Carnival Corp. (NYSE: CCL) Maintained Hold but cut estimates at Argus.
Chesapeake Energy Corporation (NYSE: CHK) Cut to Hold at Brean Murray.
Cheniere Energy Inc. (NYSE: LNG) Started as Outperform with $13.50 target at Credit Suisse
Cheniere Energy Partners, LP (NYSE: CQP) Started as Neutral with $20 target at Credit Suisse.
Cree Inc. (NASDAQ: CREE) maintained Buy with $33 target at Canaccord Genuity; Raised to Buy at ThinkEquity; Cut to Neutral at Ticonderoga.
Expedia, Inc. (NASDAQ: EXPE) Started as Underweight at JPMorgan.
France Telecom S.A. (NYSE: FTE) Cut to Sell at Deutsche Bank.
Google Inc. (NASDAQ: GOOG) Cut to Market Perform from Outperform at Wells Fargo.
Janus Capital Group, Inc. (NYSE: JNS) Cut to Sell at Citigroup.
The Kroger Co. (NYSE: KR) Cut to Market Perform at BMO Capital.
MGM Resorts International (NYSE: MGM) Raised to Neutral at Credit Suisse.
Office Depot, Inc. (NYSE: ODP) Raised to Equal-weight at Barclays.
OfficeMax Inc. (NYSE: OMX) Raised to Equal-weight at Barclays.
PVH Corporation (NYSE: PVH) Started as Neutral with $72 target at Credit Suisse.
Ralph Lauren Corporation (NYSE: RL) Started as Outperform with $168 target at Credit Suisse.
Telefonica SA (NYSE: TEF) Cut to Sell at UBS.
Textron Inc. (NYSE: TXT) Cut to Neutral at JPMorgan.

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JON C. OGG

Unlike the over-supply in other shipping markets, LNG vessels are in short supply and carriers like Teekay LNG Partners LP (NYSE: TGP) and Golar LNG Ltd. (NASDAQ: GLNG) are reaping the rewards. The global fleet for LNG carriers totals just 364 vessels. Day rates have risen above $100,000 and Golar is thought to be concluding a deal at $120,000. By 2013, the day rate could be as high $140,000.

These are the highest day rates since 2006, and are due to the fact that 90% of the LNG fleet is contracted on long-term deals that leave only a relative handful of vessels available for spot shipments. LNG cargoes headed for Europe have been redirected to Asia, where LNG prices are higher, increasing the amount of time the LNG carriers are hauling a single cargo.

Much of the LNG is coming from Qatar and is going to Japan. Before the earthquake and tsunami this past Spring, Japan consumed about 70 million tons of LNG annually. That number is expected to rise to 85 million tons in 2011 and 90 million tons in 2012. Qatar’s exports are soon expected to reach 120 million metric tons annually.

Until the recent US boom in shale gas extraction, the US was expected to be an importer of LNG and several receiving terminals had been proposed. Now, Cheniere Energy, Inc. (AMEX: LNG) and its subsidiary Cheniere Energy Partners LP (AMEX: CQP) have been approved to build a liquefaction facility at the Sabine Pass LNG receiving terminal, but that project is still a few years away. A proposed receiving terminal in Oregon has also begun the process of getting federal approval to export LNG.

The Kitimat LNG facility in British Columbia is another proposed LNG export terminal owned by Apache Corp. (NYSE: APA) with 40% and Encana Corp. (NYSE: ECA) and the Canadian arm of EOG Resources Inc. (NYSE: EOG), each with 30%. The feedstock will come from Apache and EOG fields in Canada. Initial annual capacity of five million metric tons is due in 2013.

The LNG carrier market could be constrained into 2013. New orders for LNG vessels totaled just 5 in 2010, compared with 45 so far this year. Vessels ordered this year are expected to be delivered in 2014-2015, but all may not be built.

The other impact on LNG carriers could come from new Pacific Rim facilities that will be closer to the Asian markets and lower demand for the long-haul trips from Europe and Africa.

For now, though, the outlook is strong for LNG carriers. Teekay has been only a bit better than flat for the past 12 months, but Golar shares are up more than 150%, though about 20% off of 52-week highs.

