Cheniere Energy Reveals Net Loss for 2Q 2009
Cheniere Energy reported a net loss of $13.0 million, or $0.25 per share (basic and diluted), for the second quarter of 2009 compared with a net loss of $136.5 million, or $2.90 per share (basic and diluted), during the corresponding period in 2008. The decrease in the net loss compared to the prior period of $123.5 million was largely due to the $78.6 million of restructuring charges included in the second quarter 2008 results and a $45.4 million gain on the early extinguishment of debt recognized in the second quarter of 2009. Excluding these two items, our net losses for the second quarter of 2009 and 2008 would have been $58.4 million, or $1.13 per share (basic and diluted), and $57.9 million, or $1.23 per share (basic and diluted), respectively. In addition, results include the impact of the adoption of APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled In Cash Upon Conversion, which was applied retrospectively to all periods presented.
Income from operations was $0.3 million for the second quarter of 2009 compared to a loss from operations of $103.5 million for the corresponding period in 2008. Excluding the impact of the $78.6 million of restructuring charges during the second quarter of 2008, our loss from operations in the second quarter of 2008 would have been $24.9 million, compared to income from operations of $0.3 million in the second quarter of 2009. Revenues increased $37.0 million largely as a result of commencement of revenues under a third-party terminal use agreement ("TUA") on April 1, 2009. LNG receiving terminal and pipeline development expenses decreased $2.5 million and LNG receiving terminal and pipeline operating expenses and depreciation expenses increased by $8.8 million and $9.5 million, respectively, as the initial 2.6 Bcf/d sendout capacity and 10.1 Bcf storage capacity at the Sabine Pass LNG receiving terminal was placed into service during the second half of 2008. General and administrative expenses decreased $3.9 million to $15.4 million primarily due to the restructuring initiatives implemented during 2008. General and administrative expenses include non-cash compensation expenses of approximately $5.0 million in the second quarter of 2009 and $2.8 million in the corresponding period in 2008.
Interest expense increased to $62.0 million in the second quarter of 2009 from $25.6 million in the second quarter of 2008 due to less interest subject to capitalization related to construction and an increase in the average debt outstanding quarter over quarter.
Significant events that occurred during the second quarter 2009 include:
- the receipt of the first capacity reservation fee payment from Chevron U.S.A., Inc. per its TUA that became effective in July 2009,
- the purchase by our marketing subsidiary, Cheniere Marketing, LLC, of its first commercial cargo for the Sabine Pass LNG receiving terminal, and
- a reduction of $120.4 million of convertible debt through a series of exchanges of debt for a combined use of $30.0 million cash and 4.0 million common shares.
As of June 30, 2009, the Sabine Pass LNG receiving terminal had begun receiving capacity reservation fee payments from all three of its TUA customers, Total Gas and Power North America, Inc., Chevron U.S.A., Inc. and Cheniere Marketing as the latest TUA commencement date became effective in July 2009.
During the second quarter of 2009, Cheniere Marketing purchased its first commercial LNG cargo. In line with Cheniere's risk management strategy, the cargo has been hedged and earnings will be recognized in operating results as sales are realized.
During the second quarter of 2009, Cheniere retired $120.4 million aggregate principal amount of its 2.25% Convertible Senior Unsecured Notes due 2012 in exchange for $30.0 million cash and 4.0 million shares through a series of transactions. Cheniere issued the shares pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, contained in Section 3(a)(9) of such Act. Due to Cheniere's retirement of the notes, future interest payments were reduced by approximately $8.7 million.
Sabine Pass LNG Receiving Terminal
The remaining construction of 1.4 Bcf/d sendout capacity and 6.7 Bcf of storage capacity at the Sabine Pass LNG receiving terminal is nearing completion and the LNG receiving terminal is expected to be fully operational with sendout capacity of 4.0 Bcf/d and storage capacity of 16.8 Bcf by the third quarter of 2009. Total estimated construction costs excluding financing costs are $1.559 billion with costs incurred as of June 30, 2009 totaling $1.499 billion. Costs are anticipated to be funded with available cash held by Sabine Pass LNG, L.P.
Liquidity and Capital Resources
Unrestricted cash and cash equivalents held by Cheniere at June 30, 2009 were $88.9 million. During the second quarter of 2009, $65.2 million was moved from the TUA reserve account to unrestricted cash and cash equivalents.
Restricted cash and cash equivalents and treasury securities at June 30, 2009 were $265.0 million of which $259.7 million were held at Cheniere Energy Partners, L.P. and $5.3 million were held at Cheniere. Restricted cash held by Cheniere Partners includes approximately $82.4 million in a permanent debt service reserve fund and $13.7 million for one month of interest as required by the Sabine Pass LNG senior notes indenture, $34.9 million available for distributions to Cheniere Partners' common unitholders and general partner and $128.8 million for construction, working capital and general purposes at Sabine Pass.
Cheniere estimates that it has sufficient liquidity in the form of cash and cash equivalents and working capital to fund operations and pursue its commercial strategy for the next several years. Cheniere expects approximately $35 million from restricted cash to be released to unrestricted cash during the third quarter of 2009.
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