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Cheniere Energy Reports Fourth Quarter and YE 2012 Results

February 22, 2013

HOUSTON, Feb. 22, 2013 /PRNewswire/ — For the quarter and year ended December 31, 2012, Cheniere Energy, Inc. (“Cheniere”) (NYSE MKT: LNG) reported a net loss of $94.3 million, or $0.44 per share (basic and diluted), and $332.8 million, or $1.83 per share (basic and diluted), respectively, compared with a net loss of $57.8 million, or $0.66 per share (basic and diluted), and $198.8 million, or $2.60 per share (basic and diluted), respectively, for the same periods in 2011.

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For the quarter ended December 31, 2012, results include significant items of $54.1 million, or $0.25 per share, related to liquefied natural gas (“LNG”) terminal and pipeline development expenses primarily for the liquefaction facilities Cheniere Energy Partners, L.P. (“Cheniere Partners”) is developing at the Sabine Pass LNG terminal adjacent to the existing regasification facilities (the “Sabine Pass Liquefaction Project”) and the liquefaction facilities being developed by us near Corpus Christi, Texas (the “Corpus Christi Liquefaction Project”) and losses due to the early extinguishment of debt. Excluding these significant items, the adjusted net loss for the quarter ended December 31, 2012 was $40.3 million, or $0.19 per share (basic and diluted).

For the year ended December 31, 2012, results include significant items of $135.2 million, or $0.74 per share, related to LNG terminal and pipeline development expenses primarily for the Sabine Pass Liquefaction Project and Corpus Christi Liquefaction Project, losses due to the early extinguishment of debt, and other expenses that primarily consisted of the write-down of a royalty interest. Excluding these significant items, the adjusted net loss for the year ended December 31, 2012 was $197.6 million, or $1.09 per share (basic and diluted).

Results are reported on a consolidated basis and include our ownership interest in Cheniere Partners, which was 59.5% as of December 31, 2012.

Overview of Recent Significant Events

  • In October 2012, the U.S. Department of Energy (“DOE”) granted us authority to export approximately 15 million metric tons per annum (“mmtpa”) of domestically produced LNG to Free Trade Agreement (“FTA”) countries from the proposed Corpus Christi Liquefaction Project. In August 2012, we had filed an application with the Federal Energy Regulatory Commission (“FERC”) to site, construct and operate the Corpus Christi Liquefaction Project and an application with the DOE requesting multi-contract authorization to export LNG from the Corpus Christi Liquefaction Project to all current and future countries with which the U.S. has an FTA as well as to any country with which the U.S. does not have an FTA in effect;
  • In October/November 2012, Sabine Pass LNG, L.P. (“Sabine Pass LNG”) repurchased its $550.0 million 7.25% Senior Secured Notes due 2013 by issuing $420.0 million of 6.50% Senior Secured Notes due in 2020 (the “2020 Notes”) and by Cheniere Partners selling 8.0 million common units in an underwritten public offering at a price of $25.07 per common unit for net cash proceeds of $194.0 million;
  • In December 2012, Sabine Pass Liquefaction, LLC (“Sabine Pass Liquefaction”) announced the commencement of the development of Train 5 and Train 6 of the Sabine Pass Liquefaction Project and that it has entered into an LNG sale and purchase agreement (“SPA”) with Total Gas & Power North America, Inc. (“Total”) under which Total has agreed to purchase approximately 2.0 mmtpa of LNG volumes upon the commencement of Train 5 operations;
  • In December 2012, Sabine Pass Liquefaction and Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) entered into a lump sum turnkey contract for the engineering, procurement and construction (“EPC”) of Train 3 and Train 4 of the Sabine Pass Liquefaction Project; and
  • In February 2013, Sabine Pass Liquefaction issued an aggregate principal amount of $1.5 billion of 5.625% Senior Secured Notes due 2021 (the “Sabine Liquefaction Notes”). Proceeds from the offering are intended to be used to pay capital costs incurred in connection with the construction of Train 1 and Train 2 of the Sabine Pass Liquefaction Project in lieu of a portion of the commitments under Sabine Pass Liquefaction’s $3.6 billion senior secured credit facility.