Paul Ausick

This poses a severe financial risk for many companies who are dependent upon the future of natural gas.  We are tracking United States Natural Gas (NYSE: UNG), Exxon Mobil Corp. (NYSE: XOM), Chesapeake Energy Corp. (NYSE: CHK), Encana Corp. (NYSE: ECA), Devon Energy Corp. (NYSE: DVN), EOG Resources Inc. (NYSE: EOG), and Questar Corp. (NYSE: STR).  Also being tracked are Cheniere Energy, Inc. (AMEX: LNG), Cheniere Energy Partners LP. (AMEX: CQP), Clean Energy Fuels Corp. (NASDAQ: CLNE) and Westport Innovations Inc. (NASDAQ: WPRT).  The losses are brutal, and the weak stock market is not helping things.

United States Natural Gas (NYSE: UNG) has to be one of the worst exchange-traded products out there because of erosion into roll-dates in the futures contracts.  Still, it is actively traded because investors can easily get exposure to natural gas on an intraday basis this way in their normal equity accounts.  This trust is down 3.6% at $9.97 and a new 52-week low of $9.94 was just hit this morning.

Exxon Mobil Corp. (NYSE: XOM) includes XTO after its huge natural gas acquisition.  Shares are down 1.3% at $76.71 and the 52-week range is $55.94 to $88.23.  Chesapeake Energy Corp. (NYSE: CHK) is the largest pure-play for natural gas and it recently even started a venture fund to drive nat-gas interests as part of the next energy policy.  Chesapeake is down a sharp 5.3% at $32.42 and the 52-week range is $19.68 to $35.95.

Encana Corp. (NYSE: ECA) is down 2.9% at $27.40 and close to 52-week lows as that range is $26.02 to $35.25.  Devon Energy Corp. (NYSE: DVN) is down 4.3% at $72.55 but its 52-week range is $59.07 to $93.56.  EOG Resources Inc. (NYSE: EOG) is down 4.1% at $93.96 versus a 52-week range of $85.42 to $121.44. Questar Corp. (NYSE: STR) is down only 1.7% at $17.95 and its 52-week range is $16.03 to $19.06.

Cheniere Energy, Inc. (AMEX: LNG), a liquefied natural gas (LNG) terminal operation, is down almost 9% at $8.89 versus a 52-week range of $2.30 to $12.81.  Its limited partnership is called Cheniere Energy Partners LP. (AMEX: CQP) and that is down ‘only 3.3%’ at $16.55 versus a 52-week range of $15.05 to $24.54.

Clean Energy Fuels Corp. (NASDAQ: CLNE) is T. Boone Pickens’ ‘gas station’ play that he wants to serve the nat-gas trucks as the refuel-stop on major trucking routes.  Shares are down more than 4% at $14.58 versus a 52-week range of $11.75 to $17.85.

Westport Innovations Inc. (NASDAQ: WPRT) is down 4.5% at $22.74 versus a 52-week range of $14.25 to $28.05.  The company specializes in alternative energy engines for trucks, particular those using compressed natural gas.

Dow Jones was calling for a build of 36 billion cubic feet, but the weekly gain reported by the Energy Information Administration was 44 billion cubic feet and U.S. inventories now sit at 2.758 trillion cubic feet.  What is interesting is that Dow Jones noted that this inventory build is still 2.4% under a 5-year average and more than 6% under year-ago levels.

Right now it feels like trying to find the bottom in selling levels is a bit like catching a falling knife.  It is just not very rewarding.  Maybe a bottom is close and maybe not in these stocks, but one thing is a sure bet: Natural gas dipping back under $4.00/tcf does pose a severe financial risk to the business viability of producing and even transporting natural gas.

Natural gas is not alone in its misery today.  Oil is back under $91.00 per barrel as well.

