<PAGE>
As filed with the Securities and Exchange Commission on April 9, 1998
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHENIERE ENERGY, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 95-4352386
(State of incorporation) (I.R.S. Employer Identification No.)
1200 Smith Street, Suite 1740
Houston, Texas 77002-4313
(713) 659-1361 (Address, including zip
code, and telephone number, including area code, of
Registrant's principal executive offices)
Don A. Turkleson
Chief Financial Officer
Cheniere Energy, Inc.
1200 Smith Street, Suite 1740
Houston, Texas 77002-4312
(713) 659-1361
(Name, address, including zip
code, and telephone number, including area code,
of agent for service)
Copies to:
John B. Clutterbuck
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002-2778
(713) 225-7000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of each maximum maximum
class of offering aggregate Amount of
securities to Amount to be price offering registration
be registered Registered per share price fee
<S> <C> <C> <C> <C>
Common Stock,
par value $.003
per share 3,805,804 $2.9375/(1)/ $11,179,549.25/(1)/ $3,297.97
Common Stock,
par value $.003
per share, to
be issued upon
exercise of
Warrants 1,770,000.66/(2)/ $2.9375/(3)/ $ 5,199,376.94 $1,533.82
Total 5,575,804.66 --- $16,378,926.19 $4,831.79
</TABLE>
/(1)/ Estimated solely for the purpose of computing the amount of the
registration fee, based on the average of the high and low prices for the
Company's Common Stock as reported on The Nasdaq SmallCap Market on April
3, 1998 in accordance with Rule 457 under the Securities Act of 1933.
/(2)/ Represents the number of shares issuable upon the exercise of
Warrants.
/(3)/ Estimated solely for the purpose of computing the amount of the
registration fee, based on the exercise price of the Warrants in accordance
with Rule 457(g).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Prospectus Subject to Completion
- ---------- April 9, 1998
5,575,804.66 SHARES
CHENIERE ENERGY, INC.
COMMON STOCK
This Prospectus covers 5,575,804.66 shares of Common Stock, $.003 par value
(the "Common Stock" or the "Shares"), of Cheniere Energy, Inc. ("Cheniere
Energy" or the "Company"), which may be offered from time to time by one or all
of the selling stockholders named herein (the "Selling Stockholders"). The
Company will receive no part of the proceeds of such sales, but it will receive
payment for the exercise price of any Warrants and Options in the event that any
of the Warrants or Options are exercised.
The shares of Common Stock being registered pursuant to the registration
statement of which this prospectus is a part include (i) 550,000 shares issued
in connection with the transactions (the "Reorganization") contemplated in the
Agreement and Plan of Reorganization (the "Reorganization Agreement") dated
April 16, 1996 between Cheniere Operating and Bexy Communications, Inc., to the
initial subscribers for common stock of Cheniere Operating and their
transferees, other than shares held by BSR Investments, Ltd. and William D.
Forster, (ii) 898,500 shares issued in connection with the Reorganization to
holders of common stock of Cheniere Operating issued in May and June 1996
pursuant to Regulation D, (iii) 1,993,971 shares issued during the period from
July 1996 to April 1998 pursuant to Regulation D,(iv) 363,333 shares issued from
August 1996 to December 1996 pursuant to Regulation S, (v) 141,666 and 2/3
shares issuable upon the exercise of warrants exercisable on or before June 14,
1999, at an exercise price of $3.00 per share, (vi) 68,000 shares issuable upon
the exercise of warrants exercisable on or before May 15, 1999, at an exercise
price of $3.00 per share, (vii) 12,500 shares issuable upon the exercise of
warrants exercisable on or before August 8, 1998, at an exercise price of $3.125
per share, (viii) 100,000 shares issuable upon the exercise of warrants
exercisable on or before September 1, 1999, at an exercise price of $3.125 per
share, (ix) 64,500 shares issuable upon the exercise of warrants exercisable on
or before June 14, 1999, at an exercise price of $3.00 per share, (x) 50,000
shares issuable upon the exercise of warrants exercisable on or before March 31,
2000, at an exercise price of $3.125 per share and (xi) 1,333,334 shares
issuable upon the exercise of warrants exercisable on or before December 31,
2001, at an exercise price of $2.375 per share. For more information concerning
the Shares and the transactions pursuant to which they were or will be issued,
see "Issuance of Securities to Selling Stockholders" and "Description of
Securities."
The Selling Stockholders intend to sell the shares offered hereby from time
to time in the Nasdaq SmallCap Market at prices prevailing therein, in
individually negotiated transactions at such prices as may be agreed upon or a
combination of such methods of sale, during the period following the effective
date of this Prospectus. The Company will bear all expenses with respect to the
offering of the Common Stock, except any underwriting discounts, selling
commissions, stock transfer taxes, and fees and disbursements of counsel for the
Selling Stockholders. To the extent required, the specific shares of Common
Stock to be sold, the names of the Selling Stockholders, the public offering
price, the names of any agent dealer or underwriter and any applicable
commission or discount with respect to any particular offer is set forth herein
or will be set forth in an
<PAGE>
accompanying Prospectus Supplement. See "Selling Stockholders" and "Plan of
Distribution."
