Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2015 at 15:16

New management likely to focus Cheniere on current projects

By Robert Grattan  December 14, 2015  houstonchronicle.com

As Cheniere Energy worked to ready its first exports of natural gas from an $18 billion Louisiana plant, its ousted CEO was also focused on the next big expansion, the next big project.

That was a vision his bosses on the board of directors didn't share.

"The transition to new management is trying to slow the pace of the company," said Luana Siegfried, an analyst who tracks the company for financial services firm Raymond James, said Monday after Cheniene's Sunday night announcement that it replaced Charif Souki.

Souki, who co-founded the liquefied natural gas business 19 years ago, "wanted a lot of things at the same time," Siegfried noted.

Board member Neal Shear was named interim CEO as the board searches for a new leader. The company declined interview requests for Shear and any other comments Monday.

The board "decided an entrepreneur was not the best person to run the company," Souki told Bloomberg News following his ouster. "They want to run it as a quasi utility until they see how the financial markets are going."

Activist investor Carl Icahn has been working to shake up Cheniere, buying up shares and gaining two board seats. He cheered the change on Monday, though called Souki a talented businessman.

"There is also little doubt that the board wished to move the company in a direction that differed greatly from the path Mr. Souki wanted," Icahn said in a statement.

Icahn also cited Souki's recent sale of shares in Cheniere as a reason shareholders might not want him at the helm. Souki has sold off about $118 million shares in Cheniere this year, according to Bloomberg, but still owns sizeable portion of the company.

Icahn initially bought into Cheniere in August, and has built a 13.8 percent stake in the company since then. He previously said he intended to have discussions with management over "operations, capital expenditures, financings and executive compensation," in documents filed with the U.S. Securities and Exchange Commission.

Investors, in general, didn't react strongly to the news Monday. Shares of Cheniere fell $1.15 or 2.8 percent to $40.14 on the day. Through 2015, the stock is down about 43 percent.

Souki was removed from Cheniere shortly before its $18 billion-plus Sabine Pass liquefaction terminal comes online in Louisiana. The plant's first shipment will put Cheniere at the front of a wave of rivals all vying to make money by sending cheap natural gas from U.S. markets to the higher priced markets abroad.

Cheniere will profit mostly from the fees those producers pay, meaning a large portion of its investment is protected from swings in the price by long-term contracts. The cash will be a major source of steady revenue for Cheniere, which has yet to turn a profit.

The business isn't totally immune from low prices, and as natural gas prices have plummeted abroad, many have questioned whether pouring billions into new projects makes sense.

The falling margin on shipping LNG didn't slow Souki down. He continued to advocate for more expansion. Cheniere proposed to double down and build billion-dollar expansions at Sabine Pass and at another terminal in Corpus Christi despite a widespread perception among analysts that shrinking margins on selling U.S. gas abroad meant no new LNG projects were needed.

Souki could not be reached for comment Monday by the Chronicle.

He told Bloomberg he understood the board's decision. "A lot of the board members are old friends of mine," he said. "They tried to do the best for the company."

He leaves behind a complicated legacy at Cheniere. He guided the company from one grand vision to the next, each time raising massive amounts of money from investors.

Cheniere's first major infrastructure project was a massive LNG import facility, and the company briefly flirted with bankruptcy in 2008 after U.S. shale gas producers unlocked enough gas inside the U.S. to sink the import business.

And in March, the company settled a lawsuit with investors who called management's stock grants excessive.

But Souki has also had supporters.

Instead of a default in 2008, Souki was able to raise more money and to reposition the company as an exporter of natural gas. His reversal led shareholders to a more than 640 percent return over the past five years, and his company has changed the dynamics of the global natural gas markets.

But with the LNG about to begin flowing at Sabine Pass, grand vision has given way to reality at Cheniere.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2015 at 15:19

Now he can afford some clippers at Costco. So ends the career of an entrepreneur.  One of "The Frackers".

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 15, 2015 at 2:44

My comment pertains to the book, The Frackers, by Gregory Zuckerman that we have discussed in the past.  IMO Souki's talent was raising money, not running a company.  Yes, his compensation package was obscene but I think many of us would feel the same about the compensation of CEOs of large companies in general.  Executive compensation over the last 20 years has grown far beyond traditional ranges.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 15, 2015 at 4:04

I can imagine there are quite a few in the industry who would be glad to provide their opinion. And I expect there are more than a few holding stock in Cheniere who welcome the move.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on December 31, 2015 at 4:13

America's First Shale Gas Export Terminal Starts Production

• Sabine Pass complex slated to become first to export shale gas
• Cheniere says first export cargo to leave terminal in January

Link to full article:  http://www.bloomberg.com/news/articles/2015-12-31/cheniere-starts-p...

• ▶ Reply