Cheniere Cites $132.2 Million Net Loss in Second Quarter
Cheniere Energy, Inc. reported a net loss of $132.3 million, or $2.81 per share (basic and diluted), for the second quarter of 2008 compared with a net loss of $41.1 million, or $0.76 per share (basic and diluted), during the corresponding period in 2007. Not including the impact of the restructuring charges in the second quarter of 2008, the Company's net loss would have been $53.7 million.
Losses from operations were $103.5 million for the second quarter of 2008 compared to $40.2 million for the second quarter of 2007. This increase of $63.3 million primarily resulted from restructuring charges totaling $78.6 million associated with the previously announced downsizing of our natural gas marketing and corporate operations and cancellation of our two ship charters.
Total charges included $17.1 million of non-cash items and $46.7 million of restricted cash items, of which $24.1 million occurred in the second quarter. LNG receiving terminal and pipeline development expenses and general and administrative expenses decreased $8.0 million and $9.6 million, respectively over the prior period due to more costs this period qualifying for capitalization.
At June 30, 2008, Cheniere held restricted cash and cash equivalents and treasury securities totaling $296.2 million of which $264.8 million was held at Cheniere Energy Partners with $69.4 million dedicated to the completion of the construction of the Sabine Pass LNG receiving terminal, $141.3 million reserved for interest payments on the Sabine Pass LNG, L.P. senior secured notes and $54.1 million as a reserve for distributions to Cheniere Partners' common unit holders.
At June 30, 2008, Cheniere had unrestricted cash and cash equivalents of $162.6 million compared to $296.5 million at December 31, 2007. Creole Trail pipeline expenditures incurred through June 30, 2008 were $547.7 million. On a cash basis, we had spent $522.9 million through June 30, 2008 and expect to spend an additional $33.1 million of cash from July 1, 2008 until completion of the pipeline.
Strategic Options / Liquidity Update
On August 6, 2008, we accepted a commitment for $250 million of convertible security financing in order to repay the $95 million bridge loan obtained in May and to provide for additional funds for working capital and general corporate purposes. The commitment is subject to certain conditions, including regulatory approvals, completion of definitive documentation and absence of any material adverse events. We expect to complete the financing in August 2008 and will provide details of the transaction upon closing.
With this financing and our recently announced restructuring, we are confident that we will be able to conduct our business for a minimum of three years, even assuming we are wholly unsuccessful in our efforts to exploit our 2.0 Bcf/d reserved capacity at the Sabine Pass terminal and our other business initiatives.
As part of our strategic review process, we had implemented a restructuring plan aimed at reducing costs and capital requirements. Due to our restructuring efforts summarized below, we now estimate ongoing operating and general and administrative expenses at the parent level of Cheniere Energy Inc. to be $30 to $40 million on an annualized basis. Steps taken during the quarter included:
- Entering into a domestic marketing agreement for the sale of LNG with JPMorgan Ventures Energy Corporation,
- Reducing our personnel due to the downsizing of our natural gas marketing activities, and
- Terminating two LNG vessel time charter leases.
In consideration for termination of the time charters we will forfeit cash collateral that had been classified as non-current restricted cash.
Sabine Pass Terminal - Construction Complete for 2.6 Bcf/d Terminal Capacity
Subject to the completion of routine punch list items, as of June 30, 2008, we had completed construction of the initial 2.6 Bcf/d of send out capacity and 10.1 Bcf of storage capacity at the Sabine Pass receiving terminal. The terminal is operating and able to accept commercial cargoes. The commissioning process was initiated in April 2008 and is estimated to be completed in the third or fourth quarter of 2008. To date, three LNG cargoes have been obtained for the commissioning process and we expect to obtain one more cargo to complete the process. Construction for the remaining 1.4 Bcf/d was approximately 79% complete as of the end of the second quarter.
Our estimated aggregate cost to construct the Sabine Pass LNG receiving terminal is approximately $1,462 million, before operating expenses during construction, future commissioning costs, and financing costs, an increase of approximately $36 million from our estimate as of March 31, 2008 due to commissioning costs not previously budgeted. Our estimated total construction, commissioning and operating cost budget through the achievement of full operability is approximately $1,559 million. As of June 30, 2008, we incurred approximately $1,437 million of our total budget. Our remaining construction, commissioning and operating costs are anticipated to be funded from restricted cash and cash equivalents designated for construction, working capital or additional financing.
Creole Trail Pipeline - Construction Complete
As of June 30, 2008, the Creole Trail Pipeline, consisting of 94 miles of pipeline, had been placed into commercial operations. This pipeline provides 2.0 Bcf/d transmission capacity from the Sabine Pass terminal to Gillis, Louisiana. Total costs, excluding financing costs, are expected to be approximately $556 million.
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