LNGCheniere Energy, Inc. (NYSEMKT:LNG) reported a net loss of $100.4 million, or $0.44 per share (basic and diluted), for the three months endedSeptember 30, 2016, compared to a net loss of $297.8 million, or $1.31 per share (basic and diluted), for the comparable 2015 period. Net Loss, As Adjusted was $94.2 million, or $0.41 per share (basic and diluted), for the three months ended September 30, 2016, compared to a Net Loss, As Adjusted of$164.6 million, or $0.72 per share (basic and diluted), for the comparable 2015 period.

For the nine months ended September 30, 2016, Cheniere reported a net loss of $719.7 million, or$3.15 per share (basic and diluted), compared to a net loss of $684.0 million, or $3.02 per share (basic and diluted), for the comparable 2015 period. For the nine months ended September 30, 2016, Net Loss, As Adjusted was $369.1 million, or $1.62 per share (basic and diluted), compared to a Net Loss, As Adjusted of $498.5 million, or $2.20 per share (basic and diluted), for the comparable 2015 period.

For the three and nine months ended September 30, 2016, Net Loss, As Adjusted excludes the impact of changes in the fair value of our interest rate, commodity and FX derivatives, loss on early extinguishment of debt, restructuring expense, amortization of the beneficial conversion feature related to certain Class B units of Cheniere Energy Partners, L.P. (“Cheniere Partners”) (NYSE MKT: CQP) and impairment expense. Loss on early extinguishment of debt was associated with the write-off of debt issuance costs by Sabine Pass Liquefaction, LLC (“SPL”) and Cheniere Corpus Christi Holdings, LLC(“CCH”) in connection with the refinancing of a portion of their credit facilities and by Cheniere Creole Trail Pipeline, L.P. as a result of the prepayment of its outstanding term loan. For the three and nine months ended September 30, 2015, Net Loss, As Adjusted excludes the impact of changes in the fair value of interest rate, commodity and FX derivatives, loss on early extinguishment of debt related to the write-off of debt issuance costs by SPL primarily in connection with the refinancing of a portion of its credit facilities in March 2015, amortization of the beneficial conversion feature and impairment expense.

“The third quarter of 2016 was significant for Cheniere on multiple fronts. Our transition to operations continues, highlighted in the third quarter by the substantial completion of Train 2 at Sabine Pass and the generation of approximately $67 million in Adjusted EBITDA. Commissioning activities commenced on Train 3, and our remaining Trains under construction continue on time and on budget,” said Jack Fusco, Cheniere’s President and CEO. “In addition, we continued to manage our debt maturity profile by successfully issuing bonds to prepay outstanding borrowings under credit facilities for the Sabine Pass liquefaction project, with the issuing entity having earned its first investment-grade credit rating during the quarter.”

Third Quarter 2016 Highlights

  • In September 2016, Cheniere Partners announced that Train 2 of the Sabine Pass Liquefaction Project (defined below) achieved substantial completion.
  • In September 2016, commissioning activities commenced on Train 3 of the Sabine Pass Liquefaction Project.
  • In September 2016, Cheniere announced the formation of a new executive leadership team.
  • In September 2016, SPL issued an aggregate principal amount of $1.5 billion of 5.00% Senior Secured Notes due 2027. Net proceeds from the offering were used to prepay all of the principal amounts outstanding under SPL’s credit facilities and are being used to pay a portion of the capital costs in connection with the construction of the Sabine Pass Liquefaction Project.
  • In September 2016, Cheniere submitted a proposal to the board of directors of Cheniere Energy Partners LP Holdings, LLC (“Cheniere Partners Holdings”) (NYSE MKT: CQH) to acquire the publicly held shares of Cheniere Partners Holdings not already owned by Cheniere in a stock for stock exchange.

Third Quarter and Year to Date 2016 Results

Our financial results are reported on a consolidated basis. Our ownership interest in Cheniere Partnersconsists of 100% ownership of the general partner of Cheniere Partners and 80.1% ownership interest in Cheniere Partners Holdings which owns a 55.9% limited partner interest in Cheniere Partners.