The Company's Common Stock is traded on The Nasdaq SmallCap Market under
the symbol "CHEX." The last reported sales price of the Common Stock on The
Nasdaq SmallCap Market on April 3, 1998 was $3.00 per share.
--------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5,
FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
--------------------------------------
The Selling Stockholders and any broker executing selling orders on behalf
of the Selling Stockholders may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
Commissions received by any such broker may be deemed to be underwriting
commissions under the Securities Act. See "Plan of Distribution" for
information relating to indemnification of the Selling Stockholders.
--------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------------
The date of this Prospectus is _____________________, 1998
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<PAGE>
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
shares offered hereby to any person in any jurisdiction in which it is unlawful
to make such an offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to the Registration Statement. Statements
contained herein concerning the provisions of any document are not necessarily
complete, and each such statement is qualified in its entirety by reference to
the copy of such document filed with the Commission.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Central Regional
Office, 1801 California Street, Suite 4800, Denver, Colorado 80202. Copies of
such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of the
prescribed fees. The Common Stock of the Company is quoted on The Nasdaq
SmallCap Market. Reports, proxy and information statements and other
information concerning the Company may be inspected at The Nasdaq Stock Market
at 1735 K Street, NW, Washington, D.C. 20006. In addition, the Commission
maintains a World Wide Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended August 31,
1997, including the amendment thereto on Form 10-K/A;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1997;
(3) The Company's Current Report on Form 8-K dated August 28, 1997 (filed
September 24, 1997);
(4) The Company's Current Report on Form 8-K dated September 29, 1997
(filed October 10, 1997); and
(5) The Company's Current Report on Form 8-K dated December 18, 1997
(filed December 18, 1997).
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein, to the extent required, and to be a part
hereof from the date of filing of such reports and documents. Any statement
incorporated herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted in
writing to Don A. Turkleson, Chief Financial Officer, Cheniere Energy, Inc.,
1200 Smith Street, Suite 1740, Houston, Texas 77002-4312.
4
<PAGE>
THE COMPANY
Cheniere Energy, Inc., a holding company ("Cheniere," together with
Cheniere Operating (as defined below), the "Company"), is the owner of 100% of
the outstanding common stock of Cheniere Energy Operating Co., Inc. ("Cheniere
Operating"). References herein to the "Company" or "Cheniere" refer to Cheniere
Energy, Inc. and its wholly owned subsidiary. Cheniere is a Houston-based
company formed for the purpose of oil and gas exploration, and if warranted,
development and exploitation. Cheniere is currently involved in a joint
exploration program which is engaged in the exploration for oil and natural gas
along the Gulf Coast of Louisiana, onshore and in the shallow waters of the Gulf
of Mexico. The Company commenced its oil and gas activities through such joint
program in April 1996.
THE COMPANY HAS NOT YET ESTABLISHED OIL AND GAS PRODUCTION, NOR HAS IT
BOOKED PROVEN OIL AND GAS RESERVES. The Company is currently a development
stage enterprise with no operating revenues and no expectation of generating
meaningful operating revenues before the latter part of calendar year 1998.
Cheniere is involved with one major project, a joint exploration program
pursuant to an Exploration Agreement between Cheniere and Zydeco Exploration,
Inc. ("Zydeco"), an operating subsidiary of Zydeco Energy, Inc. (the
"Exploration Agreement"), with regard to a proprietary 3-D seismic exploration
project in southern Louisiana (the "3-D Exploration Program"). Cheniere owns a
50% interest in the 3-D Exploration Program. The 3-D seismic survey (the
"Survey") covers 228 square miles within a 330 square-mile area running three to
five miles north and generally five to eight miles south of the coastline in the
most westerly 28 miles of Cameron Parish, Louisiana (the "Survey AMI"). Field
acquisition of the seismic data was completed in July 1997, and the data is
currently being interpreted.
Cheniere has been publicly traded since July 3, 1996 under the name
Cheniere Energy, Inc. The Company's principal executive offices are located at
1200 Smith Street, Suite 1740, Houston, Texas 77002, and its telephone number is
(713) 659-1361.
RISK FACTORS
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents incorporated by reference herein)
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements regarding the Company's expectations, beliefs, intentions
or future strategies. All forward-looking statements included in this document
are based on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward looking statements.
Actual results could differ materially from those expressed or implied in the
forward-looking statements as a result of known and unknown risks, uncertainties
and other factors, including the risk factors set forth below and in the
documents incorporated by reference herein. In evaluating the Company's
business, prospective investors should carefully consider the following risk
factors in addition to the other information set forth herein or incorporated
herein by reference.
