Cheniere Energy Reports First Quarter 2010 Results
- Entered into arrangement with JPMorgan LNG Co.
- Agreed to sell Freeport to pay down debt
HOUSTON, May 7 /PRNewswire-FirstCall/ -- Cheniere Energy, Inc. ("Cheniere") (NYSE Amex: LNG) reported a net loss of $35.2 million, or $0.64 per share (basic and diluted), for the first quarter 2010 compared with a net loss of $82.7 million, or $1.70 per share (basic and diluted), for the comparable 2009 period. Results are reported on a consolidated basis and include our 90.6 percent ownership interest in Cheniere Energy Partners, L.P. ("Cheniere Partners").
Overview of Significant 2010 Events:
-- In March 2010, Cheniere Marketing, LLC ("Cheniere Marketing"), a subsidiary of Cheniere, entered into an arrangement with JPMorgan LNG Co. ("LNGCo") that will allow us to source liquefied natural gas ("LNG") and provide LNGCo access to our capacity at the Sabine Pass LNG receiving terminal. -- In April 2010, we agreed to sell our 30% interest in Freeport LNG Development, L.P. ("Freeport LNG") for net proceeds of approximately $104 million. This transaction is expected to close during the second quarter of 2010, subject to certain approvals, and proceeds will be used to pay down a portion of the $400 million, 9.75% term loan ("2007 term loan").
Cheniere reported income from operations of $31.0 million for the quarter ended March 31, 2010 compared to a loss from operations of $37.4 million for the comparable period in 2009. Total revenues were $79.5 million in the first quarter of 2010, an increase of $78.3 million compared to the comparable 2009 period. LNG receiving terminal revenues increased $66.8 million compared to the comparable 2009 period as a result of the commencement of capacity payments under two third-party terminal use agreements ("TUAs") that became effective on April 1, 2009 and July 1, 2009. Marketing and trading revenues for the first quarter 2010 increased $11.6 million compared to the first quarter of 2009 due to an increase in physical gas sales and gains on derivative instruments.
Total operating costs and expenses were $48.5 million for the first quarter 2010, an increase of $9.8 million compared to the comparable 2009 period. LNG receiving terminal and pipeline operating expenses increased $4.1 million as compared to the comparable 2009 period due to increased commercial activities at the Sabine Pass LNG receiving terminal during the second quarter of 2009. Depreciation, depletion and amortization expense increased $3.6 million in the first quarter of 2010 compared to the comparable 2009 period due to the achievement of full operability of the Sabine Pass LNG receiving terminal. Included in general and administrative expenses were non-cash compensation expenses of approximately $6.3 million for the first quarter 2010 and $3.9 million in the comparable 2009 period.
Interest expense, net increased $13.9 million in the first quarter of 2010 compared to the first quarter of 2009 primarily due to less interest subject to capitalization. Derivative gains decreased $2.1 million to $0.5 million in the first quarter 2010 compared to the comparable 2009 period due to the change in the fair value of derivatives instruments tied to our LNG inventory.
Unrestricted cash and cash equivalents held by Cheniere at March 31, 2010 were $95.1 million. In addition, as of March 31, 2010, we expected to receive approximately $18 million as a result of monetizing our LNG inventory and hedging activities.
Restricted cash and cash equivalents at March 31, 2010 were $259.0 million, which were designated for the following purposes: $85.4 million and $33.0 million for Sabine Pass LNG, L.P. ("Sabine Pass LNG") and Cheniere Partners working capital, respectively; $137.3 million for interest payments related to the Sabine Pass LNG senior notes indenture and $3.3 million for other restricted purposes.
LNG Marketing and Trading
During 2009, Cheniere Marketing began successfully trading in the LNG markets. Cheniere Marketing purchases LNG and enters into derivative contracts to hedge the cash flows from future sales of the LNG inventory. Due to the nature of the hedging strategy, earnings are recognized in operating results as physical sales occur, derivatives are settled or the fair value of the derivatives change due to changes in natural gas prices. In the interim, the LNG held in the storage tanks at the Sabine Pass LNG receiving terminal is recorded at the lower of cost or market based on the NYMEX natural gas index price for the last day of the period less basis differentials.
Net revenues from marketing and trading for the first quarter of 2010 were $12.1 million compared to $0.5 million in the comparable 2009 period. The increase in revenues period over period was related to physical sales of inventory and roll off of hedges.
As of March 31, 2010 and December 31, 2009, Cheniere Marketing and Sabine Pass LNG had approximately 2,725,000 million British thermal units ("MMBtu") and 7,778,000 MMBtu of LNG inventory, respectively. As of March 31, 2010, there were a total of approximately 2,635,000 MMBtu of natural gas swaps through January 31, 2011 for which we will receive fixed prices of $3.93 to $7.15 per MMBtu.