JON C. OGG

Cheniere Energy Partners LP. (AMEX: CQP) Raised to Hold at Citigroup.
Dynegy Inc. (NYSE: DYN) Cut to Sell at S&P Equity Research (late-Tuesday call).
Ensco plc (NYSE: ESV) Raised to Outperform and $71 target at Credit Suisse.
Finisar Corporation (NASDAQ: FNSR) Target cut to $29 from $43 at Credit Suisse.
Interactive Brokers Group Inc. (NASDAQ: IBKR) Cut to Underperform and Short-Term Sell at Zacks Investment Research.
Lululemon Athletica Inc. (NASDAQ: LULU) Started as Buy at Stern Agee.
The Mosaic Co. (NYSE: MOS) Cut to Hold at Citigroup.
BankUnited, Inc. (NYSE: BKU) Started as Market Perform at KBW; Started as Buy at BofA/ML; Started as Neutral at Goldman Sachs.
Potash Corp. of Saskatchewan (NYSE: POT) Cut to Hold at Citigroup.
Suntech Power Holdings Co. Ltd. (NYSE: STP) Reiterated Underperform with $7.80 target at BofA/ML; Maintained Buy with $13 target Auriga.
Transocean Ltd. (NYSE: RIG) Started as Market Perform at Morgan Keegan.
Trinity Biotech plc (NASDAQ: TRIB) maintained Outperform as Bull of the Day at Zacks Investment Research.
United Natural Foods Inc. (NASDAQ: UNFI) Cut to Hold at Argus.
United Natural Foods Inc. (NYSE: WEN) Reiterated Sell at Argus.

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JON C. OGG

Not more than two or three years ago, energy companies believed that the US would begin importing large quantities of liquefied natural gas, or LNG. Re-gasification plants were either expanded or built to accommodate the anticipated LNG shipments. The largest of these plants, called Sabine Pass, is located in the Gulf of Mexico and is owned and operated by Cheniere Energy Partners LP (AMEX: CQP).

Cheniere Energy Partners is a subsidiary of Cheniere Energy Inc. (AMEX: LNG), the company that originally built the Sabine Pass receiving terminal and others in the Gulf of Mexico. Last month, Cheniere Partners received permission from the US Department of Energy to export LNG produced in North America from its Sabine Pass terminal. The company had already received permission to re-export imported LNG that it couldn’t sell.

The reason Cheniere Partners can’t sell imported LNG is because the US is awash with natural gas from the shale gas wells of Texas, Arkansas, Pennsylvania, and elsewhere. In late 2008, it appeared that both Cheniere Partners and Cheniere Energy might be headed for failure due both to the financial crisis and the booming supply of domestically-produced natural gas.

To turn the business around, the companies decided to build  liquefaction facilities, called ‘trains’, at Sabine Pass. Today Cheniere Partners announced that it has signed a memorandum of understanding with a Chinese company, ENN Energy Trading Co., willing to contract for 1.5 million metric tons annually of LNG produced at Sabine Pass. ENN Energy and Sabine Pass will now begin to negotiate definitive agreements that are expected to lead to a 20-year contract.

Cheniere Partners also signed a memorandum of agreement with Morgan Stanley Capital Group Inc. earlier this week that would allow Morgan Stanley to import or export up to 1.7 million metric tons annually from Sabine Pass.

Cheniere’s plan for the Sabine Pass liquefaction facility includes up to four LNG trains each with a capacity to liquefy up to 700 million cubic feet/day of natural gas, or about 3.5 million metric tons annually. The company believes that exports of US LNG could begin in 2015.

So far Cheniere faces competition from just one other North American LNG facility. A small liquefaction plant owned by ConocoPhillips Corp. (NYSE: COP), Marathon Oil Corp. (NYSE: MRO), and the Alaska Natural Gas Corp. has been operating in Alaska for more than 40 years and ships 98 billion cubic feet/year of LNG to Japan.

US oil company Apache Corp. (NYSE: APA) owns 51% of the Kitimat LNG plant in British Columbia that is expected to begin operation in 2014 and targets Asia as a destination for its shipments of liquefied gas from northwestern Canada. The Kitimat train is a lot closer to Asia than Sabine Pass, and has signed a memorandum of agreement with Korea Gas Corp. to take up to 40% of Kitimat’s annual production of about 3.5-5 million metric tons annually.

Shares in Cheniere Partners have moved up only marginally this morning, but Cheniere Energy shares are up about 4.5% on the announcement of the memorandum of understanding with ENN Energy Trading.

Paul Ausick

We have compiled the news or the catalyst for each, as well as offered additional color and an expected move for the week ahead.