5
<PAGE>
FACTORS RELATING TO THE COMPANY
Limited Operating History
The Company has a limited operating history with respect to its oil and gas
exploration activities which were commenced through a joint exploration program
in April 1996 by Cheniere Operating. Following a reorganization with Bexy
Communications, Inc. ("Bexy"), Cheniere Operating became a wholly-owned
subsidiary of Cheniere on July 3, 1996. From inception (February 21, 1996) to
November 30, 1997, the Company incurred a net loss of $2,053,697 and for the
three-month period ended November 30, 1997, the Company incurred a net loss of
$255,382. The Company is likely to continue to incur losses during the remainder
of 1998, and possibly beyond, depending on whether it generates sufficient
revenue from producing reserves acquired either through acquisitions or drilling
activities.
Limited Assets; No Proven Reserves or Current Production
The Company has not yet established oil and gas production, nor has it
booked proven oil and gas reserves. Currently, the Company's primary asset is
its interest in a joint exploration program pursuant to the Exploration
Agreement. Since almost all of the Company's assets are represented by the
investment to date in the 3-D Exploration Program and additional amounts will
be invested, the Company is highly dependent on the success of the 3-D
Exploration Program.
Need for Additional Financing
The Company presently has no operating revenues and does not expect to
generate meaningful operating revenues before the latter part of calendar year
1998. Additional capital will be required to pay for the Company's share of
costs relating to the development of prospects the Company may wish to pursue,
to exercise lease options, to acquire additional oil and gas leases and to drill
wells on potential prospects, the total amount of which will be determined by
the results of seismic operations and by the portion of the Company's 50%
working interest that is retained. The Company anticipates that its share of
these expenditures could exceed $6 million during the remainder of calendar
1998. In addition, the Company will need funds for the repayment of $4.0
million in short-term senior notes payable that will mature on or before
September 15, 1998 as well as any accrued interest thereon. Should the Company
choose to make an acquisition of producing oil and gas properties, it is likely
that such an acquisition would require that some portion of the purchase price
be paid in cash, and thus create the need for additional capital. Additional
capital may be secured from a combination of funding sources that may include
borrowings from financial institutions, debt offerings (which would increase the
leverage of the Company and add to its need for cash to service such debt),
additional offerings of Cheniere's equity securities (which could cause
substantial dilution of the Common Stock), or sales of portions of Cheniere
Operating's working interest in the prospects within the 3-D Exploration Program
(which would reduce any future revenues from the 3-D Exploration Program). The
Company's ability to raise additional capital will depend on its results of
operations and the status of various capital and industry markets at the time
such additional capital is sought. Accordingly, there can be no assurances that
capital will be available to the Company from any source or that, if available,
it will be on terms acceptable to the Company.
6
<PAGE>
3-D Exploration Program Payments; Insufficient Capital
In accordance with the terms of the Exploration Agreement, Cheniere has
made seismic fund payments totaling $16.4 million and has earned a 50% interest
in the seismic data. Zydeco is obligated under the terms of the Exploration
Agreement to develop prospects from its analysis of the seismic data and to
present such prospects to Cheniere for Cheniere's election as to participation.
Should Cheniere elect to participate in a prospect proposed by Zydeco, Cheniere
must make payment to Zydeco as a reimbursement of prospect expenses within 45
days of the date such expenses are billed by Zydeco. Cheniere Operating has in
the past failed to make seismic fund payments when due. While Cheniere
Operating has in such instances succeeded in obtaining waivers under, and
amendments to, the Exploration Agreement extending the due dates for such
payments, there can be no assurance that Cheniere Operating will successfully
obtain similar amendments should it fail to make required payments to the 3-D
Exploration Program in the future. Neither Cheniere Operating nor Cheniere
currently has sufficient capital to meet its future payment obligations under
the Exploration Agreement if it elects to participate in prospects proposed
thereunder and there can be no assurance that Cheniere Operating or Cheniere
will successfully secure the necessary funds.
Lack of Liquidity of the Common Stock
For January 1, 1998 through April 8, 1998, the average daily trading volume
of the Common Stock of Cheniere was approximately 29,000 shares. The completion
of the offering of the Common Stock provides no assurance that the trading
market for the Common Stock will become more active. Cheniere is listed on The
Nasdaq SmallCap Market.
No Dividends
Cheniere has not paid any dividends since its inception and presently
anticipates that all earnings, if any, will be retained for development of the
Company's business and that no dividends on its Common Stock will be declared in
the foreseeable future. Any future dividends will be subject to the discretion
of Cheniere's Board of Directors and will depend upon, among other things,
future earnings, the operating and financial condition of the Company, its
capital requirements and general business conditions.
