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Cheniere Energy Reports Third Quarter 2012 Results

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HOUSTON, Nov. 2, 2012 /PRNewswire/ -- Cheniere Energy, Inc. ("Cheniere") (NYSE MKT: LNG) reported a net loss of $109.0 million, or $0.52 per share (basic and diluted), for the three months ended September 30, 2012, compared to a net loss of $53.9 million, or $0.67 per share (basic and diluted), for the comparable 2011 period.  For the nine months ended September 30, 2012, Cheniere reported a net loss of $238.5 million, or $1.40 per share (basic and diluted), compared to a net loss of $140.9 million, or $1.94 per share (basic and diluted), during the comparable 2011 period.  For the three months ended September 30, 2012, results include significant items of $23.8 million, or $0.11 per share, related to other expenses that primarily consisted of the write-down of a royalty interest and to liquefied natural gas ("LNG") terminal and pipeline development expenses primarily for the liquefaction facilities Cheniere Energy Partners, L.P. ("Cheniere Partners") is developing and constructing adjacent to the Sabine Pass LNG terminal (the "Sabine Pass Liquefaction Project").   For the nine months ended September 30, 2012, results include significant items of $81.2 million, or $0.48 per share, related to LNG terminal and pipeline development expenses for the Sabine Pass Liquefaction Project, losses due to the early extinguishment of debt, and other expenses that primarily consisted of the write-down of a royalty interest. 

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Results for the three and nine months ended September 30, 2012 were also impacted by increases in general and administrative expenses of $63.2 million and $63.1 million, respectively, compared to the comparable 2011 periods primarily due to the August 2012 vesting of awards under the long-term incentive plan related to LNG trains 1 and 2 of the Sabine Pass Liquefaction Project. Cheniere recorded non-cash compensation expense of $49.8 million and $54.0 million, respectively, for the three and nine months ended September 30, 2012, compared to $2.3 million and $16.6 million for the comparable periods in 2011.  These increases were partially offset by a decrease in interest expense of $19.6 million and $34.1 million, respectively, as compared to the comparable 2011 periods. 

Results are reported on a consolidated basis and include our ownership interest in Cheniere Partners, which was 66.4% as of September 30, 2012.

Overview of Recent Significant Events

  • In July 2012, we sold 28.0 million shares of Cheniere common stock in an underwritten public offering for net cash proceeds of $380.3 million.  A portion of the proceeds were used to repay the entire outstanding principal balance plus accrued interest payable totaling $206.9 million under the Convertible Senior Unsecured Notes due August 1, 2012.  As a result, Cheniere no longer has any debt outstanding on a standalone basis.
  • Cheniere Partners made significant progress on the Sabine Pass Liquefaction Project, including the following:
    • In July 2012, Sabine Pass Liquefaction, LLC, a wholly owned subsidiary of Cheniere Partners, closed on a $3.6 billion senior secured credit facility that will be used to fund a portion of the costs of developing, constructing and placing into service LNG trains 1 and 2 of the Sabine Pass Liquefaction Project.  We also purchased the remaining $333 million of our $500 million equity commitment in Class B Units from Cheniere Partners. 
    • In August 2012, Blackstone CQP Holdco LP ("Blackstone") purchased its initial $500 million of Class B Units from Cheniere Partners, and Cheniere Partners issued a full notice to proceed to Bechtel to construct LNG trains 1 and 2 of the Sabine Pass Liquefaction Project.  As of October 31, 2012, Blackstone purchased $800 million additional Class B Units for an aggregate investment of $1.3 billion.
  • In August 2012, we filed an application with the Federal Energy Regulatory Commission ("FERC") to site, construct and operate an LNG terminal to be located near Corpus Christi, Texas (the "Corpus Christi Liquefaction Project") and an application with the U.S. Department of Energy ("DOE")  requesting multi-contract authorization to export up to 767 Bcf of LNG per year (equivalent to 15 million tonnes per annum ("mtpa")) from the Corpus Christi Liquefaction Project to all current and future countries with which the U.S. has a Free Trade Agreement ("FTA") as well as to any country with which the U.S. does not have an FTA in effect.
  • In October 2012, Sabine Pass LNG, L.P. ("Sabine Pass LNG"), a wholly owned subsidiary of Cheniere Partners, repurchased approximately 97% of the outstanding $550 million 7.25% Senior Secured Notes due 2013 through a tender offer.  The repurchase was funded from an equity contribution from Cheniere Partners and from newly issued $420 million 6.50% Senior Secured Notes due in 2020. 
  • In October 2012, we received authorization from the DOE to export up to 767 Bcf per year of domestically produced LNG from the Corpus Christi Liquefaction Project to FTA countries.

Liquefaction Project Update

Sabine Pass Liquefaction Project

Cheniere Partners continues to make progress on the Sabine Pass Liquefaction Project, which is being developed for up to four LNG trains, each with a nominal production capability of approximately 4.5 mtpa.