Abbott Laboratories (NYSE: ABT) is already worth almost $80 billion so we’d normally not care so much about one upcoming drug.  The issue coming this Wednesday is a FDA panel review of its Meridia drug, which is to treat obesity.  As the obesity class is largely unmet and as there have been many FDA roadblocks on this indication for others, this could easily be a new blockbuster drug if ultimately approved.

Adobe Systems, Inc. (NASDAQ: ADBE) and Apple Inc. (NASDAQ: AAPL) are one issue.  It appears as though Steve Jobs decided that he was being too much like some other Technocrats in his heavy-handed and severely limiting blockage of Flash.  This last week Apple relaxed some App restrictions and requirements, and Wall Street’s vote was that this means that Adobe’s Flash will now get to run on iPhone and iPad platforms. While Adobe closed down 2% at $32.20 Friday, its shares closed up 9.5% for the week and its 52-week range is $26.01 to $38.20.  With Samsung apparently bringing a tablet earlier than expected, Steve Jobs may have waited too long to stop his heavy-handed tricks.

Allos Therapeutics, Inc. (NASDAQ: ALTH) was up 6.8% at $4.25 on Friday after it was floated out there are as one of the possible takeover candidates in the sector.  Frankly, the argument sounded weak but there was over 300% normal share volume and the low call option volume was actually well above normal trading levels.  The 52-week trading range is $3.58 to $8.79.

Best Buy Co. (NYSE: BBY) has earnings this coming Tuesday.  With all the technology warnings seen and with the building of inventories, we have been critical of the lack of any guidance from the company.  It has to be expected that Best Buy will talk down the yearly results when it reports, but there is a lot of that warning already baked into the cake now.  At $33.88, its 52-week range is $30.90 to $48.83.

Cheniere Energy, Inc. (AMEX: LNG) saw a large pop of Friday night after it already closed up almost 6% at $2.66 Friday because of a Department of Energy approval allowing it to sell LNG all over the world.  But then came more than a 10% pop after Jim Cramer talked it up on CNBC’s MAD MONEY.  The 52-week trading range is $1.77 – $5.40, but investors may also not want to forget about the Cheniere Energy Partners LP. (AMEX: CQP) in there also.

Cisco Systems Inc. (NASDAQ: CSCO) has its analyst meeting on Tuesday.  You know the routine and it is not an uncertain outlook.  Chambers needs to address this dividend.  Cisco is a tech growth leader, but the stock has been dead money and by the looks of it all the share buybacks conducted to date have just been to keep employee stock options from diluting the stock too bad.  Chambers always talks about “Caishe-flow” and he needs to start paying a dividend.

That may change soon. Cheniere Energy, Inc. (AMEX: LNG), through its subsidiary Cheniere Energy Partners, L.P. (AMEX: CQP), has begun a project to add liquefaction to its Sabine Pass LNG receiving terminal in Cameron Parish, Louisiana. Earlier this year Cheniere received permission from the US Department of Energy to re-export imported LNG cargoes to a total of 500 billion cubic feet over two years. Construction of another export facility in Alaska is being studied by Apache Corp. (NYSE: APA).

The booming production of natural gas in the shale gas plays of Texas, Louisiana, and Arkansas have stalled the expected demand for LNG in the US. Devon Energy Corp. (NYSE: DVN), Chesapeake Energy, Corp. (NYSE: CHK), and XTO Energy Corp. (NYSE: XTO), which is about to be acquired by Exxon Mobil Corp. (NYSE: XOM), are among the largest natural gas producers in the region. Cheniere expects to liquefy about 1 billion cubic feet of gas per day at two trains (plants). The company could build a total of four trains at Sabine Pass, giving it a total liquefaction capacity of 2 billion cubic feet/day.

Cheniere’s Sabine Pass terminal has a sendout capacity of 4 billion cubic feet/day and an LNG storage capacity of 16.9 billion cubic feet. Pipelines already exist to connect the terminal to the land-based natural gas transportation system. This infrastructure, designed to regasify LNG and ship the gas to the mainland, could be transformed into a bi-directional operation by adding liquefaction capacity at a cost equal to the cost of expanding an existing LNG train.