Possible Issuance of Additional Shares; Shareholder Dilution
Cheniere has 45,000,000 authorized shares of stock, consisting of (a)
40,000,000 shares of the Common Stock, having a par value of $.003 per share,
and (b) 5,000,000 shares of preferred stock, having a par value of $.0001 per
share (the "Preferred Stock"). As of April 3, 1998, approximately 62.6% of the
shares of the Common Stock remained unissued. Cheniere's Board of Directors has
the power to issue any and all of such shares without shareholder approval. It
is likely that Cheniere will issue shares of the Common Stock, among other
reasons, in order to raise capital to sustain operations, to repay $4.0 million
in short-term senior notes payable and/or to finance future oil and gas
exploration projects. In addition, Cheniere has reserved 1,720,000 and 2/3
shares of the Common Stock for issuance upon the exercise of outstanding
warrants and 651,444 and 2/3 shares of the Common Stock for issuance upon the
exercise of outstanding options. Any issuance of the Common Stock by Cheniere
may result in a reduction in the book value per share or market price per share
of the outstanding shares of the Common Stock
7
<PAGE>
and will reduce the proportionate ownership and voting power of such shares. See
"Description of Securities."
Dependence on Key Personnel
The Company is dependent upon its executive officers for its various
activities. The Company does not maintain "key person" life insurance policies
on any of its personnel nor does it have employment agreements with any of its
personnel. The loss of the services of any of these individuals could
materially and adversely affect the Company. In addition, the Company's future
success will depend in part upon its ability to attract and retain additional
qualified personnel. In addition to its officers, the Company currently has
four full-time employees: one geophysicist, one geologist and two administrative
assistants.
Dependence on Industry Partners
As the Company has few employees and limited operating revenues, the
Company will be largely dependent upon industry partners for the success of its
oil and gas exploration projects for the foreseeable future.
Control by Principal Stockholders
William D. Forster, Co-Chairman of the Board of Directors of the Company,
and BSR Investments, Ltd. ("BSR"), an entity under the control of a member of
the immediate family of Charif Souki, Co-Chairman of the Board of Directors of
the Company, own in the aggregate approximately 36.0% of the outstanding Common
Stock. Accordingly, it is likely that Mr. Forster and BSR will effectively be
able to elect all of the directors of Cheniere and to control Cheniere's
management, operations and affairs, including the ability to prevent or cause a
change in control of Cheniere.
Certain Anti-Takeover Provisions
The Company's Certificate of Incorporation and By-laws and the Delaware
General Corporation Law contain provisions that may have the effect of
discouraging unsolicited takeover proposals for the Company. These provisions,
among other things, authorize the Board of Directors to designate the terms of
and issue new series of preferred stock, limit the personal liability of
directors, require the Company to indemnify directors and officers to the
fullest extent permitted by applicable law and impose restrictions on business
combinations with certain interested parties.
FACTORS RELATING TO THE OIL AND GAS INDUSTRY
Operating Hazards and Uninsured Risks
The oil and gas operations of the Company are subject to all of the risks
and hazards typically associated with the exploration for, and the development
and production of, oil and gas. Risks in drilling operations include cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution
and other environmental risks. The Company's activities are also subject to
perils specific to marine operations, such as capsizing, collision, and damage
or loss from severe weather. These hazards can cause personal injury and loss
of life, severe damage to and destruction of property and equipment, pollution
or environmental damage and suspension of operations. In accordance with
customary industry practices, the Company
8
<PAGE>
intends to maintain insurance against some, but not all, of such risks and some,
but not all, of such losses. The occurrence of a significant event not fully
insured or indemnified against could materially and adversely affect the
Company's financial condition and operations. Moreover, no assurance can be
given that the Company will be able to maintain adequate insurance in the future
at rates considered reasonable by the Company.
Exploration Risks
The Company's exploration activities involve significant risks. There can
be no assurance that the use of technical expertise as applied to geophysical or
geological data will ensure that any well will encounter hydrocarbons. Further,
there is no way to know in advance of drilling and testing whether any prospect
encountering hydrocarbons in the Survey AMI by the 3-D Exploration Program will
yield oil or gas in sufficient quantities to be economically viable. In
addition, the Company is highly dependent upon seismic activity and the related
application of new technology as a primary exploration methodology. There can be
no assurance that the 3-D Exploration Program's efforts will be successful.
High Dependence upon Lease Acquisition Activities
Both the United States Department of the Interior and the State of
Louisiana award oil and gas leases on a competitive bidding basis and non-
governmental owners of the onshore mineral interests within the Survey AMI are
not obligated to lease their mineral rights to the 3-D Exploration Program
except to the extent they have granted lease options to the 3-D Exploration
Program. Other major and independent oil and gas companies having financial
resources significantly greater than those of the 3-D Exploration Program may
bid against the 3-D Exploration Program for the purchase of oil and gas leases.
Accordingly, there can be no assurance that the 3-D Exploration Program or any
other oil and gas venture of the Company will be successful in acquiring
farmouts, seismic permits, lease options, leases or other rights to explore or
recover oil and gas. Consequently, the proportion of the Survey AMI which could
be subsequently explored through drilling would be reduced to the extent that
the 3-D Exploration Program is not successful at such acquisitions.
