CEI 2012 1st Qtr Form 10Q


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the quarterly period ended March 31, 2012
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from                 to             
Commission File No. 001-16383
CHENIERE ENERGY, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
95-4352386
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
700 Milam Street, Suite 800
 
Houston, Texas
77002
(Address of principal executive offices)
(Zip code)
(713) 375-5000
(Registrant’s telephone number, including area code)
 
 
 
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  x
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
 
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  x 

155,443,998 shares of the registrant’s Common Stock, $0.003 par value, were issued and outstanding as of April 18, 2012




 



CHENIERE ENERGY, INC.
INDEX TO FORM 10-Q


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




i




Part I.        Financial Information

Item 1.
Consolidated Financial Statements

CHENIERE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
March 31,
 
December 31,
 
2012
 
2011
ASSETS
(unaudited)
 
 
Current assets
 
 
 
Cash and cash equivalents
$
439,827

 
$
459,160

Restricted cash and cash equivalents
123,023

 
102,165

Accounts and interest receivable
1,873

 
3,043

LNG inventory
3,293

 
6,562

Prepaid expenses and other
23,010

 
20,522

Total current assets
591,026

 
591,452

 
 
 
 
Non-current restricted cash and cash equivalents
82,892

 
82,892

Property, plant and equipment, net
2,092,796

 
2,107,129

Debt issuance costs, net
31,728

 
33,356

Goodwill
76,819

 
76,819

Intangible LNG assets
4,782

 
4,782

Other
54,479

 
18,895

Total assets
$
2,934,522

 
$
2,915,325

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 

 
 

Current liabilities
 

 
 

Current debt, net of discount
$
198,893

 
$
492,724

Accrued liabilities
85,247

 
63,074

Deferred revenue
26,525

 
26,628

Accounts payable
1,916

 
1,103

Other
1,592

 
1,431

Total current liabilities
314,173

 
584,960

 
 
 
 
Long-term debt, net of discount
2,466,287

 
2,465,113

Long-term debt-related parties, net of discount
9,598

 
9,598

Long-term deferred revenue
24,500

 
25,500

Other non-current liabilities
3,149

 
3,146


 
 


Commitments and contingencies


 


 
 
 
 
Stockholders' deficit
 

 
 

Preferred stock, $0.0001 par value, 5.0 million shares authorized, none issued

 

Common stock, $0.003 par value
 

 
 

Authorized: 240.0 million shares at March 31, 2012 and December 31, 2011
 

 
 

Issued and outstanding: 153.8 million shares and 129.5 million shares at March 31, 2012 and December 31, 2011, respectively
461

 
389

Treasury stock: 3.4 million shares at March 31, 2012 and December 31, 2011, at cost
(20,499
)
 
(20,195
)
Additional paid-in-capital
1,252,826

 
898,702

Accumulated deficit
(1,316,620
)
 
(1,260,205
)
Accumulated other comprehensive loss
(241
)
 
(258
)
Total stockholders' deficit
(84,073
)
 
(381,567
)
Non-controlling interest
200,888

 
208,575

Total equity (deficit)
116,815

 
(172,992
)
Total liabilities and equity (deficit)
$
2,934,522

 
$
2,915,325

The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 
Three Months Ended
 
March 31,
 
2012
 
2011
Revenues
 
 
 
LNG terminal revenues
$
67,260

 
$
70,001

Marketing and trading revenues
2,658

 
8,449

Oil and gas sales
550

 
768

Other
6

 
13

Total revenues
70,474

 
79,231


 
 
 
Operating costs and expenses
 
 
 
General and administrative expense
19,993

 
21,510

Depreciation, depletion and amortization
16,290

 
15,386

LNG terminal and pipeline operating expense
11,557

 
10,194

LNG terminal and pipeline development expense
21,819

 
8,437

Other
94

 
138

Total operating costs and expenses
69,753

 
55,665

Income from operations
721

 
23,566

 
 
 
 
Other income (expense)
 
 
 
Interest expense, net
(58,350
)
 
(64,154
)
Loss on early extinguishment of debt
(507
)
 

Derivative loss
(836
)
 

Other income
125

 
109

Total other expense
(59,568
)
 
(64,045
)
Loss before income taxes and non-controlling interest
(58,847
)
 
(40,479
)
Income tax provision
(6
)
 

Loss before non-controlling interest
(58,853
)
 
(40,479
)
Non-controlling interest
2,438

 
641

Net loss
$
(56,415
)
 
$
(39,838
)

 
 
 
Net loss per share attributable to common stockholders - basic and diluted
$
(0.43
)
 
$
(0.60
)
Weighted average number of common shares outstanding - basic and diluted
131,107

 
66,950

 















The accompanying notes are an integral part of these consolidated financial statements.


1


CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

The following table is a reconciliation of our net loss to our comprehensive loss for the periods shown (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2012
 
2011
Net loss
 
$
(56,415
)
 
$
(39,838
)
Foreign currency translation
 
17

 
(60
)
Comprehensive loss
 
$
(56,398
)
 
$
(39,898
)













































The accompanying notes are an integral part of these consolidated financial statements.


2


CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)

 
Total Stockholders' Equity (Deficit)
 
 
 
 
 
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Non- controlling Interest
 
Total
Equity (Deficit)
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance—December 31, 2011
129,510

 
$
389

 
3,386

 
$
(20,195
)
 
$
898,702

 
$
(1,260,205
)
 
$
(258
)
 
$
208,575

 
$
(172,992
)
Issuances of stock
24,150

 
72

 


 

 
351,835

 

 

 

 
351,907

Issuances of restricted stock
121

 

 

 

 

 

 

 

 

Forfeitures of restricted stock
(1
)
 

 
1

 

 

 

 

 

 

Stock-based compensation

 

 

 

 
2,289

 

 

 

 
2,289

Treasury stock acquired
(20
)
 

 
20

 
(304
)
 

 

 

 

 
(304
)
Foreign currency translation

 

 

 

 

 

 
17

 

 
17

Loss attributable to non-controlling interest

 

 

 

 

 

 

 
(2,438
)
 
(2,438
)
Sale of common units to non-controlling interest

 

 

 

 

 

 

 
2,843

 
2,843

Distribution to non-controlling interest

 

 

 

 

 

 

 
(8,092
)
 
(8,092
)
Net loss

 

 

 

 

 
(56,415
)
 

 

 
(56,415
)
Balance—March 31, 2012
153,760

 
$
461

 
3,407

 
$
(20,499
)
 
$
1,252,826

 
$
(1,316,620
)
 
$
(241
)
 
$
200,888

 
$
116,815














The accompanying notes are an integral part of these consolidated financial statements.


3


CHENIERE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended
 
March 31,
 
2012
 
2011
Cash flows from operating activities
 
 
 
Net loss
$
(56,415
)
 
$
(39,838
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation, depletion and amortization
16,290

 
15,386

Loss on early extinguishment of debt
507

 

Purchase of Crest Royalty, net of amortization
(25,664
)
 

Non-cash interest expense on 2008 Loans

 
7,695

Amortization of debt issuance and discount costs
7,165

 
6,984

Non-cash compensation
2,289

 
8,011

Non-controlling interest
(2,438
)
 
(641
)
Investment in restricted cash and cash equivalents
(26,830
)
 
(39,725
)
Other
(2,634
)
 
(152
)
Changes in operating assets and liabilities:
 
 
 
Accounts and interest receivable
1,169

 
(28,289
)
Accounts payable and accrued liabilities
17,516

 
36,719

LNG inventory, net
3,269

 
(8,389
)
Deferred revenue
(1,104
)
 
(1,384
)
Prepaid expenses and other
(1,816
)
 
(5,621
)
Net cash used in operating activities
(68,696
)
 
(49,244
)

 
 
 
Cash flows from investing activities
 
 
 
Investment in Cheniere Partners
(60
)
 

LNG terminal and pipeline construction-in-process, net
(270
)
 
(2,214
)
Use of restricted cash and cash equivalents
784

 
2,263

Other
(2,499
)
 
(181
)
Net cash used in investing activities
(2,045
)
 
(132
)

 
 
 
Cash flows from financing activities
 
 
 
Sale of common stock, net
351,907

 

Repurchases and prepayments of debt
(298,000
)
 

Sale of common units by Cheniere Partners
2,843

 
1,515

Use of restricted cash and cash equivalents
5,249

 
5,085

Distributions to non-controlling interest
(8,092
)
 
(6,600
)
Purchase of treasury shares
(1,798
)
 

Other
(701
)
 
(312
)
Net cash provided by (used in) financing activities
51,408

 
(312
)

 
 
 
Net decrease in cash and cash equivalents
(19,333
)
 
(49,688
)
Cash and cash equivalents—beginning of period
459,160

 
74,161

Cash and cash equivalents—end of period
$
439,827

 
$
24,473

 









The accompanying notes are an integral part of these consolidated financial statements.


4


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



NOTE 1—Basis of Presentation

The accompanying unaudited consolidated financial statements of Cheniere Energy, Inc. have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included. As used herein, the terms "Cheniere," "the Company," "we," "our" and "us" refer to Cheniere Energy, Inc. and its wholly owned or controlled subsidiaries, unless otherwise stated or indicated by context.

Results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2012.

Certain reclassifications have been made to prior period information to conform to the current presentation.  The reclassifications had no effect on our overall consolidated financial position, results of operations or cash flows.

For further information, refer to the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended by Amendment No. 1 on Form 10-K/A.
 
NOTE 2—Liquidity

As of March 31, 2012, we had unrestricted cash and cash equivalents of $439.8 million available to Cheniere. In addition, we had consolidated restricted cash and cash equivalents of $205.9 million (which included cash and cash equivalents and other working capital available to Cheniere Energy Partners, L.P. ("Cheniere Partners"), in which we own an 88.7% interest, and Sabine Pass LNG, L.P. ("Sabine Pass LNG")) designated for the following purposes: $137.3 million for interest payments related to the Senior Notes described below; $3.5 million for Sabine Pass LNG's working capital; $55.9 million for Cheniere Partners' working capital; and $9.2 million for other restricted purposes.

During the second quarter of 2011, we reclassified $298.0 million of debt from a long-term liability to a current liability because our 2007 Term Loan described below was due within 12 months as of May 31, 2011. During the third quarter of 2011, we reclassified $190.7 million, net of discount, of debt from a long-term liability to a current liability because our Convertible Senior Unsecured Notes were due within 12 months as of August 15, 2011. In December 2011, we closed an underwritten public offering of 41,745,000 shares of our common stock, which were sold to the public at a price per share of $8.35, resulting in net proceeds of approximately $330.9 million. In January 2012, we used a portion of the net proceeds to repay in full the outstanding principal balance of the $298.0 million 2007 Term Loan due May 31, 2012. The aggregate repayment amount was $298.2 million, including the outstanding principal amount and accrued interest through January 5, 2012.

In September 2011, we initiated an at-the-market program to sell up to 10 million shares of our common stock. We did not sell any shares of our common stock in connection with the at-the-market program during the three months ended March 31, 2012.