Our strategic focus is to safely manage and operate the Sabine Pass LNG receiving terminal and Creole Trail pipeline, serve our customers and monetize the 2.0 Bcf/d of regasification capacity we have reserved through Cheniere Marketing at the Sabine Pass LNG receiving terminal. We are also in various stages of developing our other LNG receiving terminal and pipeline related projects.
Our strategy to monetize our TUA capacity includes entering into long-term TUAs with third parties, developing a portfolio of long-term, short-term and spot LNG purchase agreements and entering into business relationships for the domestic marketing of natural gas that is imported by Cheniere Marketing into the Sabine Pass LNG receiving terminal. During the first quarter of 2010, Cheniere Marketing entered into a multi-year services agreement with LNGCo. We believe this arrangement strengthens our ability to participate in the LNG markets by allowing us to source LNG and utilize our capacity at the Sabine Pass LNG receiving terminal and our network of relationships in the most effective way. This arrangement reduces our working capital requirements to purchase and hedge LNG.
Our strategy to improve our capital structure and address maturities of our existing indebtedness may include entering into long-term TUAs or LNG purchase agreements, refinancing our existing debt, issuing equity or other securities, selling assets or a combination of the foregoing. During the first quarter of 2010, we agreed to sell our 30 percent interest in Freeport LNG which allows us to pay down a portion of our 2007 term loan.
Cheniere Energy, Inc. is a Houston-based energy company primarily engaged in LNG related businesses, and owns and operates the Sabine Pass LNG receiving terminal and Creole Trail pipeline in Louisiana. Cheniere is pursuing related business opportunities both upstream and downstream of the Sabine Pass LNG receiving terminal. Cheniere is also the founder and holds a 30% limited partner interest in another LNG receiving terminal. Additional information about Cheniere Energy, Inc. may be found on its web site at www.cheniere.com.
For additional information, please refer to the Cheniere Energy, Inc. Quarterly Report on Form 10-Q for the period ended March 31, 2010, 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 facts, 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 and (ii) statements expressing beliefs and expectations regarding the development of Cheniere's LNG receiving terminal and pipeline businesses. 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 March 31, 2010 2009 (Unaudited) (Unaudited) Revenues LNG receiving terminal revenues $ 66,827 $ — Oil and gas sales 537 734 Marketing and trading 12,142 501 Other 11 — Total revenues 79,517 1,235 Operating costs and expenses LNG receiving terminal and pipeline development expense 718 — LNG receiving terminal and pipeline operating expense 12,813 8,687 Oil and gas production and exploration costs 99 87 Depreciation, depletion and amortization 15,624 12,062 General and administrative expense 19,217 17,797 Total operating costs and expenses 48,471 38,633 Income (Loss) from operations 31,046 (37,398) Derivative gain, net 505 2,562 Interest expense, net (67,194) (53,250) Interest income 97 811 Other loss (103) (64) Non-controlling interest 482 4,597 Net loss $ (35,167) $ (82,742) Net loss per common share—basic and diluted $ (0.64) $ (1.70) Weighted average number of common shares outstanding—basic and diluted 54,870 48,650
March 31, 2010(Unaudited) December 31, 2009 Cash and cash equivalents $ 95,106 $ 88,372 Restricted cash and cash equivalents 176,098 138,309 LNG inventory 11,140 32,602 Other current assets 22,427 26,992 Non-current restricted cash and cash equivalents 82,892 82,892 Property, plant and equipment, net 2,202,216 2,216,855 Debt issuance costs, net 44,978 47,043 Goodwill 76,819 76,819 Other assets 24,967 22,738 Total assets $ 2,736,643 $ 2,732,622 Current liabilities $ 92,018 $ 66,212 Long-term debt, net of discount 3,055,021 3,041,875 Deferred revenue 32,500 33,500 Other liabilities 25,793 23,162 Non-controlling interest 210,525 217,605 Stockholders' deficit (679,214) (649,732) Total liabilities and stockholders' deficit $ 2,736,643 $ 2,732,622
March 31, Consolidated 2010 Sabine Pass Cheniere Energy Other Cheniere Cheniere Energy, (unaudited) LNG, L.P. Partners, L.P. Energy, Inc. Inc. Cash and cash equivalents $ — $ — $ 95,106 $ 95,106 Restricted cash and cash equivalents 222,749 32,979 3,262 258,990 Total $ 222,749 $ 32,979 $ 98,368 $ 354,096 (1) Please refer to the Cheniere Energy, Inc. Quarterly Report on Form 10-Q for the period ended March 31, 2010, filed with the Securities and Exchange Commission.
SOURCE Cheniere Energy
Released May 7, 2010