Whammy (LNG, CQP)

On Monday, Don Turkleson, SVP & CFO of Cheniere Energy inc. (AMEX: LNG) owned 573,163 shares of common stock in the company. As of now, he owns 147,063. He sold 426,100 shares for what looks like an average price in the range of $11.50/share. That’s about $4.9 million worth–and according the SEC filings, the sales were made to meet a broker margin call. The stock closed at $10.86 yesterday, down about $6.00 from Monday’s close, and near the bottom of its 52-week range of $9.99 to $43.50. Ouch.

Cheniere’s share price also dived on Wednesday, from $14 to $11, on the news that Stanley Horton, the company’s President & COO was leaving the company.  Double ouch.  It also disclosed that it was near an agreement with "a major North American natural gas marketing company" to acquire Cheniere’s rights to market 2 Bcf/d of re-gasified LNG from the Sabine Pass LNG plant.

Cheniere’s spin-off master limited partnership, Cheniere Energy Partners, LP (AMEX:CQP) went public in March 2007 at $20.21/share, and closed yesterday at $11.63, a drop of 42%. Triple ouch.

The problem is two-fold. First, Cheniere has bet it’s entire existence on demand for LNG. It will own all or part of three Gulf Coast LNG terminals, the first of which to come online is Sabine Pass, which received its first tanker load from Nigeria on April 11.  Natural gas prices are high enough to support LNG imports, but domestic pipeline expansion projects have managed so far to limit the demand for imported gas. This could change by next year, but that’s potentially another one of Cheniere’s problem.

The company is low on cash and seems to be in a situation where it could have difficulty getting more credit. According to Cheniere’s 2007 annual report, unrestricted cash totaled $296.5 million, and the company admitted that "to execute our current business plan, we will need additional financing in the next 12 months, which we expect to obtain from issuing debt or equity securities, or conducting asset sales or obtaining credit support." The only thing they’ve been able to achieve so far is the marketing deal, but that only curbs the need for more cash, it does nothing to stop the bleeding (although the company did announce on Tuesday that it was cutting 200 staff).

Because Cheniere buys LNG on the spot market, it needs cash. Yet without the marketing piece of the value chain, Cheniere’s major source of income is operating the Sabine Pass plant. That alone is not likely to throw off enough cash to keep the cycle going without an infusion.

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Paul Ausick
April 18, 2008

Posted on: April 18, 2008 – 10:02 am in Oil & Gas, ,