Cheniere Energy, Inc. (NYSEMKT:LNG)

CAPS Rating: 3 out of 5

The Company is engaged primarily in the business of developing and constructing, and then owning and operating, a network of three onshore LNG receiving terminals, and related natural gas pipelines, along the Gulf Coast of the United States.

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Player Avatar TSIF (99.96) Submitted: 5/23/2011 5:06:40 PM : Underperform Start Price: $11.75 LNG Score: +7.18

Cheniere Energy, Inc has been very volitile the last two years with some 50-100% short term swings. The foray up above ten has been a tough climb with hedge funds and Cheniere trading punches on how some debt is structured between Cheniere Engergy and it's affiliates. The debt load on Cheniere Energy held it back hard during the peak of the recession. I won't take a stand on the accounting disagreements. My current downthumb is based on the 17% spike Cheniere Energy had today, (I missed it's peak near 25%).

The spike was a result of announcement that "U.S. Department of Energy's decision to grant a subsidiary of the natural gas company's general partnership authorization to export domestically produced liquefied natural gas."

Cheniere Energy would be the first one granted this ability, two other company's have pending applications. The approval is great news for Cheniere Energy, the problem I have is that the target date to refit the facility is 2015. While NG prices in the US remain about 40% below some other countries and the new methods to extract it from shale give the US a 100 year plus buffer, Cheniere is cash poor currently and the benefits will not occur quickly enough to support the share price rise. I expect a decay back down as the time to benefit sinks in. Another possibility is for Cheniere Energy to use the spike to do some dilutive stock issues.

Short term retrace. Target: sub $10.00

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