zman’s Energy Brain

oil, gas, stocks, etc…

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More Cheniere Comments

Posted by zmann on October 30, 2006

I don’t mean to pick on these guys, just their stock.

Sabine pass note offering of $2.15 B last week to refi old debt, fund the completion of the initial 2 stages of their first of 3 LNG projects, and general corporate purposes.

Mkt cap: $1.4 billion, Total Enterprise Value (Mkt Cap + Debt- WC) = $2.7 billion

TTM Revenue: $2.4 million, that’s right, some pipeline revenue on $2.7B in TEV. Earnings? Forget about it!
Cash per share: $0.66B / .055 billion shares = $12 per share (we’re at $25 per share kids)
Book Value: about $5 per share.
Insiders continue to bleed shares although not a deluge.

Ok, so it’s a development stage company with no prospect of earings anytime soon.

The company is developing no less than three LNG terminals along the U.S. gulf coast (Sabine Pass, Corpus Christi, and Creole Trail) and also develops pipelines and has a smidegeon of gas reserves on its books but in truth my dogs give off more on a daily basis. The heart of this story is the LNG facilities which decompress shiploads of LNG arriving from foreign lands to supplement US supply and Canadian imports.

These projects were conceptualized in the early 2000s when gas was substantially below current levels but LNG imports were far lower than the current four receiving stations now see daily.

Are they in doubt of coming to fruition at this point? You betchya. We have additional capacity but LNG shipments to the US have leveled off over the last 2 years despite a spike in natural gas prices.
lng.JPG

There are currently 4 LNG receiving stations in the US. No one has built a new one in over 20 years although 2 were taken out of mothballs in the last 3 years as gas prices marched slowly higher on the back of increasing demand and declining (albeit pretty slowly) production levels.

Costs to complete the 3 facilities are : unknown but somewhere north of $8 billion, which seems like a lot, definitely more than the current round of financing will accomodate until you think maybe they’re just trying to get the facilities licensed and started and sell them off. The thing is, XOM just dropped its interest in a US LNG facility which calls into doubt the need for more facilities.
Just some food for thought on a company that trades extremely tight with gas prices.

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2 Responses to “More Cheniere Comments”

  1. zmann said

    That’s 3 straight days down $0.25 on December gas. You can’t attribute that to rolloing out to longer contracts. That longs taking profits and a severe decline in short covering. CFTC data shows both longs and shorts exited the market last week but the liquidation was 2 to 1 in favor of the longs.

  2. Jon said

    Zman,

    I’m a little surprised BP is not down more today after the ripping 60 Minutes gave them last night over the Texas City refinery explosion. Plus I remember the remarks Phil quoted from one of the corp. officers having to interrupt vacation to visit the Texas City site.

    Also – good call on GSF last week, it had not yet fallen as much as the other drillers so I tried to get puts, unfortunately didn’t get filled 😦

    -Jon

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