10-QPeriod: Q3 FY2008

Cheniere Energy, Inc. Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 7, 2008For Securities:LNG

Summary

Cheniere Energy, Inc. (LNG) reported a net loss of $67.4 million ($1.42 per share) for the third quarter of 2008, an increase from the $53.5 million loss ($1.14 per share) in the same period of the prior year. This widening loss was primarily driven by decreased interest income, an increased loss from early debt extinguishment, and higher interest and depreciation expenses. However, the company also reported a derivative gain and a decrease in general and administrative expenses. Significant events during the quarter included the repayment of a bridge loan with proceeds from a $250 million convertible term loan and an additional issuance of Sabine Pass LNG Senior Secured Notes. The company is progressing with the construction of its Sabine Pass LNG receiving terminal, with the initial phase nearing completion and the remaining capacity expected to be operational by Q3 2009. Despite ongoing construction and financial activities, the company has secured long-term capacity reservation agreements for its Sabine Pass facility. Financially, Cheniere ended the quarter with $128.3 million in unrestricted cash and cash equivalents, alongside $578.0 million in restricted cash and securities designated for specific purposes, including construction costs and interest payments. The company has undertaken significant restructuring efforts, including a 43% reduction in personnel, to reduce costs and capital requirements. The financial results reflect both these strategic adjustments and the ongoing significant capital expenditures for its LNG infrastructure projects.

Key Highlights

  • 1Cheniere reported a net loss of $67.4 million for Q3 2008, compared to a $53.5 million loss in Q3 2007.
  • 2The company repaid its $95 million bridge loan using proceeds from a new $250 million senior secured convertible term loan.
  • 3Sabine Pass LNG receiving terminal's initial phase is physically complete, with remaining capacity expected online in Q3 2009. Total send-out capacity will be 4.0 Bcf/d.
  • 4Long-term capacity reservation agreements are in place for the entire 4.0 Bcf/d of regasification capacity at Sabine Pass.
  • 5Unrestricted cash and cash equivalents stood at $128.3 million as of September 30, 2008.
  • 6Significant restructuring charges of $78.9 million were recognized for the nine months ended September 30, 2008, related to downsizing operations.
  • 7The company's total assets grew to $3.05 billion, while total liabilities remained substantial, with long-term debt exceeding $3.15 billion.

Frequently Asked Questions

Cheniere Energy reported a net loss of $67.4 million, or $1.42 per share, for the third quarter of 2008. This is an increase in net loss compared to the $53.5 million loss, or $1.14 per share, reported in the same quarter of the previous year. The wider loss was mainly due to lower interest income, higher loss from early debt extinguishment, increased interest expense, and higher depreciation, partially offset by a derivative gain and reduced general and administrative expenses.

During the third quarter of 2008, Cheniere repaid its $95 million bridge loan using proceeds from a $250 million senior secured convertible term loan. Additionally, the company issued $183.5 million of Sabine Pass LNG's 7 1/2% Senior Secured Notes due 2016.

The physical construction of the initial 2.6 Bcf/d of send-out capacity and 10.1 Bcf of storage capacity at the Sabine Pass LNG receiving terminal has been completed, and the facility is capable of accepting commercial cargoes. Construction of the remaining 1.4 Bcf/d of send-out capacity and 6.7 Bcf of storage capacity was approximately 84% complete as of September 30, 2008, with full operability expected in the third quarter of 2009. The entire 4.0 Bcf/d of regasification capacity has been reserved under long-term Terminal Use Agreements (TUAs).

Cheniere implemented a cost-saving program that involved downsizing its natural gas marketing business and reducing personnel by approximately 43%. For the nine months ended September 30, 2008, the company recognized $78.9 million in restructuring charges related to this program. These charges included impacts from cancelling LNG vessel charter agreements and other exit costs.