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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (25280)	8/27/2003 10:23:00 PM
From: Ed Ajootian	Read Replies (1) \| Respond to of 206089

Dennis, I agree that SRE and MRO stand the best chance of getting their LNG terminals done but I wonder how much the price of SRE and MRO would ever get affected by their respective LNG projects, given how large those companies are. In any event, they are good companies to own anyway as you have said. MRO also has interesting play going in Russia. Its my understanding that only a ship that is built specially for LNG can ship LNG, so the LNG shipping market is completely different from other shipping markets. Re: Cheniere, I also have my doubts about whether they will ever succeed in getting any of their terminals done. But for at least the next 6 months or so that question is largely irrelevant to the Cheniere investment question IMO. The point is there is nothing that will likely come up to indicate that they will not be successful for the next 6 months, so during this time they can just continue to ride up on all the hype. Also, they have stated that they plan to file FERC applications for 2 more LNG terminals in January. These filings should power the stock up also. The first "binary event" (as I like to say) for Cheniere will be whether or not their first terminal, Freeport, gets approved by the FERC. They have said the earliest that would happen is next March. Until that time, they can just keep lining up more consultants and contractors, etc., such as the one they announced today, and the stock should continue to drift up on the hype. Regarding financing the terminals, the first one, Freeport, they only own 30% of. I understand that you can get project financing for these things, including construction financing, as long as you have locked up commitments for say 2/3rds of the capacity beforehand. They have already gotten a non-binding commitment from Dow Chemical, for a third of the capacity. That has given them a huge amount of credibility IMO. Freeport is estimated to cost $400 M to build, thus $120 M to Cheniere. I would think they could get $80 M of their $120 M financed with project financing, leaving them needing to raise $40 M of equity. I think this would be achievable. Another possible source of funds would be their 9% interest in a private E&P company called Gryphon Exploration, which is worth something north of $10 M. Now once they have 1 LNG terminal under their belt the others should be a lot easier, since the stock will have skyrocketed much higher by then on the news of getting Freeport going.