In March 2012, we sold 24.2 million shares of Cheniere common stock in an underwritten public offering for net cash proceeds of approximately $351.9 million. We believe that we will have sufficient unrestricted cash, liquid assets, cash generated from our operations and proceeds from capital market transactions to satisfy our debt obligations and fund our operations for at least the next 12 months. We may use a portion of our unrestricted cash and cash equivalents in order to satisfy our principal payment on our Convertible Senior Unsecured Notes due in August 2012.
 


5


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

NOTE 3—Restricted Cash and Cash Equivalents
 
Restricted cash and cash equivalents consist of cash and cash equivalents that are contractually restricted as to usage or withdrawal, as follows:
 
Senior Notes Debt Service Reserve
 
Sabine Pass LNG has consummated private offerings of an aggregate principal amount of $2,215.5 million of Senior Notes (See Note 8—"Debt and Debt—Related Parties" ). Under the indenture governing the Senior Notes (the "Sabine Pass Indenture"), except for permitted tax distributions, Sabine Pass LNG may not make distributions until certain conditions are satisfied, including that there must be on deposit in an interest payment account an amount equal to one-sixth of the semi-annual interest payment multiplied by the number of elapsed months since the last semi-annual interest payment and there must be on deposit in a permanent debt service reserve fund an amount equal to one semi-annual interest payment of $82.4 million. Distributions are permitted only after satisfying the foregoing funding requirements, a fixed charge coverage ratio test of 2:1 and other conditions specified in the Sabine Pass Indenture.

As of March 31, 2012 and December 31, 2011, we classified $54.9 million and $13.7 million, respectively, as current restricted cash and cash equivalents for the payment of interest due within twelve months. As of March 31, 2012 and December 31, 2011, we classified the permanent debt service reserve fund of $82.4 million as non-current restricted cash and cash equivalents. These cash accounts are controlled by a collateral trustee and, therefore, are shown as restricted cash and cash equivalents on our Consolidated Balance Sheets.
   
Other Restricted Cash and Cash Equivalents
  
As of March 31, 2012 and December 31, 2011, $59.4 million and $81.4 million, respectively, of current restricted cash and cash equivalents were primarily related to cash and cash equivalents held by Sabine Pass LNG and Cheniere Partners that were considered restricted to Cheniere.  As of March 31, 2012 and December 31, 2011, due to various other contractual restrictions, $8.7 million and $6.4 million had been classified as current restricted cash and cash equivalents, respectively, and $0.5 million had been classified as non-current restricted cash and cash equivalents on our Consolidated Balance Sheets.

NOTE 4—Variable Interest Entity

In 2010, Cheniere Marketing, LLC ("Cheniere Marketing") entered into various agreements ("LNGCo Agreements") with JPMorgan LNG Co. ("LNGCo") under which Cheniere Marketing has agreed to develop and maintain commercial and trading opportunities in the LNG industry and present any such opportunities exclusively to LNGCo. Cheniere Marketing also agreed to provide, or arrange for the provision of, all of the operations and administrative services required by LNGCo in connection with any LNG cargoes purchased by LNGCo, including negotiating agreements and arranging for transporting, receiving, storing, hedging and regasifying LNG cargoes. Cheniere Marketing does not have the authority to contractually bind LNGCo under the LNGCo Agreements. In the event LNGCo declines to purchase an LNG cargo presented to it by Cheniere Marketing under the LNGCo Agreements, Cheniere Marketing may pursue the opportunity on its own behalf or present it to third parties. In March 2012, Cheniere Marketing and LNGCo amended their LNGCo Agreements to extend the term until April 2014; however, either party may terminate the agreements without penalty prior to such date. In return for the services to be provided by Cheniere Marketing, LNGCo will pay a fixed fee to Cheniere Marketing and may pay additional fees depending upon the gross margin of each transaction.

During the three months ended March 31, 2012 and 2011, we recognized $2.6 million and $2.4 million, respectively, of marketing and trading revenues from LNGCo. As of March 31, 2012, the carrying amount of Cheniere Marketing’s assets relating to LNGCo, which is equivalent to Cheniere Marketing's maximum exposure to loss, was $2.6 million.  A portion of this $2.6 million represents our fixed fee receivable and is reported as accounts and interest receivable on our consolidated financial statements, and the remaining portion represents our margin deposit receivable and is reported as prepaid expense and other current assets on our consolidated financial statements and is to be paid to Cheniere Marketing upon the completion or termination of the LNGCo Agreements.



6


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

NOTE 5—Property, Plant and Equipment
 
Property, plant and equipment consists of LNG terminal and natural gas pipeline costs, LNG site and related costs, investments in oil and gas properties, and fixed assets, as follows (in thousands):
 
March 31,
 
December 31,
 
2012
 
2011
LNG terminal costs
 
 
 
LNG terminal
$
1,647,582

 
$
1,647,107

LNG terminal construction-in-process
39,422

 
39,010

LNG site and related costs, net
4,980

 
4,982

Accumulated depreciation
(135,674
)
 
(125,108
)
Total LNG terminal costs, net
$
1,556,310

 
$
1,565,991

 
 
 
 
Natural gas pipeline costs
 

 
 

Natural gas pipeline
$
564,022

 
$
564,021

Natural gas pipeline construction-in-process
2,427

 
2,427

Pipeline right-of-ways
18,455

 
18,455

Accumulated depreciation
(56,590
)
 
(52,878
)
Total natural gas pipeline costs
$
528,314

 
$
532,025

 
 
 
 
Oil and gas properties, successful efforts method
 

 
 

Proved
$
4,170

 
$
4,170

Accumulated depreciation, depletion and amortization
(3,094
)
 
(3,033
)
Total oil and gas properties, net
$
1,076

 
$
1,137

 
 
 
 
Fixed assets
 

 
 

Computer and office equipment
$
6,114

 
$
5,952

Furniture and fixtures
4,057

 
4,057

Computer software
12,647

 
12,601

Leasehold improvements
7,318

 
7,318

Other
2,778

 
1,892

Accumulated depreciation
(25,818
)
 
(23,844
)
Total fixed assets, net
$
7,096

 
$
7,976

Property, plant and equipment, net
$
2,092,796

 
$
2,107,129

 
LNG Terminal Costs
 
Depreciation expense related to the Sabine Pass LNG terminal totaled $10.6 million and $10.7 million for the three months ended March 31, 2012 and 2011, respectively.

Natural Gas Pipeline Costs 

Depreciation expense related to the Creole Trail Pipeline totaled $3.7 million for each of the three months ended March 31, 2012 and 2011.

Fixed Assets 

Depreciation expense related to our fixed assets totaled $2.0 million and $0.8 million for the three months ended March 31, 2012 and 2011, respectively.



7


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

NOTE 6—Non-controlling Interest
 
We have consolidated certain partnerships because we have a controlling interest in these ventures. Therefore, the entities’ financial statements are consolidated in our consolidated financial statements and the entities’ other equity is recorded as a non-controlling interest. The following table sets forth the components of our non-controlling interest balance since inception attributable to third-party investors’ interests at March 31, 2012 (in thousands): 
Net proceeds from Cheniere Partners’ issuance of common units (1)
$
153,636

Net proceeds from Holdings’ sale of Cheniere Partners common units (2)
203,946

Distributions to Cheniere Partners’ non-controlling interest (3)
(129,115
)
Non-controlling interest share of loss of Cheniere Partners
(27,579
)
Non-controlling interest at March 31, 2012
$
200,888

 
(1)
In March and April 2007, we and Cheniere Partners completed a public offering of 15,525,000 Cheniere Partners common units (the "Cheniere Partners Offering"). Cheniere Partners received $98.4 million in net proceeds from the issuance of its common units to the public. Prior to January 1, 2009, a company was able to elect an accounting policy of recording a gain or loss on the sale of common equity of a subsidiary equal to the amount of proceeds received in excess of the carrying value of the parent’s investment. Effective January 1, 2009, the sale of common equity of a subsidiary is accounted for as an equity transaction.
In January 2011, Cheniere Partners initiated an at-the-market program to sell up to 1.0 million common units, the proceeds from which would be used primarily to fund development costs associated with its proposed liquefaction project at the Sabine Pass LNG terminal. As of December 31, 2011, Cheniere Partners had sold 0.5 million common units with net proceeds of $9.0 million. During the three months ended March 31, 2012, Cheniere Partners sold 0.1 million common units with net proceeds of $2.8 million related to this at-the-market program.
In September 2011, Cheniere Partners sold 3.0 million common units in an underwritten public offering and 1.1 million common units to Cheniere Common Units Holding, LLC, a wholly owned subsidiary of Cheniere, at a price of $15.25 per common unit. Cheniere Partners received net proceeds of $43.3 million and $16.4 million from the public offering and Cheniere Common Units Holding, LLC sale, respectively.
(2)
In conjunction with the Cheniere Partners Offering, Cheniere LNG Holdings, LLC ("Holdings") sold a portion of the Cheniere Partners common units held by it to the public, realizing net proceeds of $203.9 million, which included $39.4 million of net proceeds realized once the underwriters exercised their option to purchase an additional 2,025,000 common units from Holdings. Due to the subordinated distribution rights on our subordinated units, we have recorded those proceeds as a non-controlling interest.

(3)
Cash distributions to the non-controlling interest are recorded directly against the non-controlling interest on our Consolidated Balance Sheets. There is no obligation beyond what is reflected in our consolidated financial statements to fund or absorb such distributions to the non-controlling interest. If in the future the non-controlling interest on our Consolidated Balance Sheets is reduced to zero, these distributions may increase the loss allocated to us.

NOTE 7—Accrued Liabilities
 
As of March 31, 2012 and December 31, 2011, accrued liabilities consisted of the following (in thousands): 
 
 
March 31,
 
December 31,
 
 
2012
 
2011
Accrued interest expense and related fees
 
$
61,344

 
$
35,884

Payroll
 
5,442

 
19,321

LNG liquefaction costs
 
12,121

 
1,702

LNG terminal costs
 
1,632

 
1,122

Other accrued liabilities
 
4,708

 
5,045

Accrued liabilities
 
$
85,247

 
$
63,074

 



8


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

NOTE 8—Debt and Debt—Related Parties
 
As of March 31, 2012 and December 31, 2011, our debt consisted of the following (in thousands): 
 
 
March 31,
 
December 31,
 
 
2012
 
2011
Current debt
 
 
 
 
2007 Term Loan
 
$

 
$
298,000

Convertible Senior Unsecured Notes
 
204,630

 
204,630

Total current debt
 
204,630

 
502,630

Current debt discount
 
 
 
 
Convertible Senior Unsecured Notes
 
(5,737
)
 
(9,906
)
Total current debt, net of discount
 
$
198,893

 
$
492,724

 
 
 
 
 
Long-term debt (including related parties)
 
 
 
 
Senior Notes
 
$
2,215,500

 
$
2,215,500

2008 Loans (including related parties)
 
282,293

 
282,293

Total long-term debt
 
2,497,793

 
2,497,793

Long-term debt discount
 
 

 
 

Senior Notes
 
(21,908
)
 
(23,082
)
Total long-term debt (including related parties), net of discount
 
$
2,475,885

 
$
2,474,711

  
2007 Term Loan
 
In May 2007, Cheniere Subsidiary Holdings, LLC, a wholly owned subsidiary of Cheniere, entered into a $400.0 million credit agreement ("2007 Term Loan"). Borrowings under the 2007 Term Loan generally bore interest at a fixed rate of 9¾% per annum. Interest was calculated on the unpaid principal amount of the 2007 Term Loan outstanding and was payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The 2007 Term Loan had a maturity date of May 31, 2012. The 2007 Term Loan was secured by a pledge of our 135,383,831 subordinated units in Cheniere Partners.