Another North American LNG export terminal is on the drawing board about 400 miles north of Vancouver, British Columbia. The Kitimat LNG project is majority owned by a subsidiary of Apache Corp. and is expected to liquefy about 700 million cubic feet/day of western Canadian natural gas beginning in 2014.

Apache owns rights to what the company believes is more than 10 trillion cubic feet of natural gas in northeast British Columbia. Without this export terminal and a 300-mile long pipeline to haul the gas to Kitimat, that gas is stranded. The company is funding the front-end engineering and design work for the Kitimat facility now and expects to make a final decision next year. The estimated cost of the LNG facility is about $2.9 billion.

As Cheniere noted, the LNG import business in the US has not developed as hoped, mainly due to the explosive growth in the shale gas plays. The gas producers should line up solidly behind Cheniere because having an export market for all that gas will help boost and stabilize prices. Or so the thinking goes.

That the US is likely to become a significant exporter of natural gas just a few years after it was expected to become a significant importer is quite a reversal. But if shale gas development and extraction continues on its current pace both Cheniere and Apache will have a head start on a potentially lucrative new business.

Paul Ausick

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Cheniere Energy reported a first quarter EPS net loss of -$0.64, compared with an EPS net loss in the same period a year ago of -$1.70. The results are consolidated and include the company’s 90.6% interest in Cheniere Partners, which reported earnings per common unit of $0.36, up from $0.08 in the same period a year ago.

Revenues at Cheniere Energy totaled $79.5 million, up from just $1.2 million a year ago, primarily due to to payments the company has received under two third-party terminal use agreements it signed last year. The company’s Sabine Pass LNG receiving terminal is now fully operational and posted revenues of $66.8 million for the quarter, compared with no revenue at all in 2009′s first quarter.

The company’s marketing and trading group reported revenues of $12.14 million, up from $501,000 a year ago. Cheniere Energy purchases LNG and uses derivative contracts to hedge its cash flows from future sales of its LNG inventory. The company recognizes earnings as physical sales occur, and it settles its derivative contracts as natural gas prices change.

Cheniere Partners reported first quarter revenue of $130.8 million, more than double revenues of $62.5 million in the year-ago quarter. Revenues are derived from terminal use agreements with Cheniere Energy’s Marketing subsidiary and similar agreements with divisions of Total SA (NYSE:TOT) and Chevron Corp. (NYSE:CVX).

Cheniere Energy’s EPS loss was higher than expected and the shares are down about 5%, while Cheniere Partners’ shares are up more than 5% on the earnings news.

It wouldn’t be unreasonable to wonder what is going on with LNG anyway, given the vast amounts of natural gas now being pumped out of shale plays like the Barnett, Marcellus, and Fayetteville shales. In general, the enthusiasm of five or six years ago has cooled off, both because of the increase in shale gas development and the low price of natural gas.

However, as a long-term play, LNG still has some believers. Yesterday, General Electric Co.’s (NYSE:GE) Energy Financial Services group invested $15 million in the Gulf Energy LNG terminal now under construction in Mississippi. One analyst is quoted as saying, “There’s no screaming need for it right this minute, but when world demand grows again, then we’re going to be grateful that we have access to LNG.”

In April, Cheniere sold its 30% stake in the Freeport LNG terminal, which is 50%-owned and operated by ConocoPhillips Corp. (NYSE:COP) for about $104 million. The Freeport terminal is shown in the photo.

The company will use the proceeds to pay a portion of its $400 million, 9.75% term loan that the company owes to one of its subsidiaries.

Another sign of life in the LNG business is another April deal involving a subsidiary of Russia’s Gazprom with Sempra Energy Corp. (NYSE:SRE). Beginning next month, Gazprom will pay Sempra for the right to deliver and sell up to two LNG cargoes a month to Sempra’s Cameron receiving terminal near Lake Charles, Louisiana. Gazprom already supplies LNG to Sempra’s terminal in Baja California.

There’s still life in the US LNG business, but it did not materialize as fast and as big as anticipated just a few years ago. Combined with the long-term interest in LNG is the relatively low entry price to get a piece of the action.

Paul Ausick

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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

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