Lack of Diversification; Oil and Gas Industry Conditions; Volatility of
Prices for Oil and Gas
As an independent energy company, the Company's revenues and profits will
be substantially dependent on the oil and gas industry in general and the
prevailing prices for oil and gas in particular. Oil and gas prices have been
and are likely to continue to be volatile and subject to wide fluctuations in
response to any of the following factors: relatively minor changes in the supply
of and demand for oil and gas; market uncertainty; political conditions in
international oil producing regions; the extent of domestic production and
importation of oil in certain relevant markets; the level of consumer demand;
weather conditions; the competitive position of oil or gas as a source of energy
as compared with other energy sources; the refining capacity of oil purchasers;
and the effect of federal and state regulation on the production, transportation
and sale of oil. It is likely that adverse changes in the oil market or the
regulatory environment would have an adverse effect on the Company's ability to
obtain capital from lending institutions, industry participants, private or
public investors or other sources.
9
<PAGE>
Intense Competition in Oil and Gas Industry
The oil and gas industry is highly competitive. Most of the Company's
current and potential competitors have significantly greater financial resources
and a significantly greater number of experienced and trained managerial and
technical personnel than the Company and the 3-D Exploration Program. There can
be no assurance that the Company or the 3-D Exploration Program will be able to
compete effectively with such firms.
Risks of Turnkey Contracts
The Company anticipates that any wells to be drilled in which the Company
will have an interest will be drilled by established industry contractors under
turnkey contracts that limit the Company's financial and legal exposure. Under
a turnkey drilling contract a negotiated price is agreed upon and the money
placed in escrow. The contractor then assumes all of the risk and expense,
including any cost overruns, of drilling a well to contract depth and completing
any agreed upon evaluation of the wellbore. Upon performance of all these
items, the escrowed money is released to the contractor.
On a footage or day work basis, all risk and expense, including cost
overruns, of drilling a well to total depths lies with the operator.
Circumstances may arise where a turnkey contract is not economically beneficial
to the Company or is otherwise unobtainable from proven industry contractors.
In such instances, the Company may decide to drill, or cause to be drilled, the
applicable well(s) on either a footage or day work basis and the drilling
thereof will be subject to the usual drilling hazards such as cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution
and other environmental risks. The Company would also be liable for any cost
overruns attributable to downhole drilling problems that otherwise would have
been covered by a turnkey contract had one been negotiated.
United States Governmental Regulation, Taxation and Price Control
Oil and gas production and exploration are subject to comprehensive
federal, state and local laws and regulations controlling the exploration for
and production and sale of oil and gas and the possible effects of such
activities on the environment. Failure to comply with such rules and
regulations can result in substantial penalties and may adversely affect the
Company. Present, as well as future, legislation and regulations could cause
additional expenditures, restrictions and delays in the Company's business, the
extent of which cannot be predicted and which may require the Company to limit
substantially, delay or cease operations in some circumstances. In most, if not
all, areas where the Company may conduct activities, there may be statutory
provisions regulating the production of oil and natural gas which may restrict
the rate of production and adversely affect revenues. The Company plans to
acquire oil and gas leases in the Gulf of Mexico, which will be granted by the
federal government and administered by the U.S. Department of Interior Minerals
Management Service (the "MMS"). The MMS strictly regulates the exploration,
development and production of oil and gas reserves in the Gulf of Mexico. Such
regulations could have a material adverse effect on the Company's operations in
the Gulf of Mexico. The federal government regulates the interstate
transportation of oil and natural gas, through the Federal Energy and Regulatory
Commission ("FERC"). The FERC has in the past
10
<PAGE>
regulated the prices at which oil and gas could be sold. Federal reenactment of
price controls or increased regulation of the transport of oil and natural gas
could have a material adverse effect on the Company. In addition, the Company's
operations are subject to numerous laws and regulations governing the discharge
of oil and hazardous materials into the environment or otherwise relating to
environmental protection, including the Oil Pollution Act of 1990. These laws
and regulations have continually imposed increasingly strict requirements for
water and air pollution control, solid waste management, and strict financial
responsibility and remedial response obligations relating to oil spill
protection. The cost of complying with such environmental legislation will have
a general adverse effect on the Company's operations.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
Based on the current exercise price of the Warrants (as defined below), if all
of the Warrants are exercised, the Company will receive proceeds of up to
approximately $4,500,000. The Company expects to use any such proceeds for
ongoing activities related to its 3-D seismic exploration project in Cameron
Parish, Louisiana, working capital and/or general corporate purposes.
11
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of April
8, 1998 by each Selling Stockholder.
