10-QPeriod: Q1 FY2004

Cheniere Energy, Inc. Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 13, 2004For Securities:LNG

Summary

Cheniere Energy, Inc. reported a net loss of $1.07 million for the first quarter of 2004, a significant shift from the $3.12 million net income reported in the same period of 2003. This change is primarily driven by increased expenses related to the development of LNG receiving terminals. While oil and gas revenues saw a substantial increase due to higher production volumes, this was offset by increased general and administrative expenses and significant investment in LNG terminal development. The company's balance sheet shows a substantial increase in cash, largely due to a private placement equity offering and warrant/option exercises, providing improved liquidity. Significant progress has been made in securing future revenue streams for the Freeport LNG terminal through agreements with major energy companies like Dow Chemical and ConocoPhillips.

Key Highlights

  • 1Net loss of $1.07 million ($0.06 per share) for Q1 2004, compared to a net income of $3.12 million ($0.23 per share) in Q1 2003.
  • 2Significant increase in LNG receiving terminal development expenses to $3.88 million from $0.39 million in the prior year's quarter, reflecting accelerated development schedules.
  • 3Oil and gas revenues more than doubled to $332,345 from $110,120, driven by increased production from 11 wells compared to 5 wells.
  • 4Cash position significantly improved, with cash and cash equivalents rising to $14.59 million from $1.26 million, primarily due to a $13.88 million net private placement offering.
  • 5Freeport LNG terminal secured major agreements with Dow Chemical and ConocoPhillips, indicating strong future demand for regas capacity.
  • 6The company reported no off-balance sheet arrangements as of March 31, 2004.
  • 7The company anticipates FERC approval and completion of permitting for its LNG terminals by the end of 2004, with construction to follow.

Frequently Asked Questions

The shift from net income to a net loss was primarily due to a significant increase in LNG receiving terminal development expenses, which rose to $3.88 million in Q1 2004 from $0.39 million in Q1 2003. Additionally, higher general and administrative expenses and non-cash compensation charges contributed to the loss, outweighing gains from equity in the Freeport LNG partnership and a reimbursement payment.

Cheniere's liquidity position has significantly improved. Cash and cash equivalents increased substantially to $14.59 million as of March 31, 2004, from $1.26 million at the end of 2003. This improvement is largely attributable to the net proceeds of $13.88 million from a private placement of common stock in January 2004 and funds received from warrant and option exercises.

Cheniere is in the preliminary stages of developing LNG receiving terminals. For the Freeport LNG terminal, significant agreements have been made with Dow Chemical and ConocoPhillips, securing future regas capacity and financing. For the Corpus Christi LNG terminal, the company is nearing the point where it will begin funding its share of project expenses, with a partner having funded the initial development costs. The company expects FERC approval and permitting for its LNG terminals by the end of 2004.

A key market risk is the reliance on sustained U.S. natural gas prices at or above $3.00 per Mcf for the development and operation of LNG receiving terminals. A decline in natural gas prices below this level could materially adversely affect the company's ability to develop and operate these facilities. The company also faces commodity price fluctuation risks for its oil and gas exploration activities.