Cheniere Energy Inc., which shipped the first cargo of American shale gas earlier this year, would require a “significant premium” before entertaining potential takeover bids, even as the outlook for LNG exports has dimmed amid a worldwide glut.
Bloomberg reports when Neal Shear became Cheniere’s interim chief executive officer in December, he said his “only fear” was that he’d find a letter on his desk one morning from someone interested in buying the natural gas exporter. An acquirer would have to offer a premium for the company that just sent its debut cargo of liquefied natural gas abroad in February, Shear says in an interview with Bloomberg TV.
His declaration comes as Cheniere’s stock has plunged about 51% in the past year—mostly due to a slump in oil prices, the benchmark for global LNG, and waning demand from Asia’s top buyers that has wiped out most of the discount for U.S. supplies. Although he didn’t say whether the Houston-based exporter has received any offers, Shear says “Cheniere could be strategic to a variety of different companies.”
Cheniere could be an attractive target for large U.S. gas drillers because of its focus on exporting, says William Frohnhoefer, an independent consultant who covers the global LNG infrastructure space and is based in Middletown, New Jersey.
“Generally, with LNG export assets globally, if you’re buying an asset, you have to buy oil and gas fields as well,” Frohnhoefer says. “Cheniere’s a pure play. People know pretty much exactly what they’re getting down to the penny.”
The discount for spot gas at the Henry Hub in Louisiana dropped to $2 per million British thermal units this month versus Northeast Asia spot LNG prices from more than $15 in December 2013. While Cheniere has long-term contracts covering 87% of its capacity, current spreads represent a challenge for the industry, Shear says.
Cheniere is discussing internally what margin it believes is sufficient to stimulate growth, according to Shear, given that it would be “reluctant to effectively participate in a race to the bottom.”
