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

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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