2012 Results

Cheniere reported loss from operations of $75.8 million for the year ended December 31, 2012 compared to income from operations of $58.1 million for the comparable period in 2011.

Total revenues decreased $24.2 million, from $290.4 million in 2011 to $266.2 million for year ended December 31, 2012 primarily as a result of lower of cost or market adjustments to LNG inventory and less LNG export activity. Results for the year ended December 31, 2012 were also impacted by increases in general and administrative expenses of $63.7 million, from $88.4 million in 2011 to $152.1 million in 2012 primarily due to the August 2012 vesting of awards under the long-term incentive plan related to Train 1 and Train 2 of the Sabine Pass Liquefaction Project. Included in general and administrative expenses were non-cash compensation expenses of $53.2 million for the year ended December 31, 2012 and $24.4 million for the comparable 2011 period. LNG terminal and pipeline operating expenses increased $18.0 million, from $39.1 million in 2011 to $57.1 million in 2012 primarily as a result of the loss incurred to purchase LNG to maintain the cryogenic readiness of the Sabine Pass LNG terminal and increased dredging services in 2012. LNG terminal and pipeline development expenses increased $25.3 million, from $40.8 million in 2011 to $66.1 million in 2012 as a result of costs incurred to develop the Sabine Pass Liquefaction Project and Corpus Christi Liquefaction Project.

During 2012, we extinguished all outstanding indebtedness, excluding debt of Cheniere Partners and its subsidiaries. The average debt outstanding decreased year over year, resulting in a $58.6 million decrease in interest expense in 2012 as compared to the comparable 2011 period.

Liquefaction Projects Update

Sabine Pass Liquefaction Project

Cheniere Partners continues to make progress on the Sabine Pass Liquefaction Project, which is being developed for up to six natural gas liquefaction trains (“Trains”), each with a nominal production capacity of approximately 4.5 mmtpa. The Trains are in various stages of development.

  • Train 1 and Train 2 have received all FERC and DOE approvals. We have secured approximately $5.7 billion of required financing to construct Train 1 and Train 2. We have issued a full notice to proceed to Bechtel and have commenced construction of Train 1 and Train 2 and the related new facilities needed to treat, liquefy, store and export natural gas. As of December 31, 2012, the overall project for Train 1 and Train 2 was approximately 18% complete. The estimated substantial completion dates for Train 1 and Train 2 are ahead of the contractual schedule for guaranteed substantial completion, and we anticipate that Train 1 will achieve initial LNG production in late 2015.
  • Train 3 and Train 4 have received all FERC and DOE approvals, and we have entered into a lump sum turnkey EPC contract with Bechtel for Train 3 and Train 4. Construction of Train 3 and Train 4 and the related facilities is expected to commence upon, among other things, obtaining financing commitments sufficient to fund construction and making a positive final investment decision. We are in the process of securing the required financing for the construction of Train 3 and Train 4 and expect construction to begin in 2013.
  • We recently began the development of Train 5 and Train 6. In September 2012, we entered into an agreement with Total whereby Sabine Pass Liquefaction will gradually obtain access to Total’s send-out capacity and other services provided under its terminal use agreement with Sabine Pass LNG that may be used to accommodate the development of Train 5 and Train 6. Bechtel has begun preliminary engineering on Train 5 and Train 6, and we expect to initiate the regulatory approval process in the first half of 2013. In December 2012, we entered into an SPA with Total under which Total has agreed to purchase approximately 2.0 mmtpa of LNG volumes upon the commencement of Train 5 operations.

Corpus Christi Liquefaction Project

As currently contemplated, the Corpus Christi Liquefaction Project is being designed for up to three LNG trains with an aggregate peak capacity of approximately 15 mmtpa. We have engaged Bechtel to complete front-end engineering and design work and expect to have cost estimates in the second half of 2013.