In May 2010, we sold our 30% interest in Freeport LNG Development, L.P. ("Freeport LNG") to institutional investors for net proceeds of $104.3 million. The net proceeds from the sale were used to prepay $102.0 million of the 2007 Term Loan in May 2010. As of December 31, 2010, $298.0 million was outstanding under the 2007 Term Loan and included in long-term debt on our Consolidated Balance Sheets. During the second quarter of 2011, we reclassified $298.0 million of debt from a long-term liability to a current liability because our 2007 Term Loan was due within 12 months as of May 31, 2011.

In January 2012, we repaid in full the entire outstanding principal balance of the 2007 Term Loan due May 31, 2012. We used a portion of the net proceeds from the public offering of common stock in December 2011 to repay in full the outstanding principal balance of the $298.0 million 2007 Term Loan. The aggregate repayment amount was $298.2 million, including the outstanding principal amount and accrued interest through January 5, 2012.

Convertible Senior Unsecured Notes
 
In July 2005, we consummated a private offering of $325.0 million aggregate principal amount of Convertible Senior Unsecured Notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended ("the Securities Act"). The notes bear interest at a rate of 2¼% per year. The notes are convertible at any time into our common stock under certain circumstances at an initial conversion rate of 28.2326 shares per $1,000 principal amount of the notes, which is equal to a conversion price of approximately$35.42 per share. As of March 31, 2012, no holders had elected to convert their notes at the conversion rate.
 
We may redeem some or all of the notes on or before August 1, 2012, for cash equal to 100% of the principal plus any accrued and unpaid interest if in the previous 10 trading days the volume-weighted average price of our common stock exceeds $53.13, subject to adjustment, for at least five consecutive trading days. In the event of such redemption, we will make an additional payment equal to the present value of all remaining scheduled interest payments through August 1, 2012, discounted at the U.S. Treasury securities rate plus 50 basis points. The indenture governing the notes contains customary reporting requirements.



9


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

During the second quarter of 2009, we reduced debt by exchanging $120.4 million aggregate principal amount of our Convertible Senior Unsecured Notes for a combination of $30.0 million cash and cash equivalents and 4.0 million shares of common stock, reducing our principal amount due in 2012 to $204.6 million. The remaining principal amount of the Convertible Senior Unsecured Notes are convertible into 5.8 million shares of our common stock.

During the third quarter of 2011, we reclassified $190.7 million of debt, net of discount, from a long-term liability to a current liability because our Convertible Senior Unsecured Notes were due within 12 months as of August 1, 2011.

We adopted on January 1, 2009 an accounting standard that requires issuers of certain convertible debt instruments to separately account for the liability component and the equity component represented by the embedded conversion option in a manner that will reflect that entity's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The fair value of the embedded conversion option at the date of issuance of the Convertible Senior Unsecured Notes was determined to be $134.0 million and has been recorded as a debt discount to the Convertible Senior Unsecured Notes, with a corresponding adjustment to additional paid-in capital. At March 31, 2012, the unamortized debt discount to the Convertible Senior Unsecured Notes was $5.7 million.

Senior Notes
 
In November 2006, Sabine Pass LNG issued an aggregate principal amount of $2,032.0 million of Senior Notes (the "Senior Notes"), consisting of $550.0 million of 7¼% Senior Secured Notes due 2013 (the "2013 Notes") and $1,482.0 million of 7½% Senior Secured Notes due 2016 (the "2016 Notes"). In September 2008, Sabine Pass LNG issued an additional $183.5 million, before discount, of 2016 Notes whose terms were identical to the previously outstanding 2016 Notes. Interest on the Senior Notes is payable semi-annually in arrears on May 30 and November 30 of each year. The Senior Notes are secured on a first-priority basis by a security interest in all of Sabine Pass LNG’s equity interests and substantially all of its operating assets.

Sabine Pass LNG may redeem some or all of the Senior Notes at any time, and from time to time, at a redemption price equal to 100% of the principal plus any accrued and unpaid interest plus the greater of:
1.0% of the principal amount of the Senior Notes; or
the excess of: a) the present value at such redemption date of (i) the redemption price of the Senior Notes plus (ii) all required interest payments due on the Senior Notes (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over b) the principal amount of the Senior Notes, if greater.

Under the Sabine Pass Indenture, except for permitted tax distributions, Sabine Pass LNG may not make distributions until certain conditions are satisfied: there must be on deposit in an interest payment account an amount equal to one-sixth of the semi-annual interest payment multiplied by the number of elapsed months since the last semi-annual interest payment, and there must be on deposit in a permanent debt service reserve fund an amount equal to one semi-annual interest payment of approximately $82.4 million. Distributions are permitted only after satisfying the foregoing funding requirements, a fixed charge coverage ratio test of 2:1 and other conditions specified in the Sabine Pass Indenture. During the three months ended March 31, 2012 and 2011, Sabine Pass LNG made distributions of $69.4 million and $75.2 million, respectively, after satisfying all the applicable conditions in the Sabine Pass Indenture.
 
2008 Loans (Including Related Parties)

In August 2008, we entered into a credit agreement pursuant to which we obtained $250.0 million in convertible term loans ("2008 Loans"). The 2008 Loans have a maturity date in 2018. The 2008 Loans bear interest at a fixed rate of 12% per annum, except during the occurrence of an event of default during which time the rate of interest will be 14% per annum. Interest is due semi-annually on the last business day of January and July. The 2008 Loans are secured by Cheniere's rights and fees payable under management services agreements with Sabine Pass LNG and Cheniere Partners, by Cheniere's 12.0 million common units in Cheniere Partners, by the equity and assets of Cheniere's pipeline entities, by the equity of various other subsidiaries and certain other assets and subsidiary guarantees.



10


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

In June 2010, the 2008 Loans were amended to permit all funds on deposit in a terminal use agreement ("TUA") reserve payment account to be applied to the prepayment of the accrued interest on the loans outstanding under the 2008 Loans, with any remainder to be applied to the prepayment of the principal balance of such 2008 Loans. As a result, $63.6 million from the TUA reserve account was used to prepay $60.9 million of accrued interest and $2.7 million of principal of the 2008 Loans.

In December 2010, the 2008 Loans were amended to, among other things: eliminate the "put rights" which had allowed the lenders to demand repayment of the 2008 Loans on the third, fifth, and seventh anniversaries thereof; allow for the early prepayment of the 2008 Loans; allow Cheniere for a limited period to sell Cheniere Partners common units held as collateral and prepay the 2008 Loans with the proceeds; and release restrictions on prepayments of other indebtedness of Cheniere as certain conditions are met. In addition, 96.6% of the lenders agreed to terminate their rights to exchange the 2008 Loans for Series B Preferred Stock of Cheniere.

The outstanding principal amount of the 2008 Loans held by Scorpion Capital Partners, LP ("Scorpion"), the holder of 3.4% of the 2008 Loans as of March 31, 2012, is exchangeable for shares of Cheniere common stock at a price of $5.00 per share pursuant to an amendment to the 2008 Loans adopted in September 2011. No portion of any accrued interest is eligible for exchange into Cheniere common stock. On June 16, 2011, our stockholders approved a proposal to permit Scorpion to exchange its 2008 Loans for common stock, to hold such shares of common stock, and to allow Scorpion to vote the common stock as any other stockholder. The portion of outstanding principal amount of the 2008 Loans for Scorpion is classified as related party long-term debt on our consolidated financial statements because Scorpion is an affiliate of one of Cheniere's directors. As of March 31, 2012 and December 31, 2011, we classified $9.6 million of the 2008 Loans as part of Long-Term Debt—Related Parties on our Consolidated Balance Sheets because a related party then held these portions of this debt.

NOTE 9—Financial Instruments
 
Derivative Instruments

We have entered into certain derivative instruments to hedge the exposure to variability in expected future cash flows attributable to the future sale of our LNG inventory ("LNG Inventory Derivatives"), and to hedge the price risk attributable to future purchases of natural gas to be utilized as fuel to operate the Sabine Pass LNG terminal ("Fuel Derivatives"). Changes in the fair value of our derivatives instruments are reported in earnings because we have not elected to designate these derivative instruments as a hedging instrument that is required to qualify for cash flow hedge accounting. The estimated fair value of financial instruments is the amount at which the instrument could be exchanged currently between willing parties.
 
The fair values of our derivative instruments are based on inputs that are quoted prices in active markets for similar assets or liabilities, resulting in Level 2 categorization of such measurements. The following table (in thousands) sets forth, by level within the fair value hierarchy, the fair value of our derivative instruments assets and liabilities at March 31, 2012
 
 
Quoted Prices in Active Markets  for Identical Instruments
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
 
Total Carrying
Value
LNG Inventory Derivatives asset (1)
 
$

 
$
1,942

 
$

 
$
1,942

Fuel Derivatives liability (2)
 

 
(1,577
)
 

 
(1,577
)
 
 
 
 
 
 
(1)
LNG Inventory Derivatives asset is classified as other current assets on our Consolidated Balance Sheets. Changes in the fair value of LNG Inventory Derivatives are recorded in marketing and trading revenues on our Consolidated Statements of Operations. We recorded marketing and trading revenues of $1.9 million and marketing and trading losses of $0.6 million related to LNG Inventory Derivatives in the three months ended March 31, 2012 and 2011, respectively.
(2)
Fuel Derivatives liability is classified as other current liabilities on our Consolidated Balance Sheets. Changes in the fair value of Fuel Derivatives are classified as derivative gain (loss) on our Consolidated Statements of Operations. We recorded derivative loss of $0.8 million and zero related to Fuel Derivatives in the three months ended March 31, 2012 and 2011, respectively.
 


11


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

Other Financial Instruments

The estimated fair value of financial instruments, including those financial instruments for which the fair value option was not elected are set forth in the table below. The carrying amounts reported on our Consolidated Balance Sheets for cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, interest receivable, and accounts payable approximate fair value due to their short-term nature.
 
