Cheniere Reports $93.3M Loss for Q4

Cheniere Energy, Inc. reported a net loss of $93.3 million, or $1.71 per share (basic and diluted), for the fourth quarter of 2006 compared with a net loss of $18.5 million, or $0.34 per share (basic and diluted), during the corresponding period in 2005.

The primary reasons for the $74.8 million increase in the net loss between periods relate to the following: $63.2 million of losses related to the early extinguishment of debt and termination of interest rate swaps associated with the early termination of debt, and an $8.3 million increase in general and administrative expenses primarily related to increased personnel costs related to the expansion of our business and non-cash compensation related to the expensing of stock options beginning in 2006. Absent the losses related to the early extinguishment of debt and termination of interest rate swaps we would have reported a net loss of $30.1 million, or $0.55 per share (basic and diluted), for the fourth quarter of 2006.

Financial results for the year ended December 31, 2006 reflect a net loss of $145.9 million, or $2.68 per share (basic and diluted), compared to a net loss of $29.5 million, or $0.56 per share (basic and diluted), in 2005. The primary reasons for the $116.4 million increase in the net loss between periods relate to the following: $63.2 million of losses related to the early extinguishment of debt and termination of interest rate swaps associated with the early termination of debt, and a $28.9 million increase in general and administrative expenses primarily related to increased personnel costs related to the expansion of our business and non-cash compensation related to the expensing of stock options beginning in 2006, and in 2005, we recorded a $20.2 million gain on the sale of our investment in Gryphon Exploration Company ("Gryphon"). Absent the losses related to the early extinguishment of debt and termination of interest rate swaps reported in 2006, and absent the gain on the sale of our investment in Gryphon reported in 2005, we would have reported a net loss of $82.7 million, or $1.52 per share (basic and diluted), for the year ended December 31, 2006 compared to a net loss of $49.7 million, or $0.94 per share (basic and diluted), for the year ended December 31, 2005.

In November 2006, using proceeds from the previously announced $2.032 billion senior secured note offering by our wholly owned subsidiary, Sabine Pass LNG, L.P. ("Sabine Pass LNG"), we terminated and repaid $383.4 million in borrowings under the then existing project finance facility of Sabine Pass LNG and $598.5 million of term debt. As a result of the early termination of debt, we recorded $63.2 million of losses related to the early extinguishment of debt and the termination of interest rate swaps.

Our working capital at December 31, 2006 was $767.0 million, a decrease of $43.1 million from $810.1 million at December 31, 2005. Our primary sources of working capital in 2006 were proceeds from the issuances of the Sabine Pass LNG senior secured notes in November and borrowings under the Sabine Pass LNG project finance facility. Uses of working capital more than offset sources and include the following: non-current restricted cash to finance the remaining construction costs of the Sabine Pass LNG receiving terminal project and to secure a letter of credit associated with a purchase order to purchase pipe related to the Creole Trail natural gas pipeline, repayment of debt, construction costs at our Sabine Pass LNG receiving terminal and related pipeline projects, and funds used in operations.

Cheniere is developing a network of three, 100% owned LNG receiving terminals and related natural gas pipelines along the Gulf Coast of the United States. The three terminals will have an aggregate send-out capacity of 9.9 billion cubic feet per day. Cheniere is pursuing related LNG business opportunities both upstream and downstream of the terminals. Cheniere is also the founder and holds a 30% limited partner interest in a fourth LNG receiving terminal.

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