Cheniere Energy Partners
Cheniere operated an LNG import facility in the U.S., but a glut of supply owing to increased production from shale fields turned it into a loss-making project. Cheniere had to take a lot of debt to sustain the facility and is now reeling under a financial burden. A walloping debt burden of about $3 billion is staring Cheniere in the face, and it includes a payment of $298 million due in May 2012. The company also reported a 19% decrease in cash and near cash equivalents to $131.3 million in the quarter ending Sept. 30.
The silver lining
The Herculean construction cost, coupled with a dip in cash and near cash equivalents, has brought Cheniere on the verge of default and made it absolutely necessary for the company to refinance its debt, especially for the May repayment. Cheniere is banking on the BG deal to secure refinancing. The other good news for Cheniere is that Chesapeake
The enormous demand for natural gas from Europe and Asia, along with higher prices compared with the U.S., offer quite lucrative prospects for U.S. natural gas firms. Behemoths like ExxonMobil
With the U.S. already having enough reserves -- and thus supply -- to cater to international demand after fulfilling domestic needs, more and more export facilities like Cheniere's are expected to emerge. With Cheniere already building one and sitting pretty with a 20-year contract, it is expected to enjoy the first mover's advantage. The only obstacle in its way is the huge debt burden. I am hoping the company is able to cross it. What say you, Fools?
If you're looking for an outstanding natural gas stock today, check out The Motley Fool's "One Stock to Own Before Nat Gas Act 2011 Becomes Law." You can download this special report for free by clicking here.
Fool contributor Amitabha Chakraborty does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.