In July 2012, Cheniere Partners secured financing of approximately $5.6 billion, including $2.0 billion of equity and $3.6 billion of debt commitments, for developing, constructing and placing into service LNG trains 1 and 2.  Cheniere Partners has issued a full notice to proceed to Bechtel and construction has commenced for LNG trains 1 and 2.  LNG exports from the Sabine Pass LNG terminal are anticipated to commence in late 2015, with LNG train 2 commencing operations approximately six to nine months thereafter.

Commencement of construction for LNG trains 3 and 4 is subject, but not limited to, entering into an engineering, procurement and construction ("EPC") agreement, reaching a positive final investment decision and obtaining financing.  Cheniere Partners has engaged Bechtel to complete front-end engineering and design work for LNG trains 3 and 4 and has begun negotiating a lump sum turnkey EPC contract, which is expected to be finalized by the end of the fourth quarter of 2012. Construction of LNG trains 3 and 4 is expected to begin in 2013.

Corpus Christi Liquefaction Project

In August 2012, we filed applications with the FERC for authorization to site, construct and operate an LNG terminal to be located near Corpus Christi, Texas and with the DOE requesting multi-contract authorization to export up to 767 Bcf per year (equivalent to 15 mtpa) of LNG from the proposed Corpus Christi Liquefaction Project to all current and future FTA countries as well as to any non-FTA countries.  In October 2012, the DOE granted us authority to export up to 767 Bcf per year of domestically produced LNG to FTA countries.

As currently contemplated, the Corpus Christi Liquefaction Project is being designed for up to three LNG trains with an aggregate peak capacity of 15 mtpa.  We have engaged Bechtel to complete front-end engineering and design work.  Commencement of construction for the Corpus Christi Liquefaction Project is subject, but not limited to, receiving regulatory approvals, entering into an EPC agreement, reaching a positive final investment decision and obtaining financing. 

 

Timelines for Liquefaction Projects















Target Date







Sabine Pass Liquefaction



Corpus Christi Liquefaction



Milestone



Trains 1 & 2



Trains 3 & 4



Trains 1 - 3

DOE export authorization



Received



Received



Received - FTA Pending - Non-FTA

 

Definitive commercial agreements



Completed 7.7 mtpa



Completed 8.3 mtpa



3Q13



- BG Gulf Coast LNG, LLC



4.2 mtpa



1.3 mtpa







- Gas Natural Fenosa



3.5 mtpa











- KOGAS







3.5 mtpa







- GAIL (India) Ltd.







3.5 mtpa





EPC contract



Completed



4Q12



4Q13

Financing commitments







1Q13



1Q14



- Equity



Received











- Debt



Received









FERC authorization



Received



Received



1Q14



- Certificate to commence construction



Received



2013





Commence construction



Completed



2013



1Q14

Commence operations



2015/2016



2016/2017



2017

























 

Cheniere Energy, Inc. is a Houston-based energy company primarily engaged in LNG related businesses, and owns and operates the Sabine Pass LNG terminal and Creole Trail Pipeline in Louisiana. Cheniere is pursuing related business opportunities both upstream and downstream of the Sabine Pass LNG terminal. Through its subsidiary, Cheniere Energy Partners, L.P., Cheniere is developing a liquefaction project adjacent to the Sabine Pass LNG terminal for up to four LNG trains with aggregate capacity of approximately 18 mtpa. Construction has begun on LNG trains 1 and 2 at the Sabine Pass LNG terminal. Cheniere has also initiated a project to develop an LNG terminal near Corpus Christi, Texas. The Corpus Christi LNG terminal is being designed and permitted for up to three modular LNG trains, with aggregate peak capacity of up to 15 mtpa and which would include three 160,000 m3 full containment storage tanks and two LNG carrier docks. Commencement of construction for the Corpus Christi LNG terminal is subject, but not limited to, obtaining regulatory approvals, entering into long-term customer contracts sufficient to underpin financing of the project, entering into an engineering, procurement and construction contract, and Cheniere making a final investment decision. We believe LNG exports from the Corpus Christi LNG terminal could commence as early as 2017.

For additional information, please refer to the Cheniere Energy, Inc. website at www.cheniere.com and Quarterly Report on Form 10-Q for the period ended September 30, 2012, filed with the Securities and Exchange Commission.

This press release contains certain statements that may include "forward-looking statements" within the meanings of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included herein are "forward-looking statements." Included among "forward-looking statements" are, among other things, (i) statements regarding Cheniere's business strategy, plans and objectives, including the construction and operation of liquefaction facilities, (ii) statements regarding our expectations regarding regulatory authorizations and approvals, (iii) statements expressing beliefs and expectations regarding the development of Cheniere's LNG terminal and pipeline businesses, including liquefaction facilities, (iv) statements regarding the business operations and prospects of third parties, (v) statements regarding potential financing arrangements and (vi) statements regarding future discussions and entry into contracts. Although Cheniere believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect.  Cheniere's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in Cheniere's periodic reports that are filed with and available from the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Cheniere does not assume a duty to update these forward-looking statements.

