There is no question that the US has a new "Crown Jewel" leading the way in the US. Like Potash is to Canada, we have uncovered Cheniere Energy (AMEX: $LNG) located here in Houston, Texas.
Cheniere Energy is working on exporting LNG to World Trade Organizations not already approved by the DOE. So, what's all the hoopla about LNG and alternative energy sources using natural gas?
Well, it's really quite simple. Several foreign LNG trading groups are literally lining up at the door to get a piece of Cheniere's export capacity as natural gas prices rise from $4 per unit cost in the US vs. the $12+ range in Europe and Asia. Industry giant, "Chesapeake Energy wants to export LNG"…says Mike Stice, senior vice president for natural gas projects at Oklahoma City-based Chesapeake Energy, would like to create new markets for the natural gas that is inundating the US, due in part to dramatically increased production in shale gas plays. Also, liquefying and exporting shale gas from shale plays like the Haynesville, Barnett, and Eagle Ford to global markets holds major promise as the US confronts an oversupply of cheap supplies, said analyst Rick Smead of Navigant Consulting.
Smart Investors searching for the next Gold Mine need to look at what's happening in the world of LNG; Liquefied Natural Gas. Long before the Japanese nuclear crisis there has been a US company called Cheniere Energy from Houston, Texas (AMEX: LNG) leading the way to help the US export its massive glut of natural gas to countries around the world as a clean alternative to oil, coal and nuclear energy. Cheniere has several industry supporters who include: Chesapeake Energy (NYSE: CHK), Sumitomo in Japan, Encana, ENN Energy of China, Gas Natural Fenosa of Spain, and EDF Trading of France.
1) Letter of support from Chesapeake Energy
2) Letter of support from Encana
More Due Dilligence:
Other key supporters include the state legislators of Louisiana who are all on board in support of Cheniere Energy's plan to export LNG to the world.
1) Letter from Gov. Bobby Jindal
2) Letter of support from Senator Mary Landrieu
3) Letter of support from Senators James Inhofe and Mary Landrieu and Representatives Dan Boren and Charles Boustany along with other Members of Congress
So, why Cheniere Energy's LNG plan now? Well here is an update below.
Current Cheniere Energy's (LNG) Liquefaction Project Update:
First, Cheniere holds the key for taking US natural gas and exporting it to countries like Japan and Europe. It makes a great case for arbitrage as well to export liquefied natural gas (LNG) at a base cost we see the Henry Hub price closed at $2.81 per MMBtu on January 11 in the US and sell it for 2x - 3x that price in Asia and Europe where demand is increasing. That's the play!
In June 2010, Cheniere's Sabine Liquefaction initiated a project to add liquefaction services at the Sabine Pass LNG terminal that would transform the terminal into a bi-directional facility capable of liquefying natural gas and exporting LNG in addition to importing and regasifying foreign-sourced LNG. As currently contemplated, the project is being designed and permitted for up to four LNG trains, each with a nominal production capacity of approximately 4.0 million tonnes per annum ("mtpa"). Sabine Liquefaction intends to enter into long-term, fixed-fee contracts for at least 3.5 mtpa per train, before reaching a final investment decision regarding the development of each train.
Recent developments of the liquefaction project include:
• In August 2010, Cheniere's Sabine Liquefaction received approval from the Federal Energy Regulatory Commission ("FERC") to begin the pre-filing process required to seek authorization to commence construction of the liquefaction project. In January 2011, the pre-filing period was completed and Sabine Liquefaction submitted an application requesting authorization to site, construct and operate liquefaction facilities at the Sabine Pass LNG terminal. The FERC process is expected to be complete by early 2012.
• Most recently...Cheniere Energy Inc (LNG) Posts Large Volume Increase, 6,809,000 Shares Trade Hands. The stock last traded at $9.78, up from its previous close of $9.46. Separately, analysts at Citigroup raised their price target on shares of Cheniere Energy Inc to $19.00 in a research note to investors on Wednesday, November 23rd.
• Also, in January 2012, Cheniere Energy announces early repayment of 2007 term loan. Also SAC Capital Advisors, the $14 billion hedge fund run by Steven A Cohen, bought a 5.7 percent stake in Cheniere Energy.
• In December 2011; Cheniere to sell US gas to GAIL in India - a 20 year multi-$Billion deal
• In November 2011: Cheniere Energy announces 20-Year LNG sale and purchase agreement with Gas Natural Aprovisionamientos, a subsidiary of Gas Natural Fenosa, under which Gas Natural Fenosa has agreed to purchase 3.5M tonnes per annum of LNG.
• In October 2011Cheniere Energy and BG Group have signed a 20-year $8 Billion agreement to supply liquefied natural gas from US shale gas.
Under the deal, Cheniere will export 3.5 million tonnes a year of liquefied natural gas from its Sabine Pass terminal to BG for a period of 20 years. The pricing, at a cost of 115% the US price plus $2.15 per million British therms, makes the US exported gas cheaper than gas available in Asia or Europe.
The deal would mark the first exports of US domestic liquefied natural gas.• In May 2011Cheniere Energy Partners announces DOE approval to export natural gas
• In September 2010, the Department of Energy ("DOE") granted Cheniere's Sabine operation an order authorizing Sabine Liquefaction to export up to 16 mtpa of domestically produced LNG from the Sabine Pass LNG terminal to Free Trade Agreement ("FTA") countries for a 30-year period beginning on the earlier of the date of first export or September 7, 2020. Sabine Liquefaction filed a second application requesting expansion of the order to export to include countries with which the U.S. does not have an FTA. The public comment period for this authorization ended December 13, 2010, and the order is pending.
• Sabine Liquefaction has engaged one of the largest construction firms, Bechtel to complete front-end engineering and design work and to negotiate a lump-sum turnkey contract for the project. Construction costs are estimated to be consistent with other recent liquefaction expansion projects constructed by Bechtel, or approximately $400 per ton, before financing costs. Additional work needs to be completed with Bechtel in order for Sabine Liquefaction process to be able to make an estimate specific to the project.
• Sabine Liquefaction has engaged SG Americas Securities, LLC ("Societe Generale") for general financial strategy and planning in connection with the development and financing of the project.
• To date, Sabine Liquefaction has signed (8) eight non-binding memoranda of understanding ("MOUs") with potential customers for up to approximately 9.8 mtpa of bi-directional processing capacity. Sabine Liquefaction has initiated negotiations to convert these non-binding MOUs into definitive agreements.
Sabine Liquefaction will contemplate making a final investment decision to commence construction upon, among other things, entering into acceptable commercial arrangements, receiving regulatory authorization to construct and operate the liquefaction assets and obtaining adequate financing. Based on company estimates, we expect construction to commence in 2012 and operations to commence in 2015.
Also, the recent Japanese news is very Bullish for Cheniere Energy's plan to export LNG to World Trade Organizations (WTO) who are in need. Comparing to the PNG LNG project of InterOil (NYSE: IOC) stock at $72 which comes online in 2014, Cheniere Energy (AMEX: LNG) looks very attractive and very rewarding to those who jump in now. The stock has been on an uptrend over the past 6 months and should continue upward as their business plan progresses.
Current LNG Chart
LNG Institutional Holders
Recommendation: Strong Buy on (AMEX: $LNG)
This could be a multiple bagger for longer term shareholders who are patient from my Buy recommendations around $3.00 in Oct 2010.
The editor is currently long LNG and trades other related energy stocks as well.