10-QPeriod: Q3 FY2003

Cheniere Energy, Inc. Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 13, 2003For Securities:LNG

Summary

Cheniere Energy, Inc.'s 10-Q filing for the period ending September 30, 2003, reveals a company actively engaged in developing its Liquefied Natural Gas (LNG) terminal projects while continuing its oil and gas operations. The company reported a net loss of $2.39 million for the third quarter of 2003, an increase from the $1.47 million loss in the same period of the prior year, largely driven by increased LNG terminal development expenses. Despite the short-term losses, significant progress is evident in strategic partnerships and asset development. The company successfully divested a 60% interest in its Freeport LNG project, securing substantial cash and future development funding, while retaining a 40% stake. Furthermore, Cheniere formed a new limited partnership for its Corpus Christi LNG terminal project, bringing in a strategic partner to fund initial expenses. The company also continues to manage its oil and gas properties, though these operations are becoming a smaller part of the overall business strategy as LNG development takes center stage. Cheniere's liquidity appears supported by a combination of existing cash, a new line of credit, and potential future capital raises, though management acknowledges the need for ongoing financing to support its ambitious development plans.

Key Highlights

  • 1Increased net loss for the third quarter to $2.39 million from $1.47 million in the prior year, primarily due to higher LNG terminal development costs.
  • 2Successfully divested a 60% interest in the Freeport LNG project, receiving cash and securing development funding while retaining a 40% stake.
  • 3Formed a new limited partnership (Corpus Christi LNG) for the Corpus Christi LNG terminal project, with a partner contributing land and initial funding.
  • 4Oil and gas revenues increased due to more wells coming online and higher prices, but remain a relatively small contributor compared to LNG development activities.
  • 5Secured a $5 million line of credit to support liquidity needs.
  • 6Continued issuance of common stock through private placements and exercise of stock options and warrants, indicating ongoing equity financing activities.
  • 7Transitioned accounting for its investment in Gryphon Exploration Company from the equity method to the cost method.

Frequently Asked Questions

The increased net loss for the third quarter of 2003, amounting to $2.39 million compared to $1.47 million in the prior year, is primarily attributed to higher general and administrative expenses related to the development of LNG terminal facilities. These expenses increased significantly due to additional permitting, environmental, and regulatory work for two LNG terminal projects in 2003, compared to one in the prior year.

Cheniere Energy is managing its liquidity through a combination of existing cash reserves, a newly established $5 million line of credit, and ongoing equity financing activities such as private placements and the exercise of stock options and warrants. The company's business strategy also relies on the potential divestiture of producing oil and gas properties and participation in its LNG projects, and management believes it can meet future capital needs through these various sources.

Significant progress has been made on the LNG front. Cheniere successfully sold a 60% interest in its Freeport LNG project, receiving substantial cash and securing up to $9 million for permit and construction preparation, while retaining a 40% stake. Additionally, the company formed a new limited partnership, Corpus Christi LNG, L.P., for its Corpus Christi terminal project, bringing in BPU LNG as a partner who will contribute land and fund initial project expenses, with Cheniere managing the project.

Cheniere's oil and gas segment saw increased revenues in the third quarter of 2003 due to more wells coming online and higher commodity prices. However, this segment is becoming less central to the company's overall strategy as LNG terminal development takes precedence. While providing some revenue, the oil and gas operations are not expected to generate significant cash flow for the foreseeable future.