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Cheniere Energy, Inc. Message Board

  • rs.kirby rs.kirby Nov 23, 2010 2:17 PM Flag

    Hype, Debt, Et. Al

    The roving herds of day-traders have come and gone after the hedge funds screwed around with this thing like a killer whale does seals. And lo, the killer whale hedgies have moved on, to wit, take note of the floundering and filleted seals batting there fins in the water with all this hype. This was under 3 bucks a month ago and has doubled on an agreement to agree, maybe, that will take place in 2015. Wake up and smell the concrete bag your holding. Shorts are back and are taking remaining seals down. Better take some deep breaths. I said it was going to 7 when it was 2.90 a month ago and yesterday: it did.
    Now it's going back to 4.
    Buckle up.

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    • It's as tho none of you have listened to me. Puzzling.

    • Hey dude, what do you think happens from here? Talk to me Nostradamus!!!

    • This guy nailed it pretty good. Paulson probably read his post and jumped ship. Toilet going to be flushed for a good month or so. I'll buy back at 3.35 - GLTA

    • Many thanks for your willingness to share an obvious amount of experience and knowledge... One of the best boards I have ever taken part in is the SFI board. It's because of the willingness of commercial real estate experts there who patiently share their expertise and opinions, both positive and negative, that I chose to invest in SFI preferred. Your willingness to do ths same here has me encouraged... However, jsut like I chose to invest in SFI preferreds, I suspect I will use CQP, not LNP, as the safer way to participate. Thanks

    • It is more to do with the basis differential to the Hub and shipping distances. For someone to step up to paying $1+/mmbtu for liquefaction capacity, they have to be fairly confident that they'll be able to ship out one cargo after the other. If you are missing loading windows because there is no price gain in going to other markets, then your liquefaction cost starts multiplying very quickly.

      Remember, unlike Kitimat, Cheniere is selling liquefaction capacity to third parties, not exporting LNG themselves.

      Doing a really simplistic analysis (which assumes the price at the liquefaction terminal would equal HH), take today for example:

      - HH price: $4.42/mmbtu
      - Liquefaction processing (assumes no windows missed): $1.50 (from Cheniere)
      - Cost of gas consumed in liq process: $0.50
      - Shipping cost to UK: $1.00/mmbtu (rough estimate)
      - Shipping Cost to North Asia: $3.00/mmbtu (rough estimate)

      So, to the UK today would be around $8.42/mmbtu and to Asia would be around $10.42/mmbtu. As it stands, the gas price today in the UK is $8.29/mmbtu and cargoes into North Asia are going at around $9-10/mmbtu. So, if you held liquefaction capacity today in Sabine Pass, you wouldn't export so you'd be skipping windows and paying $1.50/mmbtu all the while. Not particularly attractive. And that is the main issue, if one is considering this project would one step up to $1.50/mmbtu take-or-pay costs? Companies like Chevron are already struggling with the fact that they are paying $0.32/mmbtu in take-or-pay on the regas side without having much use for the capacity. That pales in comparison to $1.50/mmbtu.

      Benefit for this project is that the Panama Canal expansion around 2016 will shorten shipping distance and costs. Still, you have the same issue of wondering would you use the capacity year-in, year-out all year round. If not, it is a big expense to step up to.

      Kitimat looks better on the basis of a few things: 1) shipping costs into North Asia of less than a dollar, 2) lower capex due to need for fewer ships (takes 1/3 the time to get from Kitimat to Japan as it does for Gulf Coast to Japan, means quicker turn arounds, fewer ships required), 3) I am rusty on this part but I believe (might be wrong) that gas prices in BC trade at a negative differential to HH, meaning the price of nat gas is lower, 4) most importantly, because of proximity to the premium Asian markets, Asian buyers are more likely to enter into long-term contracts with Kitimat (as KOGAS has done in signing an HOA for 2mtpa from Kitimat).

      Doesn't mean Sabine or Freeport export can't work, just means Kitimat has a significant advantage.

    • Haynesworth... Haynesville... Is there a difference?

    • Having just begun studying this situation, I'm interested in what you say about the Kitimat project. Does Haynesworth make Sabine competitive with Kitimat as far as potential export economics?

    • Nice thought, expect that Sabine Pass has been up and running for a couple of years now.

      I still believe the stock is moving largely on the basis of confusion over how the industry works and how the Cheniere business model works.

      I see all kinds of excitement bubbling about the cargoes being re-exported currently but no recognition that such re-export does not (to the best of my knowledge) do much for the stock "LNG" as "LNG" doesn't own those cargoes.

      I see loads of excitement about the potential for liquefaction, but a lot of confusion around the difference between liquefaction: requiring huge investment and not until 2015, and the current re-export.

      I see a lot of confusion around the MOUs. From my standpoint, the Morgan Stanley MOU is really interesting. The ENN MOU gives good press given the China connection, but ultimately ENN doesn't have the capability to follow through on it.

      Most of all, I see no understanding over the challenges around having a liquefaction terminal in the Gulf Coast in terms of market access and liquefaction economics. The Kitimat export project in Canada, which has direct access to the Asian markets and is backed by Apache and EOG is a far more interesting export project and much more likely to succeed.

      I do think something could happen with this project, but it will take a CNOOC, KOGAS, Petronas or someone like that to get involved. I think such involvement is possible. However, don't think the stock price movement that we have seen is backed by any real fundamentals. If I was buying in at this price, I'd be worried that when the next quarter results look the same as all past quarters, people will realize that "LNG" is not making any more money in this environment than they did all along (in fact, the current environment is very negative for the base LNG business of regas) then the stock will drop back down until more meaningful export news comes along.

    • Indeed. Cheniere is basically a broker with high margins. Once things are up and running the debt will get paid off in no time.

    • going to 9$ by year end.

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