Author's note: Yes, I have a vested interest in Cheniere Energy. I'm hoping it will be a good part of my retirement. Never would I promote an investment I would not find sound enough to personally participate. No guarantees however.
I've had Cheniere Energy under the microscope for six years now. Originally I thought it was a good investment for LNG importation. Being on the drilling side for thirty years I thought it was a sure bet. I was wrong. Little did I know that technology, a new way for hydraulic fracturing of formations, coupled with new fluids and methods of directional drilling, would make Natural Gas cheep and abundant here in the US. Speculative estimates are conservatively suggesting there is enough in reserve to light up the US for 100 years. This will create jobs, and give us a viable chance to develop alternatives, without destroying our existing infrastructure to make way for clean energy. Natural Gas IS a viable clean energy.
I watched my investment drop 40 percent before withdrawing, very lucky that I was paying attention because in a short period of time it went for US$30plus to US$.97. I thought it was a long term investment, and even though large blocks of investors were making money with their "put" options, I was in denial. For years it floundered, and I day-traded trying to recoup my losses, but with no crystal ball I just about broke even. I watched those insider "block" investors making big bucks, sometimes doubling their money twice a week. No, I'm not privy to inside information, but it was evident to me, by the trends I noted, that some people did, and they had big money. Markets are controlled by big blocks of money. It takes big money to manipulate a market, and several investors coinciding simultaneously. Yes, that is just what it sounds like.
It was decided to make the Cheniere facility exportable, and I again jumped aboard, even replenishing my losses with some of my savings, to keep my ego and intellect in balance. I bought in at about US$2, and decided not to trade it, to just sit and wait. Over the last few years it has climbed to US$20.5, and I'm expecting that to double again this year. I also expect it to pay a dividend, and possibly split, and all of that would be very good. But I have learned one thing on Scott Trade, "Don't count your chickens before they hatch."
I'm not alone in my optimistic assessment of the Cheniere Phenomena. Last look indicated no put options on the horizon, as it is becoming more evident to the big boys that this is likely to be a stable long- term investment. No doubt there were others who also took a loss along with me, and that must have left a sour taste, but doing ones homework here reflects what Cramer said just a few days ago about six investment opportunities he thought would kick, and Cheniere was in the bag with his special exclamation, "BUY! BUY! BUY!"
Of course, a few Motley Fools have tried to throw water of this fire for years saying that anything can happen, as surely there is Natural Gas in abundance in other places. And they are right. But here are just a few primary thoughts to consider that makes Cheniere a good bet...
1.) The US has pipeline infrastructure already in place. Infrastructure is expensive, and time consuming to build. It is waiting.
2.) The Panama Canal is being widened for super tankers. Don't know if the big boys have connected this particular dot, but it seems evident somebody did. Perhaps the man behind the curtain.
3.) The first LNG export phase is scheduled to be completed in 2015, and finishing the last stage of this project in 2017. The $10 billion price tag is projecting an 18 million ton per year export ability, and is the first facility in the history of the U.S. to have a "free" export license, to export LNG to any country of its choosing. This is most amazing.
"LNG is the fastest-growing component of the global natural gas market, increasing at a 6% annual rate over the last decade. For countries that lack indigenous natural gas resources and delivery infrastructure, LNG represents a rapid and cost-effective means of introducing natural gas into their local fuel mix. Currently there are 25 LNG-importing countries in Europe, Asia, South America, Central America, North America and the Middle East, up from 17 importing countries in 2007. Numerous developing countries, including Poland, Croatia, Bangladesh, Jamaica, Colombia, Panama, El Salvador, Costa Rica and Lebanon, among others, are considering plans to build new LNG terminals and enter the global LNG trade. " -Cheniere Energy Web Site
4.) Having the only license of this kind gives Cheniere an amazing advantage, as they will be the only kid on the block for some time. Sure, some speculators say the CQP is overvalued at this time, reflecting on the value to debt ratio, but why no put options? The big boys are holding their ground, as this will be an amazing long term investment, and they want their proverbial foot in the door. Here is why...
"Cheniere estimates that construction of the liquefaction capacity is comparable to expansion economics, since the Sabine Pass terminal already has many of the facilities required for an export terminal. Cheniere’s bi-directional service would use its existing infrastructure, including five storage tanks and two berths at the Sabine Pass terminal, as well as Chenier's 94-mile Creole Trail Pipeline, which would be reconfigured as a bi-directional system. The 853-acre Sabine Pass site is strategically situated to provide export services given its large acreage position, proximity to unconventional gas plays in Louisiana and Texas, its interconnections with multiple interstate and intrastate pipeline systems, and its premier marine access less than 4 miles from the Gulf Coast. " -Cheniere web site.
5.) Centrally located, Cheniere will take full advantage of Chenier's Sabine Pass LNG facility in Cameron Parish, Louisiana. Gas development and a labyrinth of pipelines will readily utilize five of the six major US shale plays from the Midwest to the Gulf Coast, including the Barnett, Haynesville, Woodford, Fayetteville/Arkoma, and Eagle Ford. From the tight-sands of East Texas to the Anadarko and Gulf Coast plays, these pay-sands represent the lion's share of future U.S. production.
"A number of large-diameter interstate pipelines have been built in recent years to connect these emerging unconventional basins to major gas market hubs, particularly in the Perryville area of northeastern Louisiana. The Sabine Pass LNG Terminal can deliver to and potentially receive natural gas from eleven interstate and intrastate pipeline systems in the Gulf Coast. These pipelines will allow Sabine Pass and its customers to purchase and receive gas from the emerging unconventional basins, as well as the historically prolific Gulf Coast Texas and Louisiana onshore gas fields." -Cheniere web site
Yes, it is a sign of these quick-moving and volatile times, and I am in it to sink or swim. Those who see that the cheese has moved, will be fed. If I lose, it won't be from a lack of trying.
Author's post script: With the profits you make from Cheniere, immediately purchase as much silver as you can. You will not be sorry. Buy scrap coins, as close to spot as you can. Sit on it and wait for the eggs to hatch. It is not the golden egg, but the silver egg that will hatch the most chicks. Silver is intentionally undervalued, but that cannot be held forever. You could survive not only the devalue of the US dollar, but its total collapse, if you have tangible assets that cannot spoil, and is rare.
"Hope for the best, prepare for the worse." -Eagle Scout