Cheniere Energy Inc.'s liquefaction project costs drove down the company's operations income in 2011, and Cheniere reported net losses for both the fourth quarter and the year, according to a Feb. 24 earnings statement.
The company experienced a net loss of $57.8 million, or 66 cents per diluted share during the fourth quarter of 2011, compared with a net loss of $86.1 million, or $1.51 per diluted share for the same period of 2010. As Cheniere's subsidiary Sabine Pass LNG LP continues to develop its LNG terminal and pipeline project, the company saw higher costs in this area than it had in the previous year. Compared with 2010, these expenses rose $2.7 million for the fourth quarter of 2011 and $28.8 million for the year.
The Sabine liquefaction project is being designed for up to four liquefaction trains with about 4.5 million tonnes per annum, or mtpa, of nominal production capability each. As of February 2012, the company said it has sold approximately 16 mtpa of LNG, coming to 89% of the expected nameplate liquefaction volumes that will be available when all the liquefaction facilities are completed.
Over the past year, the company entered into three long-term sale agreements, totaling approximately 10.5 million mtpa of LNG per year. These will go into effect when the commercial delivery begins at each applicable LNG train, the first two of which Cheniere expects to begin constructing in the first half of 2012. To that end, Sabine Liquefaction entered into an agreement with Bechtel Oil, Gas and Chemicals Inc., for the first two LNG trains for a contract price of $3.9 billion.
The company said it anticipates LNG exports could begin as early as 2015, with each liquefaction train starting its operations in six- to nine-month staggered stages, and the U.S. Department of Energy has authorized the project to export domestically. Cheniere estimated that before financing costs it will pay between $4.5 billion and $5.0 billion to construct the first two liquefaction trains, and the company still needs regulatory approval for all four of its LNG trains.
Cheniere also attributes its increased net loss for the fourth quarter and 2011 on the whole to higher general and administrative expenses associated with the LNG project. Increased labor costs from additional hiring, non-cash compensation expenses and increased variable compensation expenses, drove general and administrative costs up $14 million and $19.8 million for the quarter and year, compared with the same periods of 2010.
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(Originally published February 27, 2012, in SNL Daily Gas Report.)