<TABLE>
<CAPTION>
Amount of Shares Offered
Hereby/(2)/
-----------------------------
Shares of Shares
Shares Beneficially Common Stock Beneficially
Owned Prior Number Underlying Owned After
Name of to Offering/(1)/ of Shares Warrants the Offering/(2)/
Selling of Common to Purchase
Stockholder Number Percent Stock Common Stock/(3)/ Number Percent
----------- ------ ------- ----- ----------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Adams, Dennis L. 50,000 * 50,000 0 0 0
Alba Limited 25,000 * 0 25,000 0 0
Apex Investment Fund Ltd. 200,000 1.2 200,000 0 0 0
Arabella, S.A. 475,000 2.8 0 475,000 0 0
Astor, Laudimir Trust 62,500 * 62,500 0 0 0
Bank Insinger de Beaufort 100,000 * 100,000 0 0 0
Bemel & Ross Profit Sharing 10,000 * 10,000 0 0 0
Blair, C.M.Foster, W.M. & Co.,Inc. 13,600 * 0 13,600 0 0
Borenstein, Richard 35,833 * 2,500 33,333 0 0
Brander, Martin 15,000 * 15,000 0 0 0
Brandwynne, Jacqueline B. 100,000 * 100,000 0 0 0
BSR Investments, Ltd.(4) 2,768,667 16.5 0 166,667 2,602,000 15.5
Cinco de Mayo, Ltd. 20,000 * 20,000 0 0 0
Cochran, Ronald W. 20,000 * 20,000 0 0 0
Cullman, Joseph F. III 217,917 1.3 201,250 16,667 0 0
Decoteau, Murry A., DDS 100,000 * 100,000 0 0 0
Dixon, Peter T., Trustee for U/Art 35,000 * 35,000 0 0 0
Dixon, Peter T., Trustee for U/Art 35,000 * 35,000 0 0 0
East End Associates, Inc. 66,666 * 66,666 0 0 0
Emerson, J. Steven IRA 50,000 * 50,000 0 0 0
Ezralow, Bryan, TTEE 30,000 * 30,000 0 0 0
Ezralow, Marc 30,000 * 30,000 0 0 0
Ezralow, Marshall, TTEE 40,000 * 40,000 0 0 0
Finkelstein, Allen 30,000 * 30,000 0 0 0
Forster, Gail Daly & John, TTEEs(5) 100,000 * 100,000 0 0 0
Forster, Gail Daly(6) 137,917 * 121,250 16,667 0 0
Forster, William Family Trust(7) 120,000 * 120,000 0 0 0
Fuerst, Kim 200,000 1.2 200,000 0 0 0
Gallizio, Giorgia Tiberio Trust 13,500 * 13,500 0 0 0
Gallizio, Giovanni Enos 12,000 * 12,000 0 0 0
Gallizio, Giovanni Trust 20,000 * 20,000 0 0 0
Goot, Stephen B. 13,000 * 13,000 0 0 0
Great Heritage 50,000 * 0 50,000 0 0
Guildford Manor, Ltd. 160,000 1.0 110,000 50,000 0 0
Hellmold, Ralph O. 161,583.33 1.0 13,750 147,833.33 0 0
Hoemke, Beth 20,000 * 20,000 0 0 0
Howard Leemon 8,500 * 0 8,500 0 0
Hughes, Brendan 58,333 * 58,333 0 0 0
Israel, Robert I. 17,917 * 1,250 16,667 0 0
Johnston, Kim W., M.D. 22,222 * 22,222 0 0 0
Kessler, Douglas W., P.C. 17,917 * 1,250 16,667 0 0
Kessler, Paul L. IRA Rollover 62,500 * 62,500 0 0 0
Koutsoubos, Ted 30,000 * 30,000 0 0 0
Lacemar Investments Corp. 50,000 * 50,000 0 0 0
Leemon, Carolyn 21,250 * 12,750 8,500 0 0
Leemon, Howard, DDS, Benefit Plan 32,500 * 32,500 0 0 0
Lessman, Andrew 50,000 * 50,000 0 0 0
Liipfert, Richard B. 11,111 * 11,111 0 0 0
Mark, Alan & Charlene Mark, JTWROS 3,000 * 3,000 0 0 0
Merback, Arden 9,000 * 9,000 0 0 0
MM&B Holdings, L.L.C. 358,333 2.1 25,000 333,333 0 0
Moshen, Eli 11,000 * 11,000 0 0 0
Neel, John S., Jr. 46,944 * 13,611 33,333 0 0
Ostis Ventures Ltd. 100,000 * 100,000 0 0 0
Phillippine, Pierre 18,000 * 18,000 0 0 0
Redliw Corp. 54,400 * 0 54,400 0 0
Reefs & Co., Ltd. 12,500 * 0 12,500 0 0
Reimer, Charles M.(8) 20,000 * 20,000 0 0 0
Rivera, Joe 12,500 * 12,500 0 0 0
Robinson, Joe Sam Jr., M.D. 173,819 1.0 115,486 58,333 0 0
Robinson, Mixon 50,000 * 50,000 0 0 0
Rover Enterprises, Ltd. 200,000 1.2 200,000 0 0 0
Runnels, G. Tyler 50,000 * 50,000 0 0 0
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Amount of Shares Offered
Hereby/(2)/
-----------------------------
Shares of Shares
Shares Beneficially Common Stock Beneficially
Owned Prior Number Underlying Owned After
Name of to Offering/(1)/ of Shares Warrants the Offering/(2)/
Selling of Common to Purchase
Stockholder Number Percent Stock Common Stock/(3)/ Number Percent
----------- ------ ------- ----- ----------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Salton, Albin 35,833 * 2,500 33,333 0 0
Scorpion Energy Partners 50,000 * 50,000 0 0 0
Shabati, Ofer 16,000 * 0 16,000 0 0
Smission, Hugh F., M.D. 100,348 * 58,681 41,667 0 0
Smission, LaWahna 11,111 * 11,111 0 0 0
Souki, Ramez 13,333 * 13,333 0 0 0
Stephen R. Horn 8,333.33 * 0 8,333.33 0 0
