Despite the tankers, a bad time for LNG

Stan Horton, now the former President of Cheniere Energy, with a picture of the Sabine Pass LNG terminal. (Steve Ueckert / Chronicle)

No, this isn’t an LNG-only blog, but … Cheniere Energy will cut more than half of its staff, its president is stepping down and it will be unloading its marketing operations as part of a restructuring of the liquefied natural gas terminal operator.
In a statement late Tuesday (we were mailing our taxes and missed it) the company said it has cut 200 out of 360 jobs, President Stan Horton is stepping down and it is negotiating with “a major North American natural gas marketing company” to take over its marketing business.
Cheniere took its first shipment of LNG at its Sabine Pass terminal on the Louisiana side of the waterway on Friday, has two other projects planned and a 30 percent stake in the Freeport LNG terminal. While Total SA and Chevron Corp. each have contracted for 1 bcf of capacity from the terminal Cheniere’s own marketing group is on the hook for the other 2 bcf. While the shipments weren’t going to start showing up any time soon, the company apparently felt it was too much of a threat to the balance sheet. From the statement by Chairman and CEO Charif Souki:

It has become evident to us that the capital markets are currently very difficult. This proposed strategic arrangement will allow us to receive large quantities of LNG without putting strain on our balance sheet. In addition, this proposed arrangement will allow us to reduce our overhead considerably, conserve our liquidity, and focus on maximizing the value of our terminal and pipeline. We will now turn our attention to optimizing the value of our assets through the continuation of the strategic review process initiated last month.

Credit rating agency GimmeCredit put out a note of warning about Cheniere today, saying the Energy Information Administration prediction of a 24 percent cut in 2008 LNG imports and forecasts that regasification capacity will grow to three times import levels by 2010 is troubling, particularly for stockholders.
Debt holders have some assurances, but GimmeCredit believes someone may take the company up on its plans announced earlier this year to find a buyer for all or part of the business:

We think several major energy companies control enough LNG supply to leverage Sabine’s idle capacity. We would view an acquisition of Cheniere, Inc., its GP interest, or the offloading of even a portion of its capacity obligation to any company with a superior credit profile as a positive.

By the way, this is Oil & Gas Journal’s take on the new shipments, and news from Reuters that Woodlands-based Excelerate Energy is delaying the arrival of a shipment to its new offshore terminal.