 


 

(Financial Table Follows)

 

 

 

Cheniere Energy, Inc.

Selected Financial Information

(in thousands, except per share data) (1)









Three Months Ended

Nine Months Ended



September 30,

September 30,



2012

2011



2012



2011



Revenues





LNG terminal revenues

$

65,939



$

68,375



$

199,269



$

205,678



Marketing and trading

(292)



(2,999)



(1,641)



10,055



Oil and gas sales

350



426



1,165



2,079



Other

1



11



6



42



Total revenues

65,998



65,813



198,799



217,854















Operating costs and expenses













General and administrative expense

79,427



16,227



120,236



57,116



Depreciation, depletion and amortization

15,233



15,271



47,001



46,282



LNG terminal and pipeline operating expense

14,056



10,976



36,606



29,023



LNG terminal and pipeline development expense

11,721



11,143



54,629



32,936



Oil and gas production and exploration costs

78



1,841



244



2,117



Total operating costs and expenses

120,515



55,458



258,716



167,474



Income (loss) from operations

(54,517)



10,355



(59,917)



50,380















Other income (expense)











Interest expense, net

(45,504)



(65,125)



(159,719)



(193,867)



Loss on early extinguishment of debt





(15,098)





Derivative gain (loss), net

287



(716)



(288)



(1,164)



Other income (expense)

(12,081)



17



(11,500)



245



Total other expense

(57,298)



(65,824)



(186,605)



(194,786)



Loss before income taxes and non-controlling interest

(111,815)



(55,469)



(246,522)



(144,406)



Income tax provision

(61)







(211)





Loss before non-controlling interest

(111,876)



(55,469)



(246,733)



(144,406)



Non-controlling interest

2,875



1,533



8,277



3,459



Net loss

$

(109,001)



$

(53,936)



$

(238,456)



$

(140,947)















Net loss per share attributable to common stockholders—basic and diluted

$

(0.52)



$

(0.67)



$

(1.40)



$

(1.94)



Weighted average number of common shares outstanding—basic and diluted

208,712



80,473



170,414



72,739





















 



As of September 30,



As of December 31,



2012



2011

Cash and cash equivalents

$

214,995





$

459,160



Restricted cash and cash equivalents

500,711





102,165



Accounts and interest receivable

29,200





6,562



LNG inventory

6,597





3,043



Prepaid expenses and other

15,911





20,522



Non-current restricted cash and cash equivalents

267,700





82,892



Property, plant and equipment, net

2,995,052





2,107,129



Debt issuance costs, net

222,144





33,356



Goodwill

76,819





76,819



Other assets

54,596





23,677



Total assets

$

4,383,725





$

2,915,325











Current liabilities

$

168,122





$

584,960



Long-term debt (including related party debt), net of discount

2,295,939





2,474,711



Long-term deferred revenue

22,500





25,500



Long-term derivative liabilities

29,384







Other non-current liabilities

2,882





3,146



Non-controlling interest

1,268,004





208,575



Stockholders' equity (deficit)

596,894





(381,567)



Total liabilities and deficit

$

4,383,725





$

2,915,325



























 



Sabine

Pass LNG





Cheniere Partners





Other      Cheniere





Consolidated Cheniere

Cash and cash equivalents

$





$





$

214,995





$

214,995

Restricted cash and cash equivalents

142,217



(2)

617,382



(3)

8,812





768,411

Total

$

142,217





$

617,382





$

223,807





$

983,406

 

As of September 30, 2012, we had unrestricted cash and cash equivalents of approximately $215 million available to Cheniere. In addition, we had consolidated restricted cash and cash equivalents of $768.4 million (which included cash and cash equivalents and other working capital available to Cheniere Partners, in which we own a 66.4% interest, and Sabine Pass LNG) designated for the following purposes: $137.3 million for interest payments related to the Senior Notes; $4.9 million for Sabine Pass LNG's working capital; $617.4 million for the Sabine Pass Liquefaction Project and for Cheniere Partners' working capital; and $8.8 million for other restricted purposes.    

 















(1)

Please refer to the Cheniere Energy, Inc. Quarterly Report of Form 10-Q for the period ended September 30, 2012, filed with the Securities and Exchange Commission.

(2)

All cash and cash equivalents presented above for Sabine Pass LNG are considered restricted to us, but $4.9 million is considered unrestricted for Sabine Pass LNG.

(3)

All cash and cash equivalents presented above for Cheniere Partners are considered restricted to us, but $369.1 million is considered unrestricted for Cheniere Partners, including the $4.9 million considered unrestricted for Sabine Pass LNG.

 

SOURCE Cheniere Energy, Inc.


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