Adjusted EBITDA for the three and nine months ended September 30, 2016 was $67.3 million and$19.4 million, respectively, compared to losses of $51.5 million and $138.0 million, respectively, for the comparable 2015 periods. During the three months ended September 30, 2016, Train 2 of theSabine Pass Liquefaction Project achieved substantial completion. Prior to substantial completion, amounts received from the sale of commissioning cargoes were offset against LNG terminal construction-in-process because these amounts were earned during the testing phase for the construction of Trains 1 and 2 of the Sabine Pass Liquefaction Project. We expect sales of LNG cargoes from future liquefaction trains (“Trains”) to be reported in the same manner.  During the three months ended September 30, 2016, a total of 18 cargoes were loaded and exported from the Sabine Pass Liquefaction Project, 3 of which were Train 2 commissioning cargoes.

Total operating costs and expenses increased $332.3 million and $452.7 million during the three and nine months ended September 30, 2016 compared to the three and nine months ended September 30, 2015, respectively, generally as a result of the commencement of operations of Train 1 and Train 2 of the Sabine Pass Liquefaction Project in May and September 2016, respectively. Depreciation and amortization expense increased during the three and nine months ended September 30, 2016 as we began depreciation of our assets related to Train 1 and Train 2 of the Sabine Pass Liquefaction Projectupon reaching substantial completion. Selling, general and administrative expense during the three and nine months ended September 30, 2016 decreased from the comparable 2015 periods, which was primarily due to the timing of share-based compensation recognition and the recognition of certain employee-related costs within restructuring expense during the three and nine months ended September 30, 2016 historically reported in selling, general and administrative expense, a reduction in certain professional services fees, and reallocation of costs from selling, general and administrative activities to operating and maintenance activities following commencement of operations at the Sabine Pass Liquefaction Project.

As a result of restructuring efforts initiated in 2015, we recorded $26.2 million and $49.2 million of restructuring charges and other costs associated with restructuring and operational efficiency initiatives during the three and nine months ended September 30, 2016, respectively, for which the majority of these charges required, or will require, cash expenditure. Included in these amounts are $20.9 millionand $42.9 million for share-based compensation. All charges were recorded within restructuring expense on our Consolidated Statements of Operations and substantially all related to severance and other employee-related costs.

Included in selling, general and administrative expense were share-based compensation expenses of$7.5 million and $31.2 million for the three and nine months ended September 30, 2016, respectively, compared to $27.1 million and $85.2 million for the comparable 2015 periods, respectively.

Liquefaction Projects Update

Sabine Pass Liquefaction Project
Through Cheniere Partners, we are developing up to six Trains, each with an expected nominal production capacity of approximately 4.5 million tonnes per annum (“mtpa”) of LNG, at the Sabine Pass LNG terminal adjacent to the existing regasification facilities (the “Sabine Pass Liquefaction Project”).

The Trains are in various stages of operation, construction, and development.

  • Construction on Trains 1 and 2 began in August 2012 and substantial completion was achieved inMay 2016 and September 2016, respectively. Substantial completion is achieved upon the completion of construction, commissioning and the satisfaction of certain tests.
  • Construction on Trains 3 and 4 began in May 2013, and as of September 30, 2016, the overall project completion percentage for Trains 3 and 4 was approximately 91.8%, which is ahead of the contractual schedule. In September 2016, commissioning activities commenced on Train 3. Based on the current construction schedule, Cheniere Partners expects Trains 3 and 4 to reach substantial completion in 2017.
  • Construction on Train 5 began in June 2015, and as of September 30, 2016, the overall project completion percentage for Train 5 was approximately 42.8%, which is ahead of the contractual schedule. Engineering, procurement, subcontract work and construction were approximately 90.8%, 62.0%, 41.9% and 4.6% complete, respectively. Based on the current construction schedule, Cheniere Partners expects Train 5 to reach substantial completion in 2019.
  • Train 6 is currently under development, with all necessary regulatory approvals in place. Cheniere Partners expects to make a final investment decision and commence construction on Train 6 upon, among other things, entering into an engineering, procurement, and construction contract, entering into acceptable commercial arrangements, and obtaining adequate financing.