Financial Instruments (in thousands):
 
 
March 31, 2012
 
December 31, 2011
 
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
2013 Notes (1)
 
$
550,000

 
$
577,500

 
$
550,000

 
$
555,500

2016 Notes, net of discount (1)
 
1,643,592

 
1,762,752

 
1,642,418

 
1,650,630

Convertible Senior Unsecured Notes, net of discount (2)
 
198,893

 
197,451

 
194,724

 
186,740

2007 Term Loan (3)
 

 

 
298,000

 
292,728

2008 Loans (4)
 
282,293

 
282,293

 
282,293

 
282,293

 
(1)
The Level 2 estimated fair value of the Senior Notes, net of discount, was based on quotations obtained from broker-dealers who make markets in these and similar instruments based on the closing trading prices on March 31, 2012 and December 31, 2011, as applicable.
(2)
The Level 2 estimated fair value of our Convertible Senior Unsecured Notes was based on the closing trading prices on March 31, 2012 and December 31, 2011, as applicable.
(3)
The 2007 Term Loan was closely held by few holders, and purchases and sales were infrequent and were conducted on a bilateral basis without price discovery by us.  This loan was not rated and had unique covenants and collateral packages such that comparisons to other instruments were imprecise. Nonetheless, we provided an estimate of the fair value of this loan as of December 31, 2011 based on an index of the yield to maturity of CCC rated debt of other companies in the energy sector, resulting in Level 3 categorization. In January 2012, the 2007 Term Loan was paid in full.
(4)
In December 2010, the 2008 Loans were amended to, among other things: eliminate the "put rights" which had allowed the lenders to demand repayment of the 2008 Loans on the third, fifth, and seventh anniversaries thereof; allow for the early prepayment of the 2008 Loans; allow Cheniere for a limited period to sell Cheniere Partners common units held as collateral and prepay the 2008 Loans with the proceeds; and release restrictions on prepayments of other indebtedness of Cheniere as certain conditions are met. In addition, 96.6% of the lenders agreed to terminate their rights to exchange the 2008 Loans for Series B Preferred Stock of Cheniere. Pursuant to an amendment to the 2008 Loans adopted in September 2011, the outstanding principal amount of the 2008 Loans held by Scorpion is exchangeable for shares of Cheniere common stock at a price of $5.00 per share. The Level 3 estimated fair value of the 2008 Loans as of March 31, 2012 and December 31, 2011 was determined to be the same as the carrying amount due to our ability to call the debt (other than the debt held by Scorpion) at anytime without penalty or a make-whole payment for an early redemption.

NOTE 10—Income Taxes
 
We are not presently a domestic taxpayer and have not recorded a net liability for federal or state income taxes in any of the periods included in the accompanying financial statements. However, we are presently an international taxpayer and have recorded a net liability of $6 thousand for international income taxes in the current quarter. Our Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 include no income tax benefits.

During the third quarter of 2010, largely due to the increased level of trading activity in our shares, we experienced an ownership change within the provisions of Internal Revenue Code ("IRC") Section 382 that will subject approximately $855 million of our existing net operating loss ("NOL") carryforwards to the annual NOL utilization limitations.  The applicable Section 382 limitation may have affected our ability to fully utilize our existing tax NOL carryforwards.  Our ability to fully utilize our existing tax NOL carryforwards is dependent on increasing the recognition of built-in gains in the five-year period following the above-referenced ownership change. We will continue to monitor trading activity in our shares which may cause an additional ownership change which may ultimately affect our ability to fully utilize our existing tax NOL carryforwards.



12


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

NOTE 11—Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders ("EPS") excludes dilution and is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued.
 
The following table reconciles basic and diluted weighted average common shares outstanding for the three months ended March 31, 2012 and 2011 (in thousands except for loss per share):
 
 
Three Months Ended
 
 
March 31,
 
 
2012
 
2011
Weighted average common shares outstanding:
 
 
 
 
Basic
 
131,107

 
66,950

Dilutive common stock options (1)
 

 

Dilutive Convertible Senior Unsecured Notes (2)
 

 

Dilutive 2008 Loans (3)
 

 

Diluted
 
131,107

 
66,950

 
 
 
 
 
Basic and diluted net loss per share attributable to common stockholders
 
$
(0.43
)
 
$
(0.60
)
 
(1)
Stock options, phantom stock and unvested stock of 2.6 million shares representing securities that could potentially dilute basic EPS in the future, were not included in the diluted net loss per share computations for the three months ended March 31, 2012, because they would have been anti-dilutive. Stock options, phantom stock and unvested stock of 8.5 million shares representing securities that could potentially dilute basic EPS in the future, were not included in the diluted net loss per share computations for the three months ended March 31, 2011, because they would have been anti-dilutive.
(2)
Common shares of 5.8 million issuable upon conversion of the Convertible Senior Unsecured Notes for each of the three months ended March 31, 2012 and 2011 were not included in the diluted net loss per share computation because the computation of diluted net loss per share attributable to common stockholders utilizing the "if-converted" method would be anti-dilutive.
(3)
Common shares of 1.7 million issuable upon exchange of the 2008 Loans for each of the three months ended March 31, 2012 and 2011, were not included in the diluted computation because the computation of diluted net loss per share attributable to common stockholders utilizing the "if-converted" method would be anti-dilutive.

NOTE 12—Supplemental Cash Flow Information and Disclosures of Non-Cash Transactions
 
The following table provides supplemental disclosure of cash flow information (in thousands): 
 
 
Three Months Ended
 
 
March 31,
 
 
2012
 
2011
Cash paid during the period for interest, net of amounts capitalized
 
$
25,700

 
$
9,412

 


13


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

NOTE 13—Commitments and Contingencies
 
Crest Royalty
  
Under a settlement agreement dated as of June 14, 2001, we agreed to pay or cause certain affiliates, successors and assigns to pay a royalty, which we refer to as the Crest Royalty. This Crest Royalty is calculated based on the volume of natural gas processed through covered LNG facilities, subject to a maximum of approximately $11.0 million and a minimum of $2.0 million per production year. In 2003, Freeport LNG contractually assumed the obligation to pay the Crest Royalty for natural gas processed at Freeport LNG’s receiving terminal.  The calculation of the Crest Royalty, and the scope of Freeport LNG's assumed obligation to pay the Crest Royalty, are being litigated in a declaratory judgment and breach of contract action pending in Texas state court. In March 2012, Cheniere purchased all of the rights, title, and interest in the Crest Royalty for a purchase price of $27.5 million. The purchase of the Crest Royalty represents the acquisition of payments that would have been due in future periods, therefore we recorded the purchase as an other non-current asset on our Consolidated Balance Sheets that is being amortized over the remaining useful life of the Sabine Pass LNG and Freeport LNG terminals. We classified the portion that will be amortized over the next twelve months as an other current asset and the remaining portion as an other non-current asset on our Consolidated Balance Sheets.
    
NOTE 14—Business Segment Information
 
We have three operating business segments: LNG terminal business, natural gas pipeline business and LNG and natural gas marketing business. These operating segments reflect lines of business for which separate financial information is produced internally and are subject to evaluation by our chief operating decision makers in deciding how to allocate resources.
 
Our LNG terminal business segment consists of the operational Sabine Pass LNG terminal, approximately 88.7% owned (at March 31, 2012) in western Cameron Parish, Louisiana on the Sabine Pass Channel and the following two other LNG terminals that are in various stages of development: Corpus Christi LNG, 100% owned, located near Corpus Christi, Texas; and Creole Trail LNG, 100% owned, located at the mouth of the Calcasieu Channel in central Cameron Parish, Louisiana.
 
Our natural gas pipeline business segment consists of the Creole Trail Pipeline, consisting of 94 miles of natural gas pipeline connecting the Sabine Pass LNG terminal to numerous interconnections points with existing interstate natural gas pipelines in southwest Louisiana, and other natural gas pipelines in various stages of development to provide access to North American natural gas markets.
 
Our LNG and natural gas marketing business segment is seeking to enter into long-term commercial agreements for regasification capacity; develop a portfolio of long-term, short-term, and spot LNG purchase and sale agreements; assist Cheniere Partners in negotiations with potential customers for importing and exporting natural gas through the Sabine Pass LNG terminal; and enter into business relationships for the domestic marketing of natural gas imported by Cheniere Marketing as LNG to the Sabine Pass LNG terminal.



14


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

The following table summarizes revenues, net income (loss) from operations and total assets for each of our operating segments (in thousands):
 
 
Segments
 
 
LNG Terminal
 
Natural
Gas Pipeline
 
LNG & Natural Gas Marketing
 
Corporate and Other (1)
 
Total
Consolidation
As of or for the Three Months Ended March 31, 2012
 
 

 
 

 
 

 
 
 
 

Revenues
 
$
67,260

 
$
6

 
$
2,658

 
$
550

 
$
70,474

Intersegment revenues (losses) (2) (3)
 
2,365

 
24

 
(1,431
)
 
(958
)
 

Depreciation, depletion and amortization
 
10,708

 
3,680

 
1,302

 
600

 
16,290

Non-cash compensation
 
172

 
34

 
981

 
1,102

 
2,289

Income (loss) from operations
 
20,254

 
(5,723
)
 
(6,746
)
 
(7,064
)
 
721

Interest expense, net
 
(43,457
)
 
(11,484
)
 

 
(3,409
)
 
(58,350
)
Goodwill
 
76,819

 

 

 

 
76,819

Total assets
 
1,897,114

 
534,638

 
82,179

 
420,591

 
2,934,522

Expenditures for additions to long-lived assets
 
1,043

 
2

 
700

 
236

 
1,981

 
 
 
 
 
 
 
 
 
 
 
As of or for the Three Months Ended March 31, 2011
 
 

 
 

 
 

 
 

 
 

Revenues
 
$
70,001

 
$
13

 
$
8,449

 
$
768

 
$
79,231

Intersegment revenues (losses) (2) (3)
 
4,782

 
11

 
(4,793
)
 

 

Depreciation, depletion and amortization
 
10,840

 
3,754

 
261

 
531

 
15,386

Non-cash compensation
 
572

 
176

 
3,538

 
3,725

 
8,011

Income (loss) from operations
 
33,784

 
(5,496
)
 
761

 
(5,483
)
 
23,566

Interest expense, net
 
(43,235
)
 
(11,229
)
 

 
(9,690
)
 
(64,154
)
Goodwill
 
76,819

 

 

 

 
76,819

Total assets
 
1,928,351

 
550,991

 
72,092

 
12,999

 
2,564,433

Expenditures for additions to long-lived assets
 
2,561

 
(76
)
 

 
72

 
2,557

 
(1)
Includes corporate activities, oil and gas exploration, development and exploitation activities and certain intercompany eliminations. Our oil and gas exploration, development and exploitation operating activities have been included in the corporate and other column due to the lack of a material impact that these activities have on our consolidated financial statements.
(2)
Intersegment revenues related to our LNG terminal segment are primarily from tug revenues from Cheniere Marketing and the receipt of 80% of gross margins earned by Cheniere Marketing in monetizing the TUA capacity of Cheniere Energy Investments, LLC ("Cheniere Investments"), a wholly owned subsidiary of Cheniere Partners, at the Sabine Pass LNG terminal in the three months ended March 31, 2012 and 2011. These LNG terminal segment intersegment revenues are eliminated with intersegment expenses in our Consolidated Statements of Operations.
(3)
Intersegment losses related to our LNG and natural gas marketing segment are primarily from Cheniere Marketing's tug costs and the payment of 80% of gross margins earned by Cheniere Marketing in monetizing the TUA capacity of Cheniere Investments at the Sabine Pass LNG terminal in the three months ended March 31, 2012 and 2011. These LNG terminal segment intersegment costs are eliminated with intersegment revenues in our Consolidated Statements of Operations.

NOTE 15—Share-Based Compensation
 
We have granted options to purchase common stock to employees, consultants and outside directors under the Cheniere Energy, Inc. Amended and Restated 1997 Stock Option Plan ("1997 Plan") and the Cheniere Energy, Inc. Amended and Restated 2003 Stock Incentive Plan ("2003 Plan"). We recognize our share-based payments to employees in the consolidated financial statements based on their fair values at the date of grant. The calculated fair value is recognized as expense (net of any capitalization) over the requisite service period, net of estimated forfeitures, using either the straight-line or accelerated recognition methods.
 