Sturm, Alan 200,000 1.2 180,000 20,000 0 0
Sturm, Alan /Sturm, Lael Trust 10,000 * 0 10,000 0 0
Sturm, Alan/Sturm, Ari Trust 10,000 * 0 10,000 0 0
Sturm, Alan/Sturm, Marni Trust 10,000 * 0 10,000 0 0
Sturm, Gisela 35,000 * 25,000 10,000 0 0
Van Straaten, Thomas Trust 25,000 * 25,000 0 0 0
Vivaldi, Ltd. 120,000 * 120,000 0 0 0
Wagstaff, Michael J. 20,417 * 3,750 16,667 0 0
Western Slopes, Ltd. 385,000 2.3 335,000 50,000 0 0
Whittier Energy, Inc. 20,000 * 20,000 0 0 0
Williams, Walter L./(9)/ 180,000 1.1 30,000 0 150,000 *
Zimbalist, Efrem III/(10)/ 30,000 * 20,000 0 10,000 *
</TABLE>
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Commission and generally includes voting or investment
power with respect to securities. Information with respect to beneficial
ownership is based on information as of April 8, 1998 and assumes that
there is outstanding an aggregate of 14,967,866 shares of Common Stock.
Warrants and Options to purchase shares of Common Stock which are currently
exercisable or will become exercisable within 60 days of April 8, 1998, are
deemed to be outstanding for purposes of the individuals named in this
chart. Except as indicated otherwise in the footnotes below, and subject to
community property laws where applicable, the Company believes based on
information furnished by the Selling Stockholders that the persons named in
the table above have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
(2) Assumes the sale of all Shares offered hereby and no other purchases or
sales of the Company's Common Stock. See "Plan of Distribution."
(3) All Warrants are immediately exercisable
(4) BSR Investments, Ltd. is a major shareholder of the Company, controlled by
a relative of the Company's Co-Chairman, Charif Souki.
(6) Gail Daly Forster is the mother of William D. Forster, President, Co-
Chairman of the Board of Directors of Cheniere.
(5) Gail Daly Forster and John Marshall Forster TTEEs u/a 8/22/78 by William H.
Forster is a trust for the benefit of Mr. Forster's mother of which trust
Mr. Forster is a 20% remainderman. Mr. Forster disclaims beneficial
ownership of the shares of the Common Stock held by such trust.
(7) The William Forster Family Trust is a trust for the benefit of the
descendants of Mr. Forster's father. Mr. Forster disclaims beneficial
ownership of the shares of Common Stock held by such trust.
(8) Charles M. Reimer is a director of the Company.
(9) Walter L. Williams is the President, Chief Executive Officer and a director
of the Company.
(10) Efrem Zimbalist, III is a director of the Company.
13
<PAGE>
ISSUANCE OF SECURITIES TO SELLING STOCKHOLDERS
On July 3, 1996 Cheniere Operating consummated the transactions (the
"Reorganization") contemplated in the Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated April 16, 1996 between Cheniere Operating and
Bexy Communications, Inc., a publicly held Delaware corporation ("Bexy"). Under
the terms of the Reorganization Agreement, Bexy transferred its existing assets
and liabilities to Mar Ventures Inc., its wholly-owned subsidiary ("Mar
Ventures"), Bexy received 100% of the outstanding shares of Cheniere Operating
(which aggregated 824.2422 common shares outstanding prior to a 10,000 to 1
stock split which was effected immediately prior to the Reorganization) and the
former shareholders of Cheniere Operating received approximately 8,242,422 newly
issued shares of Bexy common stock, representing 93% of the then issued and
outstanding Bexy shares. Immediately following the Reorganization, the Original
Bexy Stockholders held the remaining 600,945 (7%) of the outstanding Bexy stock.
This stock split has been given retroactive effect in the financial statements.
As a result of the completion of the share exchange a change in the control of
the Company occurred. The transaction has been accounted for as a
recapitalization of Cheniere Operating. In accordance with the terms of the
Reorganization Agreement, Bexy changed its name to Cheniere Energy, Inc.
Subsequently, the Company distributed the outstanding capital stock of Mar
Ventures to the original holders of Bexy common stock.
