10-QPeriod: Q1 FY2006

Cheniere Energy, Inc. Quarterly Report for Q1 Ended Mar 31, 2006

Filed May 5, 2006For Securities:LNG

Summary

Cheniere Energy, Inc.'s (LNG) first quarter 2006 10-Q filing reveals a company heavily invested in the development of its liquefied natural gas (LNG) receiving terminals, with significant capital expenditures and ongoing construction activities. The company reported a net loss of $15.8 million for the quarter, an increase from the previous year's loss of $9.4 million, primarily driven by increased LNG terminal and pipeline development expenses, as well as higher general and administrative costs reflecting business expansion. Despite the net loss, Cheniere maintained a solid liquidity position with $678.1 million in cash and cash equivalents. The company secured substantial debt financing, including $70 million drawn under the Sabine Pass Credit Facility and a $600 million Term Loan, alongside a $325 million convertible senior unsecured note offering in July 2005. These funds are crucial for financing the construction of its LNG terminals and related infrastructure, with estimated total costs for terminals and pipelines approaching $4 billion. The company's focus remains on bringing its Sabine Pass LNG terminal online in 2008, with other terminals and pipelines also in various stages of development and projected to commence operations between 2010 and 2011.

Key Highlights

  • 1Net loss for the quarter increased to $15.8 million ($0.29/share) from $9.4 million ($0.18/share) in the prior year, driven by higher development and G&A expenses.
  • 2Significant capital expenditures are underway, with $73.3 million invested in Phase 1 construction of the Sabine Pass LNG facility during the quarter.
  • 3Total assets grew to $1.33 billion, reflecting substantial investments in property, plant, and equipment, primarily LNG terminal construction-in-progress.
  • 4Long-term debt increased to $986 million, with $70 million drawn under the Sabine Pass Credit Facility and ongoing principal payments on the Term Loan.
  • 5The company secured crucial financing through a $325 million convertible senior unsecured note offering in July 2005 and has access to significant credit facilities for project development.
  • 6Operational focus remains on developing three wholly-owned LNG receiving terminals (Sabine Pass, Corpus Christi, Creole Trail) with projected start-up dates from 2008 to 2011.
  • 7The company has $678.1 million in cash and cash equivalents, indicating sufficient liquidity for near-term operations and development activities.

Frequently Asked Questions

Cheniere Energy's primary business activity is the development, construction, ownership, and operation of a network of LNG receiving terminals and related natural gas pipelines along the U.S. Gulf Coast. The company also engages to a limited extent in oil and natural gas exploration and development.

For the quarter ended March 31, 2006, Cheniere Energy reported a net loss of $15.8 million, or $0.29 per diluted share, compared to a net loss of $9.4 million, or $0.18 per diluted share, for the same period in 2005. This increased loss was mainly due to higher LNG terminal and pipeline development expenses and increased general and administrative costs associated with business expansion.

Cheniere is financing its projects through a combination of cash on hand, equity contributions, and significant debt financing. Key financing instruments include the $822 million Sabine Pass Credit Facility, a $600 million Term Loan, and a $325 million convertible senior unsecured note offering. The company estimates that the total cost for its three LNG receiving terminals will be approximately $3 billion and for its proposed pipelines between $800 million to $1 billion.

Construction of Phase 1 of the Sabine Pass LNG receiving terminal commenced in March 2005, with operations anticipated to begin in 2008. The estimated cost for Phase 1 is between $900 million to $950 million. The company has entered into long-term Terminal Use Agreements (TUAs) with Total and Chevron USA for a portion of the capacity.