15


CHENIERE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)

For the three months ended March 31, 2012 and 2011, the total share-based compensation expense recognized in our net loss was $2.3 million and $8.0 million, respectively.  The effect of a change in estimated forfeitures is recognized through a cumulative adjustment included in share-based compensation cost in the period of change in estimate. We consider many factors when estimating expected forfeitures, including types of awards, employee class and historical experience.
 
The total unrecognized compensation cost at March 31, 2012 and December 31, 2011 relating to non-vested share-based compensation arrangements granted under the 1997 Plan and 2003 Plan was $7.5 million and $7.7 million, respectively. That cost is expected to be recognized over 4 years, with a weighted average period of 2.2 years.
  
We received no proceeds from the exercise of stock options in the three months ended March 31, 2012 and 2011.



16


Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations

Information Regarding Forward-Looking Statements
 
This quarterly report contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical fact, included herein or incorporated herein by reference are "forward-looking statements." Included among "forward-looking statements" are, among other things:
 
statements relating to the construction or operation of each of our proposed liquefied natural gas ("LNG") terminals or our proposed pipelines or liquefaction facilities or other projects, or expansions or extensions thereof, including statements concerning the completion or expansion thereof by certain dates or at all, the costs related thereto and certain characteristics, including amounts of regasification, transportation, liquefaction and storage capacity, the number of storage tanks, LNG trains, docks, pipeline deliverability and the number of pipeline interconnections, if any; 
statements that we expect to receive an order from the Federal Energy Regulatory Commission ("FERC") authorizing us to construct and operate proposed LNG receiving terminals, liquefaction facilities, pipelines or other projects by certain dates, or at all; 
statements regarding future levels of domestic natural gas production, supply or consumption; future levels of LNG imports into North America; sales of natural gas in North America or other markets; exports of LNG from North America; and the transportation, other infrastructure or prices related to natural gas, LNG or other energy sources or hydrocarbon products; 
statements regarding any financing or refinancing transactions or arrangements, or ability to enter into such transactions or arrangements, whether on the part of Cheniere or any subsidiary or at the project level; 
statements regarding any commercial arrangements presently contracted, optioned or marketed, or potential arrangements, to be performed substantially in the future, including any cash distributions and revenues anticipated to be received and the anticipated timing thereof, and statements regarding the amounts of total LNG regasification, liquefaction or storage capacity that are, or may become, subject to such commercial arrangements; 
statements regarding counterparties to our commercial contracts, construction contracts and other contracts;
statements regarding any business strategy, any business plans or any other plans, forecasts, projections or objectives, including potential revenues and capital expenditures, any or all of which are subject to change; 
statements regarding legislative, governmental, regulatory, administrative or other public body actions, requirements, permits, investigations, proceedings or decisions;  
statements regarding our anticipated LNG and natural gas marketing activities; and 
any other statements that relate to non-historical or future information.
 
These forward-looking statements are often identified by the use of terms and phrases such as "achieve," "anticipate," "believe," "contemplate," "develop," "estimate," "expect," "forecast," "plan," "potential," "project," "propose," "strategy" and similar terms and phrases, or by the use of future tense. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which are made as of the date of and speak only as of the date of this quarterly report.
 
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended by Amendment No.1 on Form 10-K/A. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, we assume no obligation to update or revise these forward-looking statements or provide reasons why actual results may differ.

As used herein, the terms "Cheniere," "the Company," "we," "our" and "us" refer to Cheniere Energy, Inc. and its wholly owned or controlled subsidiaries.
 


17


Introduction
 
The following discussion and analysis presents management's view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes in Item 1. "Consolidated Financial Statements". This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis include the following subjects: 
Overview of Business 
Overview of Significant Events 
Liquidity and Capital Resources 
Results of Operations 
Off-Balance Sheet Arrangements 
Summary of Critical Accounting Policies and Estimates
Recent Accounting Standards 

Overview of Business
 
 We own and operate the Sabine Pass LNG terminal in Louisiana through our 88.7% ownership interest in and management agreements with Cheniere Energy Partners, L.P. ("Cheniere Partners") (NYSE Amex Equities: CQP), which is a publicly traded partnership that we created in 2007.  We also own and operate the Creole Trail Pipeline, which interconnects the Sabine Pass LNG terminal with natural gas markets in North America.  One of our subsidiaries, Cheniere Marketing, LLC ("Cheniere Marketing"), is marketing LNG and natural gas on its own behalf and on behalf of Cheniere Partners, and is working to monetize LNG storage and regasification capacity reserved by Cheniere Partners at the Sabine Pass LNG terminal.  Cheniere Partners is developing a project to add liquefaction capabilities at the Sabine Pass LNG terminal. We are in various stages of developing other projects, including LNG terminal and pipeline related projects, each of which, among other things, will require acceptable commercial and financing arrangements before we make a final investment decision.  

Overview of Significant Events
Our significant accomplishments since January 1, 2012 include the following: 
In January 2012, we repaid in full the entire outstanding principal balance of the 2007 Term Loan due May 31, 2012. We used a portion of the net proceeds from the public offering of common stock in December 2011 to repay the 2007 Term Loan.
In January 2012, Sabine Pass Liquefaction, LLC ("Sabine Pass Liquefaction"), a wholly owned subsidiary of Cheniere Partners, entered into an amended and restated LNG Sale and Purchase Agreement ("SPA") with BG Gulf Coast LNG, LLC ("BG"), a subsidiary of BG Group plc, under which BG has agreed to purchase an additional 2.0 million tonnes per annum ("mtpa") of LNG, bringing BG's total annual contract quantity to 5.5 mtpa of LNG. BG will purchase 3.5 mtpa of LNG with the commencement of train one operations and will purchase a portion of the additional 2.0 mtpa of LNG as each of trains two, three and four commences operations.
In January 2012, Sabine Pass Liquefaction entered into an SPA with Korea Gas Corporation ("KOGAS"), under which KOGAS agreed to purchase 182.5 million MMBtu of LNG per year (approximately 3.5 million mtpa).
In February 2012, Cheniere Partners entered into discussions with Blackstone Energy Partners L.P., Blackstone Capital Partners VI L.P., and certain affiliates (collectively, "Blackstone"), whereby Blackstone would fund an equity portion of the financing to develop, construct and place into service the Sabine Pass liquefaction project.
In March 2012, we sold 24.2 million shares of Cheniere common stock in an underwritten public offering for net cash proceeds of approximately $351.9 million. We intend to use the net proceeds from the offering for general corporate purposes, including repayment of indebtedness.


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In April 2012, Sabine Pass Liquefaction and Sabine Pass LNG, L.P. ("Sabine Pass LNG"), a wholly owned subsidiary of Cheniere Partners, received authorization under Section 3 of the Natural Gas Act (the "Order") from the FERC to site, construct and operate facilities for the liquefaction and export of domestically produced natural gas at the Sabine Pass LNG terminal located in Cameron Parish, Louisiana. The Order authorizes the development of up to four modular LNG trains.
In April 2012, Cheniere Partners engaged eight financial institutions to act as Joint Lead Arrangers to assist in the structuring and arranging of up to $4 billion of debt facilities. The proceeds will be used to pay for costs of development and construction of the liquefaction project at the Sabine Pass LNG terminal, to fund the acquisition of the Creole Trail Pipeline from us and for general business purposes.
In April 2012, Scorpion Capital Partners, L.P. exchanged all $8.4 million of its portion of the 2008 Loans described below for 1.7 million shares of Cheniere common stock and $1.4 million in accrued interest.

Liquidity and Capital Resources

Although consolidated for financial reporting, Cheniere, Sabine Pass LNG and Cheniere Partners operate with independent capital structures. We expect the cash needs for Sabine Pass LNG's operating activities for at least the next twelve months will be met through operating cash flows and existing unrestricted cash. We expect the cash needs for Cheniere Partners' operating activities for at least the next twelve months will be met through operating cash flows from Sabine Pass LNG and existing unrestricted cash. We expect the cash needs of Cheniere's operating activities for at least the next twelve months will be met by utilizing existing unrestricted cash, management fees from Sabine Pass LNG and Cheniere Partners, distributions from our investment in Cheniere Partners and operating cash flows from our pipeline and LNG and natural gas marketing businesses.

The following table presents (in thousands) Cheniere's restricted and unrestricted cash and cash equivalents for each portion of our capital structure as of March 31, 2012. All restricted and unrestricted cash and cash equivalents held by Cheniere Partners and Sabine Pass LNG are considered restricted as to usage or withdrawal by Cheniere:
 
 
Sabine
Pass LNG
 
Cheniere Partners
 
Other Cheniere
 
Consolidated Cheniere
Cash and cash equivalents
 
$

 
$

 
$
439,827

 
$
439,827

Restricted cash and cash equivalents
 
140,860

(1)
55,907

(2)
9,148

 
205,915

Total
 
$
140,860

 
$
55,907

 
$
448,975

 
$
645,742

 
 
(1)
All cash and cash equivalents presented above for Sabine Pass LNG are considered restricted to us, but $3.5 million is considered unrestricted for Sabine Pass LNG.
(2)
All cash and cash equivalents presented above for Cheniere Partners are considered restricted to us, but $59.4 million is considered unrestricted for Cheniere Partners, including the $3.5 million considered unrestricted for Sabine Pass LNG.

As of March 31, 2012, we had unrestricted cash and cash equivalents of $439.8 million available to Cheniere. In addition, we had consolidated restricted cash and cash equivalents of $205.9 million (which included cash and cash equivalents and other working capital available to Cheniere Partners, in which we own an 88.7% interest, and Sabine Pass LNG) designated for the following purposes: $137.3 million for interest payments related to the Senior Notes described below; $3.5 million for Sabine Pass LNG's working capital; $55.9 million for Cheniere Partners' working capital; and $9.1 million for other restricted purposes.

During the second quarter of 2011, we reclassified $298.0 million of debt from a long-term liability to a current liability because our 2007 Term Loan described below was due within 12 months as of May 31, 2011. During the third quarter of 2011, we reclassified $190.7 million, net of discount, of debt from a long-term liability to a current liability because our Convertible Senior Unsecured Notes were due within 12 months as of August 15, 2011. In December 2011, we closed an underwritten public offering of 41,745,000 shares of our common stock, which were sold to the public at a price per share of $8.35, resulting in net proceeds of approximately $330.9 million. In January 2012, we used a portion of the net proceeds to repay in full the outstanding principal balance of the $298.0 million 2007 Term Loan due May 31, 2012. The aggregate repayment amount was $298.2 million, including the outstanding principal amount and accrued interest through January 5, 2012.

In September 2011, we initiated an at-the-market program to sell up to 10 million shares of our common stock. We did not sell any shares of our common stock in connection with the at-the-market program during the three months ended March 31, 2012.



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In March 2012, we sold 24.2 million shares of Cheniere common stock in an underwritten public offering for net cash proceeds of approximately $351.9 million. We believe that we will have sufficient unrestricted cash, liquid assets, cash generated from our operations and proceeds from capital market transactions to satisfy our debt obligations and fund our operations for at least the next 12 months. We may use a portion of our unrestricted cash and cash equivalents in order to satisfy our principal payment on our Convertible Senior Unsecured Notes due in August 2012.