Corpus Christi LNG Terminal

We are developing up to three Trains, each with an expected nominal production capacity of approximately 4.5 mtpa of LNG, near Corpus Christi, Texas (the “CCL Project”).

The Trains are in various stages of construction and development:

  • Construction on Trains 1 and 2 began in May 2015, and as of September 30, 2016, the overall project completion percentage for Trains 1 and 2 was approximately 43.0%, which is ahead of the contractual schedule. Engineering, procurement and construction were approximately 99.3%, 59.0% and 14.4% complete, respectively. Based on the current construction schedule, we expect Trains 1 and 2 to reach substantial completion in 2019.
  • Train 3 is under development, with all necessary regulatory approvals in place. We have entered into an LNG Sale and Purchase Agreement (“SPA”) for approximately 0.8 mtpa of LNG volumes that commence with Train 3 and expect to commence construction upon entering into additional SPAs and obtaining adequate financing.

Additionally, we are developing Trains 4 and 5 adjacent to the CCL Project and have initiated the regulatory approval process with respect to those Trains.

Recent Developments

  • In October 2016, the previously announced planned outage to improve performance of the flare systems at the Sabine Pass Liquefaction Project, as well as to perform scheduled maintenance to Train 1 and other facilities, was completed on schedule and budget.
  • Cheniere is exploring the development of a midscale liquefaction project (the “Midscale Liquefaction Project”). The Midscale Liquefaction Project would be developed using electric drive modular Trains, with an expected aggregate nominal production capacity of approximately 9.5 mtpa of LNG. Cheniere has completed a competitive bidding process and awarded a front-end engineering and design contract to a consortium consisting of KBR, Inc., Siemens AG, and Chart Industries, Inc.
  • Cheniere has proposed the development of the Midcontinent Supply Header Interstate Pipeline (“MIDSHIP”), connecting new gas production in the Anadarko Basin to Gulf Coast markets. MIDSHIP is being contemplated for up to 1.4 Bcf/d of capacity and would facilitate gas supply for both the Sabine Pass Liquefaction Project and the CCL Project. Cheniere expects the regulatory pre-filing process to commence imminently and to file formal applications for the required regulatory permits in 2017, with construction expected to commence in 2018 upon, among other things, entering into a construction contract and acceptable commercial arrangements and obtaining adequate financing to construct the pipeline.
  • In October 2016, Sabine Pass LNG, L.P. (“SPLNG”) issued a notice of redemption to redeem all of its outstanding $420 million in aggregate principal amount of 6.50% Senior Secured Notes due 2020 (the “2020 Notes”) on November 30, 2016 (the “Redemption Date”). Concurrently, SPLNG intends to repay all of its outstanding $1,665.0 million in aggregate principal amount of 7.50% Senior Secured Notes due 2016 (the “2016 Notes”), which mature on the Redemption Date. Subsequent to the redemption of the 2020 Notes and the repayment of the 2016 Notes, there will be no debt maturity in the Cheniere complex until 2020. (Original Source)

Shares of Cheniere Energy are currently trading at $37.81, up $1.62 or 4.48%. LNG has a 1-year high of $51.96 and a 1-year low of $22.80. The stock’s 50-day moving average is $42.56 and its 200-day moving average is $39.24.

On the ratings front, Credit Suisse analyst Bhavesh Lodaya initiated coverage with a Buy rating on LNG and a price target of $53, in a report issued on October 12. The current price target represents a potential upside of 46% from where the stock is currently trading. According to TipRanks.com, Lodaya has a yearly average loss of 5.5%, a 20% success rate, and is ranked #3095 out of 4165 analysts.

Cheniere Energy, Inc. is engaged in the development, construction and operation of LNG terminals and marketing of LNG and natural gas. It operates through the LNG terminal and LNG and natural gas marketing segments. The LNG terminal segment comprises of the operational Sabine Pass LNG terminal in western Cameron Parish, Louisiana on the Sabine Pass Channel and the following two other LNG terminals that are in various stages of development. The LNG and natural gas marketing segment consists of Cheniere Marketing, LLC (Cheniere Marketing) marketing LNG and natural gas on its own behalf and assisting Cheniere Investments in an effort to utilize the regasification capacity held at the Sabine Pass LNG terminal.