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Cheniere Energy Inc Reports Operating Results (10-Q)

May 07, 2010 | About:
10qk

10qk

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Cheniere Energy Inc (LNG) filed Quarterly Report for the period ended 2010-03-31.

Cheniere Energy Inc has a market cap of $190.1 million; its shares were traded at around $3.32 with and P/S ratio of 1.1. LNG is in the portfolios of John Paulson of Paulson & Co., Stanley Druckenmiller of Duquesne Capital Management, LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

As of March 31, 2010, we had unrestricted cash and cash equivalents of $95.1 million that was available to Cheniere (excluding Cheniere Partners and Sabine Pass LNG). In addition, we had restricted cash and cash equivalents of $259.0 million, which were designated for the following purposes: $85.4 million and $33.0 million for Sabine Pass LNG and Cheniere Partners working capital, respectively; $137.3 million for interest payments related to the Senior Notes described below; and $3.3 million for other restricted purposes. 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 (see discussion regarding LNG and natural gas marketing business below).

Cheniere Partners relies on the receipt of operating revenues from Sabine Pass LNG s TUAs to fund quarterly cash distributions to us and other unitholders. Sabine Pass LNG is not permitted under the indenture governing the Senior Notes (the “Sabine Pass Indenture”) to make cash distributions to Cheniere Partners if it does not satisfy a fixed charge coverage ratio test of 2:1, calculated as required in the Sabine Pass Indenture, as well as other conditions. If the coverage test is not met, we may not receive distributions. The fixed charge coverage ratio test was met for the periods through March 31, 2010. Cheniere Partners received distributions from Sabine Pass LNG in the amount of $106.7 million for the three-month period ended March 31, 2010. Cheniere Partners utilized the cash received from Sabine Pass LNG to pay expenses, make distributions and fund reserves. Cheniere Partners made distributions of $70.2 million in the aggregate to us and its other unitholders during the three-month period ended March 31, 2010.

Under GAAP measurement, our LNG and natural gas marketing revenue was $12.1 million for the three months ended March 31, 2010, but only $1.6 million was generated by marketing activities during the period. However, even with our cash flow hedges in place, a change in the future inventory value may occur to the extent our hedges are not perfectly effective or we change our regasification schedule. Although a change in the future inventory value may occur, we believe that the adjusted LNG and natural gas marketing revenue non-GAAP measure is a meaningful indicator of performance of our LNG and natural gas marketing business activities during a stated period.

In the three-month periods ended March 31, 2010 and 2009, the $10.8 million and $45.1 million, respectively, of restricted cash and cash equivalents were used primarily to pay for scheduled interest payments and construction activities at the Sabine Pass LNG receiving terminal. Under the Sabine Pass Indenture, a portion of the proceeds from the Senior Notes was initially required to be used for scheduled interest payments through May 2009 and to fund the cost to complete construction of the Sabine Pass LNG receiving terminal. Due to these restrictions imposed by the Sabine Pass Indenture, the proceeds from the Senior Notes are not presented as cash and cash equivalents. When proceeds from the Senior Notes that have been designated as restricted cash and cash equivalents are used, they are presented as a source of cash and cash equivalents. The decreased use of restricted cash and cash equivalents in the three-month period ended March 31, 2010, primarily resulted from substantially completing construction of the Sabine Pass LNG receiving terminal during the third quarter of 2009.

In the three-month periods ended March 31, 2010 and 2009, operating cash flow was $3.9 million and ($22.7) million, respectively. Operating cash flow increased $26.6 million, from ($22.7) million in the three-month period ended March 31, 2009 to $3.9 million in the three-month period ended March 31, 2010. This increase in operating cash flow is primarily a result of cash generated from our LNG and natural gas marketing activities. Net cash used in operations in the three-month periods ended March 31, 2009 related primarily to the continued development and construction of the Sabine Pass LNG receiving terminal and related activities, including increased employee support costs.

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