LNG Terminal Business
 
Cheniere Partners
 
Our ownership interest in the Sabine Pass LNG terminal is held through Cheniere Partners. We own approximately 88.7% of Cheniere Partners in the form of 12.0 million common units, 135.4 million subordinated units and a 2% general partner interest. Cheniere Partners owns a 100% interest in Sabine Pass LNG, which is operating the Sabine Pass LNG terminal, and a 100% interest in Sabine Pass Liquefaction, which is developing a liquefaction project at the Sabine Pass LNG terminal.
 
We receive quarterly equity distributions from Cheniere Partners, and we receive management fees for managing Sabine Pass LNG and Cheniere Partners. For the three months ended March 31, 2012, we received $5.1 million in distributions on our common units, no distributions on our subordinated units and $0.3 million in distributions on our general partner interest. During the three months ended March 31, 2012, we received fees of $2.7 million and $2.0 million under our management agreements with Cheniere Partners and Sabine Pass LNG, respectively.

Cheniere Partners' common unit and general partner distributions are being funded from cash flows generated by Sabine Pass LNG's two third-party terminal use agreement ("TUA") customers. The subordinated unit distributions that we received in 2010 were funded from cash flows generated by Sabine Pass LNG's TUA with Cheniere Marketing. Effective July 1, 2010, Cheniere Marketing assigned its TUA with Sabine Pass LNG for 2.0 Bcf/d of regasification capacity at the Sabine Pass LNG terminal to Cheniere Energy Investments, LLC ("Cheniere Investments"), a wholly owned subsidiary of Cheniere Partners. As a result of Cheniere Marketing's assignment of its TUA to Cheniere Investments, we have not received distributions on our subordinated units since the distribution made with respect to the quarter ended March 31, 2010.

During the subordination period, the common units have the right to receive distributions of available cash from operating surplus in an amount equal to the initial quarterly distribution of $0.425 per quarter, plus any arrearages in the payment of the initial quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units that we own. As a result of Cheniere Marketing's assignment of its TUA to Cheniere Investments, Cheniere Marketing no longer makes the approximately $250 million per year of payments to Sabine Pass LNG, and Cheniere Partners will not make distributions on our subordinated units unless it generates additional cash flow from Sabine Pass LNG's excess capacity or new business. Therefore, distributions to us on our subordinated units and conversion of the subordinated units into common units will depend upon the future business development of Cheniere Partners. We expect that additional cash flows generated by Cheniere Partners' proposed liquefaction project or other new Cheniere Partners' business would be used to make quarterly distributions on our subordinated units before any increase in distributions to the common unitholders.

We and Cheniere Partners amended, effective as of July 1, 2010, the fee structure for the various general and administrative services provided by us for Cheniere Partners' benefit and changed it from a fixed fee to a variable fee. The amended and restated services agreement provides that fees will be paid quarterly from Cheniere Partners' unrestricted cash and cash equivalents remaining after making distributions to the common unitholders and the general partner in respect of each quarter and retaining certain reserves. Our ability to receive management fees from Cheniere Partners is dependent on our ability to, among other things, manage Cheniere Partners' and Sabine Pass LNG's operating and administrative expenses, monetize the 2.0 Bcf/d of regasification capacity under the Cheniere Investments TUA (as discussed below) and develop new projects through either internal development or acquisition to increase cash flow. The fixed management fees payable by Sabine Pass LNG remain unchanged.



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Concurrently with the TUA assignment, Cheniere Investments entered into a Variable Capacity Rights Agreement ("VCRA") with Cheniere Marketing. Under the terms of the VCRA, Cheniere Marketing is responsible for monetizing Cheniere Investments' TUA capacity at the Sabine Pass LNG terminal and is obligated to pay Cheniere Investments 80% of the expected gross margin of each cargo of LNG it arranges for delivery to the Sabine Pass LNG terminal. To the extent payments from Cheniere Marketing to Cheniere Investments under the VCRA or new Cheniere Partners' business increase Cheniere Partners' available cash in excess of the common unit and general partner distributions and certain reserves, the cash would be distributed to us in the form of distributions on our subordinated units and related general partner distributions. During the term of the VCRA, Cheniere Marketing is responsible for the payment of taxes and new regulatory costs under Cheniere Investments' TUA. Cheniere has guaranteed all of Cheniere Marketing's payment obligations under the VCRA.

In January 2011, Cheniere Partners initiated an at-the-market program to sell up to 1.0 million common units, the proceeds from which are used primarily to fund development costs associated with its proposed liquefaction project at the Sabine Pass LNG terminal. As of December 31, 2011, Cheniere Partners had sold 0.5 million common units with net proceeds of $9.0 million. During the three months ended March 31, 2012, Cheniere Partners sold 0.1 million common units with net proceeds of $2.8 million.

In September 2011, Cheniere Partners sold 3.0 million common units in an underwritten public offering and 1.1 million common units to Cheniere Common Units Holding, LLC at a price of $15.25 per common unit. Cheniere Partners received net proceeds of $43.3 million and $16.4 million from the public offering and Cheniere Common Units Holding, LLC sale, respectively, that it is using for general business purposes, including development costs associated with its proposed liquefaction project at the Sabine Pass LNG terminal.

Sabine Pass LNG Terminal
 
Approximately 2.0 Bcf/d of the regasification capacity at the Sabine Pass LNG terminal has been reserved under two long-term third-party TUAs, under which Sabine Pass LNG’s customers are required to pay fixed monthly fees, whether or not they use the LNG terminal. Capacity reservation fee TUA payments are made by Sabine Pass LNG's third-party TUA customers as follows:
 
Total Gas and Power North America, Inc. ("Total") has reserved approximately 1.0 Bcf/d of regasification capacity and is obligated to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced April 1, 2009. Total, S.A. has guaranteed Total’s obligations under its TUA up to $2.5 billion, subject to certain exceptions; and 
Chevron U.S.A. Inc. ("Chevron") has reserved approximately 1.0 Bcf/d of regasification capacity and is obligated to make monthly capacity payments to Sabine Pass LNG aggregating approximately $125 million per year for 20 years that commenced July 1, 2009. Chevron Corporation has guaranteed Chevron’s obligations under its TUA up to 80% of the fees payable by Chevron.

Each of Total and Chevron previously paid Sabine Pass LNG $20.0 million in nonrefundable advance capacity reservation fees, which are being amortized over a 10-year period as a reduction of each customer's regasification capacity reservation fees payable under its respective TUA.

The remaining approximately 2.0 Bcf/d of regasification capacity has been reserved by Cheniere Partners through a TUA between Cheniere Investments and Sabine Pass LNG. Cheniere Investments is obligated to make monthly capacity payments to Sabine Pass LNG aggregating approximately $250 million per year through at least September 30, 2028; however, the revenue earned by Sabine Pass LNG from Cheniere Investments' capacity payments under the TUA is eliminated upon consolidation of our financial statements.

Under each of these TUAs, Sabine Pass LNG is entitled to retain 2% of the LNG delivered for the customer's account.

Cheniere Partners is also developing proposed liquefaction facilities at the Sabine Pass LNG terminal. As currently contemplated, the liquefaction facilities are designed for up to four LNG trains, each with a nominal production capacity of approximately 4.5 mtpa. We expect to commence construction of LNG trains 1 and 2 during the first half of 2012 and begin operations in 2015, with each LNG train commencing operations approximately six to nine months after the previous LNG train. We estimate that the aggregate total cost to complete construction of the proposed liquefaction facilities will be approximately $9.0 billion to $10.0 billion, before financing costs. Our cost estimates are subject to change due to such items as change orders, increased component and material costs, escalation of labor costs and increased spending to maintain our construction schedule.


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In November 2011, Sabine Pass Liquefaction entered into a lump-sum turnkey engineering procurement and construction agreement with Bechtel Oil, Gas and Chemicals, Inc. ("Bechtel") for construction of LNG trains 1 and 2 of the liquefaction project for $3.9 billion. The contract price is only subject to adjustment by change order, including by Bechtel if it is adversely affected as a result of a delay in the commencement of construction beyond March 31, 2012.

As of March 31, 2012, Cheniere Partners had recorded $64.9 million of development expense relating to the proposed liquefaction facilities using our cash from operations and equity proceeds from the issuance of 4.1 million common units in September 2011. We expect to finance the construction costs of the proposed liquefaction project from a combination of project financing and debt and equity offerings.

Other LNG terminals
 
We will contemplate making final investment decisions to construct our proposed Corpus Christi LNG terminal and any other LNG terminal project upon, among other things, entering into acceptable commercial and financing arrangements for the applicable project. 

Natural Gas Pipeline Business
 
The Creole Trail Pipeline, consisting of 94 miles of natural gas pipeline, is currently in-service and operating. Cheniere Marketing and other third parties have entered into interruptible transportation agreements with Creole Trail Pipeline to transport natural gas from the Sabine Pass LNG terminal into North American natural gas markets. Although Cheniere Marketing and other third parties have entered into interruptible transportation agreements with Creole Trail Pipeline to transport natural gas from the Sabine Pass LNG terminal into North American natural gas markets, there are no significant cash flows generated from the Creole Trail Pipeline.

In connection with Cheniere Partners’ proposed liquefaction facilities at the Sabine Pass LNG terminal, we are developing a project to add additional capabilities to the Creole Trail Pipeline to be able to provide transportation services to the liquefaction facilities.

We will contemplate making a final investment decision to construct the remaining 59 miles of the Creole Trail Pipeline, the Corpus Christi Pipeline, the Cheniere Southern Trail Pipeline and the Burgos Hub project upon, among other things, receiving all required authorizations to construct and operate the applicable pipeline (and storage facility in the case of the Burgos Hub project), to the extent not already obtained, and entering into acceptable commercial and financing arrangements for the applicable project. We do not expect to spend significant funds on these projects in the near-term.

LNG and Natural Gas Marketing Business
 
The accounting treatment for LNG inventory differs from the treatment for derivative positions such that the economics of Cheniere Marketing's activities are not transparent in our consolidated financial statements until all LNG inventory is sold and all derivative positions are settled. Our LNG inventory is recorded as an asset at cost and is subject to lower of cost or market ("LCM") adjustments at the end of each reporting period. The LCM adjustment market price is based on period-end natural gas spot prices, and any gain or loss from an LCM adjustment is recorded in our earnings at the end of each period. Revenue and cost of goods sold are not recognized in our earnings until the LNG is sold. Generally, our unrealized derivatives positions at the end of each period extend into the future to hedge the cash flow from future sales of our LNG inventory or to take market positions and hedge exposure associated with LNG and natural gas. These positions are measured at fair value, and we record the gains and losses from the change in their fair value currently in earnings. Thus, earnings from changes in the fair value of our derivatives may not be offset by losses from LCM adjustments to our LNG inventory because the LCM adjustments that may be made to LNG inventory are based on period-end spot prices that are different from the time periods of the prices used to determine the fair value of our derivatives. Any losses from changes in the fair value of our derivatives will not be offset by gains until the LNG is actually sold.



