Cheniere Surges After U.S. Expands Its LNG Export Approval
By - May 20, 2011 4:51 PM ET Cheniere Energy Inc. (LNG), the Blackstone Group LP-backed owner of a U.S. liquefied natural-gas terminal, surged 31 percent after it won government approval to export the fuel to more countries.
Cheniere, based in Houston, rose $2.35 to $10.04 at 4:15 p.m. in New York Stock Exchange composite trading. The shares touched a 52-week high of $11.11, the biggest intraday gain since November 2008. Before today, the shares had gained 39 percent this year.
The Energy Department will allow Cheniere’s Sabine Pass terminal in Louisiana to export as much as 803 billion cubic feet a year of U.S. gas, according to the company’s statement today. Cheniere still needs Federal Energy Regulatory Commission approval to build a $6.4 billion facility at the site that can liquefy gas for export by tankers.
Today’s decision expands on a September 2010 ruling that permitted Cheniere to ship gas to 15 countries with Free Trade Agreements, according to a statement from the Energy Department in Washington. The company, which lost money for 13 consecutive years and earlier this month warned it may have to sell assets and restructure debt to avoid running out of cash, has yet to say how it intends to finance the project.
‘Breakthrough’ Plan“Cheniere Energy’s plan to transform its existing terminal into a facility that can both import and export liquefied natural gas is a precedent-setting breakthrough that will bring substantial economic benefits to southwest Louisiana,” Senator Mary Landrieu, a Louisiana Democrat, said in a statement distributed by the Energy Department.
A North American gas glut fed by new wells in previously impenetrable geologic formations has slashed prices for U.S. supplies to less than one-third the prices paid by utilities and chemical makers in nations such as Japan, according to data compiled by Bloomberg. Cheniere and other U.S. companies such as Apache Corp. (APA) see an opportunity to profit from that arbitrage.
Gas can be super-cooled to liquid form so it can be transported on tankers for distribution to markets too distant to be connected to gas fields via pipelines. Exxon Mobil Corp. (XOM), Royal Dutch Shell Plc (RDSA), Chevron Corp. (CVX) and other international energy companies are spending tens of billions of dollars on liquefaction plants to ship gas from Australia, Papua New Guinea and other sources to markets in Asia and Europe.
Japanese PremiumJapanese power companies and chemical producers were paying $14.15 per million British thermal units for Qatari LNG in March, the last month for which figures were available from Japan’s Customs Bureau. Prices at the U.S. benchmark hub in Erath, Louisiana, averaged $4.51 that same month.
Gas liquefied and exported from the Sabine Pass facility probably will originate in onshore formations in Texas, Louisiana, Oklahoma and Arkansas, Cheniere said in its application with the Energy Department.
Cheniere, whose stock traded above $44 in 2006, is among companies that built U.S. gas-import terminals during the past decade that then languished as new drilling techniques unlocked domestic supplies, pushing gas prices too low to justify costlier imports.
Cheniere’s cash and near-cash equivalents fell by $50 million during the first three months of this year, ending the quarter at $24.5 million, the Houston-based company said on May 6. Cheniere has a $298 million loan payment due in May 2012, according to data compiled by Bloomberg.
Cheniere owns the Sabine Pass terminal through its 91 percent stake in Cheniere Energy Partners LP (CQP), according to a May 6 filing.