In August 2012, we filed applications with the FERC for authorization to site, construct and operate the Corpus Christi Liquefaction Project and with the DOE requesting multi-contract authorization to export up to 767 Bcf per year (approximately 15 mmtpa) of LNG from the Corpus Christi Liquefaction Project to any non-FTA countries. In October 2012, the DOE granted us authority to export approximately 15 mmtpa per year of domestically produced LNG to FTA countries from the Corpus Christi Liquefaction Project.

We will contemplate making a final investment decision to commence construction of the Corpus Christi Liquefaction Project based upon, among other things, entering into acceptable commercial arrangements, receiving all regulatory approvals and obtaining financing.

Timelines for Liquefaction Projects

                                            Target Date
                                  Sabine Pass Liquefaction               Corpus Christi Liquefaction
                                  ------------------------               ---------------------------
                      Milestone              Trains 1 & 2 Trains 3 & 4                Trains 5 & 6      Trains 1-3
                      ---------              ------------ ------------                ------------      ----------
     -- DOE export authorization                 Received     Received         Initiating Filings 1H13 Received - FTA;
                                                                                                     Pending - Non-FTA
       Definitive commercial agreements         Completed    Completed                                     2H13
     --                                          7.7 mmtpa    8.3 mmtpa
       - BG Gulf Coast LNG, LLC                 4.2 mmtpa    1.3 mmtpa
       - Gas Natural Fenosa                     3.5 mmtpa
       - KOGAS                                               3.5 mmtpa
       - GAIL (India) Ltd.                                   3.5 mmtpa
       - Total Gas & Power N.A.                                                         2.0 mmtpa
       EPC contract                             Completed    Completed                     TBD             4Q13
     --
       Financing commitments                                   1H13                        TBD             1Q14
     --
       - Equity                                 Received
       - Debt                                   Received
       FERC authorization                       Received     Received                  Initiating          1Q14
     --                                                                                Filings 1H13
       - Certificate to commence construction   Received                    2013
       Commence construction                    Completed                   2013           TBD             1Q14
     --
       Commence operations                       2015/2016             2016/2017           TBD                         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 at the Sabine Pass LNG terminal adjacent to the existing regasification facilities for up to six Trains, each with a nominal production capacity of approximately 4.5 mmtpa. Construction has begun on Train 1 and Train 2 at the Sabine Pass Liquefaction Project. Cheniere has also initiated a project to develop liquefaction facilities near Corpus Christi, Texas. The Corpus Christi Liquefaction Project is being designed and permitted for up to three Trains, with aggregate nominal production capacity of up to 15 mmtpa of LNG and which would include three LNG storage tanks with capacity of 10.1 Bcfe and two LNG carrier docks. Commencement of construction for the Corpus Christi Liquefaction Project 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, obtaining financing, and Cheniere making a final investment decision. We believe LNG exports from the Corpus Christi Liquefaction Project could commence as early as 2017.

For additional information, please refer to the Cheniere Energy, Inc. website at www.cheniere.com and Annual Report on Form 10-K for the period ended December 31, 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                                          Year Ended
                                                           December 31,                                            December 31,
                                                           ------------                                            ------------
                                                      2012                             2011                           2012                      2011
                                                      ----                             ----                           ----                      ----
    Revenues
    LNG terminal revenues                                     $66,625                                68,594                      $265,894              $274,272
    Oil and gas sales                                  327                              489                          1,492                     2,568
    Marketing and trading                              469                            3,499                         (1,172)                   13,554
    Other                                                -                                8                              6                        50
                                                       ---                              ---                            ---                       ---
    Total revenues                                  67,421                           72,590                        266,220                   290,444
                                                    ------                           ------                        -------                   -------

    Operating costs and expenses
    LNG terminal and pipeline development expenses  11,483                            7,867                         66,112                    40,803
    LNG terminal and pipeline operating expenses    20,470                           10,077                         57,076                    39,101
    Depreciation, depletion and amortization        19,406                           15,421                         66,407                    63,405
    General and administrative expenses             31,845                           31,311                        152,081                    88,427
    Other                                              132                              150                            376                       562
                                                       ---                                                             ---
    Total operating costs and expenses              83,336                           64,826                        342,052                   232,298
                                                    ------                           ------                        -------                   -------