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LNGCo Agreements

In 2010, Cheniere Marketing entered into various agreements ("LNGCo Agreements") with JPMorgan LNG Co. ("LNGCo") under which Cheniere Marketing has agreed to develop and maintain commercial and trading opportunities in the LNG industry and present any such opportunities exclusively to LNGCo. Cheniere Marketing also agreed to provide, or arrange for the provision of, all of the operations and administrative services required by LNGCo in connection with any LNG cargoes purchased by LNGCo, including negotiating agreements and arranging for transporting, receiving, storing, hedging and regasifying LNG cargoes. Cheniere Marketing does not have the authority to contractually bind LNGCo under the LNGCo Agreements. In the event LNGCo declines to purchase an LNG cargo presented to it by Cheniere Marketing under the LNGCo Agreements, Cheniere Marketing may pursue the opportunity on its own behalf or present it to third parties. In March 2012, Cheniere Marketing and LNGCo amended their LNGCo Agreements to extend the term until April 2014; however, either party may terminate the agreements without penalty prior to such date. In return for the services to be provided by Cheniere Marketing, LNGCo will pay a fixed fee to Cheniere Marketing and may pay additional fees depending upon the gross margin of each transaction.

During the three months ended March 31, 2012 and 2011, we recognized $2.6 million and $2.4 million, respectively, of marketing and trading revenues from LNGCo. As of March 31, 2012, the carrying amount of Cheniere Marketing’s assets relating to LNGCo, which is equivalent to Cheniere Marketing's maximum exposure to loss, was $2.6 million.  A portion of this $2.6 million represents our fixed fee receivable and is reported as accounts and interest receivable on our consolidated financial statements, and the remaining portion represents our margin deposit receivable and is reported as prepaid expense and other current assets on our consolidated financial statements and is to be paid to Cheniere Marketing upon the completion or termination of the LNGCo Agreements.

Corporate and Other Activities
 
We are required to maintain corporate general and administrative functions to serve our business activities described above. 

Sources and Uses of Cash
 
The following table summarizes (in thousands) the sources and uses of our cash and cash equivalents for the three months ended March 31, 2012 and 2011. The table presents capital expenditures on a cash basis; therefore, these amounts differ from the amounts of capital expenditures, including accruals, that are referred to elsewhere in this report. Additional discussion of these items follows the table. 
 
Three Months Ended
 
March 31,
 
2012
 
2011
Sources of cash and cash equivalents
 
 
 
Sale of common stock, net
$
351,907

 
$

Sale of common units by Cheniere Partners
2,843

 
1,515

Use of restricted cash and cash equivalents
6,033

 
7,348

Total sources of cash and cash equivalents
360,783

 
8,863

 
 
 
 
Uses of cash and cash equivalents
 

 
 

Repurchases and prepayments of debt
(298,000
)
 

Operating cash flow
(68,696
)
 
(49,244
)
Distributions to non-controlling interest
(8,092
)
 
(6,600
)
LNG terminal and pipeline construction-in-process, net
(270
)
 
(2,214
)
Purchase of treasury shares
(1,798
)
 

Other
(3,260
)
 
(493
)
Total uses of cash and cash equivalents
(380,116
)
 
(58,551
)
 
 
 
 
Net decrease in cash and cash equivalents
(19,333
)
 
(49,688
)
Cash and cash equivalents—beginning of year
459,160

 
74,161

Cash and cash equivalents—end of year
$
439,827

 
$
24,473




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Sale of Common Stock, net

In March 2012, we sold 24.2 million shares of Cheniere common stock in an underwritten public offering at a price of $15.10 per share for net cash proceeds of approximately $351.9 million. We intend to use the net proceeds from the offering for general corporate purposes, including repayment of indebtedness.

Sale of Common Units by Cheniere Partners

In January 2011, Cheniere Partners initiated an at-the-market program to sell up to 1.0 million common units, the proceeds from which have primarily been used to fund development costs associated with Cheniere Partners' proposed liquefaction project at the Sabine Pass LNG terminal. During the three months ended March 31, 2012, Cheniere Partners received $2.8 million in net proceeds from its sale of common units related to this at-the-market program. During the three months ended March 31, 2011, Cheniere Partners received $1.5 million in net proceeds from its sale of common units related to this at-the-market program.

Repurchases and Prepayments of Debt
 
In January 2012, we repaid in full the entire outstanding principal balance of the 2007 Term Loan due May 31, 2012. We used a portion of the net proceeds from the public offering of Cheniere common stock in December 2011 to repay the 2007 Term Loan.

Operating Cash Flow
 
Net cash used in operations was $68.7 million and $49.2 million during the three months ended March 31, 2012 and 2011, respectively. Net cash used in operations related primarily to the general administrative overhead costs, pipeline operations costs and LNG and natural gas marketing overhead, offset by earnings from our LNG and natural gas marketing business. The increase in cash used in operations in the three months ended March 31, 2012 is primarily a result of the purchase of the Crest Royalty in March 2012.

Debt Agreements
 
The following table (in thousands) and the explanatory paragraphs following the table summarize our various debt agreements as of March 31, 2012
 
 
Sabine
Pass LNG, L.P.
 
Cheniere Energy
Partners, L.P.
 
Other Cheniere Energy, Inc.
 
Consolidated Cheniere Energy,
Inc.
Current debt
 
 
 
 
 
 
 
 
Convertible Senior Unsecured Notes
 
$

 
$

 
$
204,630

 
$
204,630

Total current debt
 

 

 
204,630

 
204,630

Current debt discount
 
 
 
 
 
 
 
 
Convertible Senior Unsecured Notes (1)
 

 

 
(5,737
)
 
(5,737
)
Current debt, net of discount
 
$

 
$

 
$
198,893

 
$
198,893

 
 
 
 
 
 
 
 
 
Long-term debt (including related party)
 
 
 
 
 
 
 
 
Senior Notes
 
$
2,215,500

 
$

 
$

 
$
2,215,500

2008 Loans (including related party)
 

 

 
282,293

 
282,293

Total long-term debt
 
2,215,500

 

 
282,293

 
2,497,793

Long-term debt discount
 
 

 
 

 
 

 
 

Senior Notes (2)
 
(21,908
)
 

 

 
(21,908
)
Long-term debt (including related party), net of discount
 
$
2,193,592

 
$

 
$
282,293

 
$
2,475,885

 
(1)
Effective as of January 1, 2009, we are required to record a debt discount on our Convertible Senior Unsecured Notes.  The unamortized discount will be amortized through the maturity of the Convertible Senior Unsecured Notes.


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(2)
In September 2008, Sabine Pass LNG issued an additional $183.5 million, par value, of 2016 Notes described below.  The net proceeds from the additional issuance of the 2016 Notes were $145.0 million.  The difference between the par value and the net proceeds is the debt discount, which will be amortized through the maturity of the 2016 Notes. 
Convertible Senior Unsecured Notes
 
In July 2005, we consummated a private offering of $325.0 million aggregate principal amount of convertible senior unsecured notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the "Convertible Senior Unsecured Notes"). The notes bear interest at a rate of 2¼% per year. The notes are convertible at any time into our common stock under certain circumstances at an initial conversion rate of 28.2326 shares per $1,000 principal amount of the notes, which is equal to a conversion price of approximately $35.42 per share. As of March 31, 2012, no holders had elected to convert their notes at the conversion rate.
 
We may redeem some or all of the notes on or before August 1, 2012, for cash equal to 100% of the principal plus any accrued and unpaid interest if in the previous 10 trading days the volume-weighted average price of our common stock exceeds $53.13, subject to adjustment, for at least five consecutive trading days. In the event of such redemption, we will make an additional payment equal to the present value of all remaining scheduled interest payments through August 1, 2012, discounted at the U.S. Treasury securities rate plus 50 basis points. The indenture governing the notes contains customary reporting requirements.

During the second quarter of 2009, we reduced debt by exchanging $120.4 million aggregate principal amount of our Convertible Senior Unsecured Notes for a combination of $30.0 million cash and cash equivalents and 4.0 million shares of Cheniere common stock, reducing our principal amount due in 2012 to $204.6 million. The remaining principal amount of the Convertible Senior Unsecured Notes are convertible into 5.8 million shares of our common stock.

During the third quarter of 2011, we reclassified $190.7 million of debt, net of discount, from a long-term liability to a current liability because our Convertible Senior Unsecured Notes were due within 12 months as of August 1, 2011.

As discussed in Note 8—"Debt and Debt—Related Parties" of our Notes to Consolidated Financial Statements, we adopted on January 1, 2009 an accounting standard that requires issuers of certain convertible debt instruments to separately account for the liability component and the equity component represented by the embedded conversion option in a manner that will reflect that entity's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The fair value of the embedded conversion option at the date of issuance of the Convertible Senior Unsecured Notes was determined to be $134.0 million and has been recorded as a debt discount to the Convertible Senior Unsecured Notes, with a corresponding adjustment to additional paid-in capital. At March 31, 2012, the unamortized debt discount to the Convertible Senior Unsecured Notes was $5.7 million.

Senior Notes
 
In November 2006, Sabine Pass LNG issued an aggregate principal amount of $2,032.0 million of Senior Notes (the "Senior Notes"), consisting of $550.0 million of 7¼% Senior Secured Notes due 2013 (the "2013 Notes") and $1,482.0 million of 7½% Senior Secured Notes due 2016 (the "2016 Notes"). In September 2008, Sabine Pass LNG issued an additional $183.5 million, before discount, of 2016 Notes whose terms were identical to the previously outstanding 2016 Notes. Interest on the Senior Notes is payable semi-annually in arrears on May 30 and November 30 of each year. The Senior Notes are secured on a first-priority basis by a security interest in all of Sabine Pass LNG’s equity interests and substantially all of its operating assets.

Sabine Pass LNG may redeem some or all of the Senior Notes at any time, and from time to time, at a redemption price equal to 100% of the principal plus any accrued and unpaid interest plus the greater of:
1.0% of the principal amount of the Senior Notes; or
the excess of: a) the present value at such redemption date of (i) the redemption price of the Senior Notes plus (ii) all required interest payments due on the Senior Notes (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over b) the principal amount of the Senior Notes, if greater.



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Under the Sabine Pass Indenture, except for permitted tax distributions, Sabine Pass LNG may not make distributions until certain conditions are satisfied: there must be on deposit in an interest payment account an amount equal to one-sixth of the semi-annual interest payment multiplied by the number of elapsed months since the last semi-annual interest payment, and there must be on deposit in a permanent debt service reserve fund an amount equal to one semi-annual interest payment of approximately $82.4 million. Distributions are permitted only after satisfying the foregoing funding requirements, a fixed charge coverage ratio test of 2:1 and other conditions specified in the Sabine Pass Indenture. During the three months ended March 31, 2012 and March 31, 2011, Sabine Pass LNG made distributions to Cheniere Partners of $69.4 million and $75.2 million, respectively, after satisfying all of the applicable conditions in the Sabine Pass Indenture.
 
2008 Loans

In August 2008, we entered into a credit agreement pursuant to which we obtained $250.0 million in convertible term loans ("2008 Loans"). The 2008 Loans have a maturity date in 2018. The 2008 Loans bear interest at a fixed rate of 12% per annum, except during the occurrence of an event of default during which time the rate of interest will be 14% per annum. Interest is due semi-annually on the last business day of January and July. The 2008 Loans are secured by Cheniere's rights and fees payable under management services agreements with Sabine Pass LNG and Cheniere Partners, by Cheniere's 12.0 million common units in Cheniere Partners, by the equity and assets of Cheniere's pipeline entities, by the equity of various other subsidiaries and certain other assets and subsidiary guarantees.

In June 2010, the 2008 Loans were amended to permit all funds on deposit in a TUA reserve payment account to be applied to the prepayment of the accrued interest on the loans outstanding under the 2008 Loans, with any remainder to be applied to the prepayment of the principal balance of such 2008 Loans. As a result, $63.6 million from the TUA reserve account was used to prepay $60.9 million of accrued interest and $2.7 million of principal of the 2008 Loans.

In December 2010, the 2008 Loans were amended to, among other things: eliminate the "put rights" which had allowed the lenders to demand repayment of the 2008 Loans on the third, fifth, and seventh anniversaries thereof; allow for the early prepayment of the 2008 Loans; allow Cheniere for a limited period to sell Cheniere Partners common units held as collateral and prepay the 2008 Loans with the proceeds; and release restrictions on prepayments of other indebtedness of Cheniere as certain conditions are met. In addition, 96.6% of the lenders agreed to terminate their rights to exchange the 2008 Loans for Series B Preferred Stock of Cheniere.

The outstanding principal amount of the 2008 Loans held by Scorpion Capital Partners, L.P. ("Scorpion"), the holder of 3.4% of the 2008 Loans as of March 31, 2012, is exchangeable for shares of Cheniere common stock at a price of $5.00 per share pursuant to an amendment to the 2008 Loans adopted in September 2011. No portion of any accrued interest is eligible for exchange into Cheniere common stock. On June 16, 2011, our stockholders approved a proposal to permit Scorpion to exchange its 2008 Loans for common stock, to hold such shares of common stock, and to allow Scorpion to vote the common stock as any other stockholder. The portion of outstanding principal amount of the 2008 Loans for Scorpion is classified as related party long-term debt on our consolidated financial statements because Scorpion is an affiliate of one of Cheniere's directors. As of March 31, 2012 and December 31, 2011, we classified $9.6 million of the 2008 Loans as part of Long-Term Debt—Related Parties on our Consolidated Balance Sheets because a related party then held these portions of this debt. In April 2012, Scorpion exchanged all $8.4 million of its loan for 1.7 million shares of Cheniere common stock and $1.4 million in accrued interest.

Issuances of Common Stock
 
During the three months ended March 31, 2012 and 2011, no shares of our common stock were issued pursuant to the exercise of stock options.  During three months ended March 31, 2012 and 2011, we issued 0.1 million and 2.2 million shares, respectively, of restricted stock to new and existing employees.  



26


Results of Operations

Three Months Ended March 31, 2012 vs. Three Months Ended March 31, 2011

Overall Operations
 
Our consolidated net loss was $56.4 million, or $0.43 per share (basic and diluted), in the three months ended March 31, 2012, compared to a net loss of $39.8 million, or $0.60 per share (basic and diluted), in the three months ended March 31, 2011. This increase in net loss was primarily a result of increased LNG terminal and pipeline development expense and decreased LNG and natural gas marketing and trading revenues, which was partially offset by decreased interest expense.
 
LNG Terminal and Pipeline Development Expense
 
Our LNG terminal and pipeline development expenses primarily include professional costs associated with front-end engineering and design work, obtaining regulatory approvals authorizing construction of our facilities and other required permitting for our planned LNG terminals and natural gas pipelines.
   
LNG terminal and pipeline development expenses increased $13.4 million, from $8.4 million in the three months ended March 31, 2011 to $21.8 million in the three months ended March 31, 2012. This increase primarily resulted from costs incurred to develop the liquefaction project at the Sabine Pass LNG terminal.

LNG and Natural Gas Marketing and Trading Revenues
 
Operating results from marketing and trading activities are presented on a net basis on our Consolidated Statements of Operations. Marketing and trading revenues represent the margin earned on the purchase and transportation costs of LNG and subsequent sales of natural gas to third parties. Our marketing and trading revenues also include pretax derivative gains/losses and inventory lower-of-cost-or-market adjustments, if any.  See the table below (in thousands) for an itemized comparison of each major type of energy trading and risk management activity:
 
 
Three Month Period Ended
 
 
March 31,
 
 
2012
 
2011
Physical LNG and natural gas sales, net of costs
 
$
(596
)
 
$
6,700

Inventory lower-of-cost-or-market write-downs
 
(1,143
)
 

Gain from derivatives
 
1,859

 
(606
)
Other energy trading activities
 
2,538

 
2,355

Total LNG and natural gas marketing revenues
 
$
2,658

 
$
8,449


LNG and natural gas marketing and trading revenues decreased $5.7 million, from $8.4 million in the three months ended March 31, 2011 to $2.7 million in the three months ended March 31, 2012. The $5.7 million decrease in marketing and trading revenues is primarily a result of less LNG export cargo sales and lower-of-cost-or-market adjustments on our LNG inventory in the three months ended March 31, 2012. Other energy trading activities primarily consist of our agreements with LNGCo that became effective on April 1, 2010. During the three months ended March 31, 2012 and 2011, we recognized $2.5 million and $2.4 million, respectively, of marketing and trading revenues from LNGCo.

Interest Expense, net
 
Interest expense, net of amounts capitalized, decreased $5.8 million, from $64.2 million in the three months ended March 31, 2011 to $58.4 million in the three months ended March 31, 2012. This decrease in interest expense resulted from the reduction of our indebtedness during the first quarter of 2012.



27


Off-Balance Sheet Arrangements
 
As of March 31, 2012, we had no "off-balance sheet arrangements" that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Summary of Critical Accounting Policies and Estimates
 
The selection and application of accounting policies is an important process that has developed as our business activities have evolved and as the accounting rules have developed. Accounting rules generally do not involve a selection among alternatives but involve an implementation and interpretation of existing rules, and the use of judgment, to apply the accounting rules to the specific set of circumstances existing in our business. In preparing our consolidated financial statements in conformity with generally accepted accounting principles in the United States ("GAAP"), we endeavor to comply with all applicable rules on or before their adoption, and we believe that the proper implementation and consistent application of the accounting rules are critical. However, not all situations are specifically addressed in the accounting literature. In these cases, we must use our best judgment to adopt a policy for accounting for these situations. We accomplish this by analogizing to similar situations and the accounting guidance governing them. There have been no significant changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended by Amendment No. 1 on Form 10-K/A.

Recent Accounting Standards
 
In May 2011, the Financial Accounting Standards Board ("FASB") issued guidance that further addresses fair value measurement accounting and related disclosure requirements.  The guidance clarifies the FASB's intent regarding the application of existing fair value measurement and disclosure requirements, changes the fair value measurement requirements for certain financial instruments, and sets forth additional disclosure requirements for other fair value measurements.  The guidance is to be applied prospectively and is effective for periods beginning after December 15, 2011.  We adopted this guidance effective January 1, 2012.  The adoption of this guidance did not have an impact on our consolidated financial position, results of operations or cash flows, as it only expanded disclosures.

In June 2011, the FASB amended current comprehensive income guidance. The amended guidance eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, we must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This guidance will be effective for public companies during the interim and annual periods beginning after December 15, 2011 with early adoption permitted. Also, in December 2011, FASB issued an accounting standard update to abrogate the requirement for presentation in the income statement of the effect on net income of reclassification adjustments out of AOCI as required in FASB's June 2011 amendment.  We adopted this guidance effective January 1, 2012. The adoption of this guidance did not have an impact on our consolidated financial position, results of operations or cash flows as it only required a change in the format of the current presentation.

Item 3.        Quantitative and Qualitative Disclosures about Market Risk
 
Cash Investments
 
We have cash investments that we manage based on internal investment guidelines that emphasize liquidity and preservation of capital. Such cash investments are stated at historical cost, which approximates fair market value on our Consolidated Balance Sheets.
 


28


Marketing and Trading Commodity Price Risk

We have entered into certain derivative instruments to economically hedge the price risk attributable to future purchases of natural gas to be utilized as fuel to operate the Sabine Pass LNG terminal ("Fuel Derivatives") and to hedge the exposure to variability in expected future cash flows attributable to the future sale of our LNG inventory ("LNG Inventory Derivatives"). We use one-day value at risk ("VaR") with a 95% confidence interval and other methodologies for market risk measurement and control purposes. The VaR is calculated using the Monte Carlo simulation method. The table below provides information about our derivative financial instruments that are sensitive to changes in natural gas prices as of March 31, 2012 (in thousands, except for volume and price range data).
Hedge Description
 
Hedge Instrument
 
Contract Volumes (MMBtu)
 
Price Range ($/MMBtu)
 
Final Hedge Maturity Date
 
Fair Value ($)
 
VaR ($)
LNG Inventory Derivatives
 
Fixed price natural gas swaps
 
3,692,500

 
$2.255 - $4.442
 
January 2013
 
$
1,942

 
$
12

Fuel Derivatives
 
Fixed price natural gas swaps
 
1,069,500

 
$3.390 - $5.002
 
April 2013
 
(1,577
)
 
96


Item 4.        Controls and Procedures

We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. As of the end of the period covered by this report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

During the most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II.        Other Information

Item 1.        Legal Proceedings
 
We may in the future be involved as a party to various legal proceedings, which are incidental to the ordinary course of business. We regularly analyze current information and, as necessary, provide accruals for probable liabilities on the eventual disposition of these matters. In the opinion of management, as of March 31, 2012, there were no threatened or pending legal matters that would have a material impact on our consolidated results of operations, financial position or cash flows.
 


29


Item 6.        Exhibits
Exhibit No.
 
Description
10.1
 
Tenth Amendment to Credit Agreement, dated January 5, 2012, by Cheniere Common Units Holding, LLC, the Loan Parties (as defined therein), the Lenders (as defined therein) and The Bank of New York Mellon, as administrative agent and collateral agent (Incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K (SEC File No. 001-16383), filed on February 24, 2012)
 
 
 
10.2
 
Amended and Restated LNG Sale and Purchase Agreement (FOB), dated January 25, 2012, between Sabine Pass Liquefaction, LLC (Seller) and BG Gulf Coast LNG, LLC (Buyer). (Incorporated by reference to Exhibit 10.1 to Cheniere Partners' Current Report on Form 8-K (SEC File No. 001-33366), filed on January 26, 2012)
 
 
 
10.3
 
LNG Sale and Purchase Agreement (FOB), dated January 30, 2012, between Sabine Pass Liquefaction, LLC (Seller) and Korea Gas Corporation (Buyer). (Incorporated by reference to Exhibit 10.1 to Cheniere Partners' Current Report on Form 8-K (SEC File No. 1-33366), filed on January 30, 2012)
 
 
 
31.1*
 
Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
 
 
 
31.2*
 
Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
 
 
 
32.1**
 
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
32.2**
 
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
101.INS+
 
XBRL Instance Document
 
 
 
101.SCH+
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL+
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF+
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB+
 
XBRL Taxonomy Extension Labels Linkbase Document
 
 
 
101.PRE+
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
*
Filed herewith.
**
Furnished herewith.
+
Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


30


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
CHENIERE ENERGY, INC.
 
 
 
 
/s/    JERRY D. SMITH        
 
Jerry D. Smith
Vice President and Chief Accounting Officer
(on behalf of the registrant and
as principal accounting officer)
 
 
 
 
Date:
May 4, 2012