    Income from operations                         (15,915)                           7,764                        (75,832)                   58,146

    Loss on early extinguishment of debt           (42,587)                               -                        (57,685)                        -
    Interest expense, net                          (41,092)                         (65,526)                     (200,811)                 (259,393)
    Derivative gain, net                               346                           (1,087)                           58)                    (2,251)
    Other income (expense)                             133                               75                        (11,367)                     320)
    Non-controlling interest                         4,584                           1,123)                         12,861                    4,582)
    Income tax provision                               207                             (160)                            (4)                     (160)
                                                       ---                                                             ---
    Net loss                                                 $(94,324)                              (57,811)                    $(332,780)            $(198,756)
                                                             ========                               =======                     =========             =========

    Net loss per common share-basic and diluted                $(0.44)                                (0.66)                       $(1.83)               $(2.60)
                                                               ======                                 =====                        ======                ======

    Weighted average number of common shares
     outstanding-basic and diluted                 215,586                           87,591                        181,768                    76,483
                                                   =======                           ======                        =======                    ======
                                         December 31, December 31,
                                                  2012      2011
                                                  ----      ----
    Cash and cash equivalents                 $201,711               $459,160
    Restricted cash and cash equivalents       520,263                102,165
    LNG inventory                                7,045                  6,562
    Accounts and interest receivable             3,486                  3,043
    Prepaid expenses and other                  16,058                 20,522
    Non-current restricted cash and cash
     equivalents                               272,924                 82,892
    Property, plant and equipment, net       3,282,305              2,107,129
    Debt issuance costs, net                   220,949                 33,356
    Goodwill                                    76,819                 76,819
    Other assets                                37,525                 23,677
                                                ------                 ------
    Total assets                            $4,639,085             $2,915,325
                                            ==========             ==========

    Current liabilities                       $159,763               $584,960
    Long-term debt, net of discount          2,167,113              2,474,711
    Deferred revenue                            21,500                 25,500
    Non-current derivative liabilities          26,424                     -
    Other liabilities                            2,680                  3,146
    Non-controlling interest                 1,751,604                208,575
    Stockholders' equity (deficit)             510,001               (381,567)
                                               -------               --------
    Total liabilities and deficit           $4,639,085             $2,915,325
                                            ==========             ==========
                  Sabine          Cheniere             Other           Consolidated
                                  Partners                             Cheniere
                 Pass LNG                            Cheniere
                 --------                            --------
     Cash
     and
     cash
     equivalents        $       -        $        -           $201,711              $201,711
     Restricted
     cash
     and
     cash
     equivalents   98,694      (2) 685,542       (3)  8,951             793,187
                   ------          -------            -----             -------
    Total                 $98,694          $685,542           $210,662              $994,898
                          =======          ========           ========              ========

As of December 31, 2012, we had unrestricted cash and cash equivalents of $201.7 million available to Cheniere. In addition, we had consolidated restricted cash and cash equivalents of $793.2 million (which included cash and cash equivalents and other working capital available to Cheniere Partners, in which we own a 59.5% interest, and Sabine Pass LNG) designated for the following purposes: $685.5 million for the Liquefaction Project and for Cheniere Partners’ working capital, $92.3 million for interest payments related to the Sabine Pass LNG Senior Secured Notes described; $6.4 million for Sabine Pass LNG’s working capital; and $9.0 million for other restricted purposes.

    (1)            Please refer to the Cheniere
                   Energy, Inc. Annual Report on
                   Form 10-K for the year ended
                   December 31, 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 $5.2 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 $419.3
                   million is considered
                   unrestricted for Cheniere
                   Partners, including the $5.2
                   million considered unrestricted
                   for Sabine Pass LNG.
                   Subsequent to December 31,
                   2012, Sabine Pass Liquefaction
                   issued the Sabine Liquefaction
                   Notes.  The $1,466 million net
                   proceeds are considered
                   restricted to us and Cheniere
                   Partners.

SOURCE Cheniere Energy, Inc.


Source: PR Newswire