Since its inception, Cheniere Operating's primary source of financing for
operating expenses and payments to the 3-D Exploration Program has been,
originally, the sale of its equity securities, and since the reorganization with
Bexy, funding from Cheniere through the sale of Cheniere's equity securities.
Through August 31, 1997, $13.9 million of proceeds, net of placement fees, have
been raised through the sale of equity, and $13.5 million of that amount was
invested in the 3-D Exploration Program.
From inception through the Reorganization, Cheniere Operating raised $2.9
million net of placement fees from the sale of common stock (which was exchanged
for Common Stock following the Reorganization) to "accredited investors" (as
defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended
(the "Securities Act")) pursuant to Rule 506 of Regulation D promulgated under
the Securities Act ("Regulation D"). The proceeds, together with cash balances,
were used to fund Cheniere Operating's initial $3 million payment to the 3-D
Exploration Program.
Subsequent to the Reorganization and prior to August 31, 1996, the Company
raised $2.0 million net of placement fees from the sale of Common Stock pursuant
to Regulation D and Common Stock and warrants to purchase Common Stock pursuant
to Regulation S promulgated under the Securities Act ("Regulation S"). Proceeds
were used to fund a $1 million payment to the 3-D Exploration Program during
August 1996.
During fiscal year 1997, the Company raised $9.4 million net of placement
fees from the sale of Common Stock to accredited investors pursuant to
Regulation D and to offshore investors pursuant to Regulation S. During fiscal
year 1997, $9.5 million was invested in the 3-D Exploration Program.
In June 1996, Cheniere Operating borrowed $425,000 through a private
placement of short-term promissory notes (the "Notes"). In connection with the
placement of the Notes, Cheniere Operating issued warrants (the "June
Warrants"), which following the Reorganization, were exchanged for an
14
<PAGE>
aggregate of 141,666 and 2/3 warrants to purchase shares of the Common Stock, to
the holders of the Notes (the "Noteholders"), each of which warrants entitles
the holder to purchase one share of the Common Stock at an exercise price of
$3.00 per share at any time on or before June 14, 1999. The exercise price was
determined at a 100% premium to the sale price of Cheniere Operating stock by
private placement during May 1996, as the Company's stock was not publicly
traded at that time. The Company satisfied all of its obligations under Notes in
the aggregate principal amount of $210,000 by paying the accrued interest on
such Notes and by agreeing to issue 105,000 shares of the Common Stock at a
price of $2.00 per share to the holders of such Notes pursuant to Regulation D.
In addition, an individual Noteholder (the "Remaining Noteholder") purchased
several outstanding Notes following which such Noteholder held Notes in the
aggregate principal amount of $215,000. In exchange for such notes, Cheniere
Operating issued a new promissory note in the amount of $215,000 to the
Remaining Noteholder, which Cheniere Operating paid on December 13, 1996. The
Remaining Noteholder also received 64,500 warrants to purchase shares of the
Common Stock in accordance with the terms of the original Note agreement. Such
additional warrants have identical terms as the June Warrants, in accordance
with the terms of the original Note Agreement. The Remaining Noteholder was not
an affiliate of the Company.
On December 15, 1997, the Company closed the private placement of a $4
million bridge financing, pursuant to which the Company issued senior term notes
that mature on March 15, 1998, but whose maturity may be extended to September
15, 1998 at the option of the Company (the "Bridge Notes"). Interest on the
Bridge Notes accrues at a rate equal to LIBOR plus four percent. The proceeds
from the bridge financing are being used to fund the Company's ongoing
activities relating to the 3-D Exploration Program in Cameron Parish, Louisiana
and for general corporate purposes. The Company's payment of $2.9 million on
December 31, 1997 completed the Company's payment obligation to earn a 50%
interest in the 3-D Exploration Program.
In connection with the foregoing bridge financing, the Company issued
100,000 shares of Common Stock and warrants to purchase 1,333,334 shares of
Common Stock (the "Bridge Warrants"). The Company has exercised its option to
extend the maturity of the Bridge Notes to September 15, 1998. Additional
Bridge Warrants to purchase 266,667 shares of Common Stock will be issued with
respect to each month that the Bridge Notes remain outstanding beyond March 15,
1998. The Bridge Warrants are exercisable, in whole or in part, at any time on
or before December 31, 2001 at an exercise price of $2.375 per share. The
Company may prepay the Bridge Notes at any time without penalty.
In April 1998, the Company completed the private placement pursuant to
Regulation D of 530,000 shares of Common Stock, resulting in net proceeds of
approximately $1,000,000 which will be used for general corporate purposes.
DESCRIPTION OF SECURITIES
Cheniere has 45,000,000 authorized shares of stock, consisting of (a)
40,000,000 shares of the Common Stock, having a par value of $.003 per share,
and (b) 5,000,000 shares of preferred stock, having a par value of $.0001 per
share (the "Preferred Stock").
The shares of Common Stock being registered pursuant to the registration
statement of which this prospectus is a part include (i) 550,000 shares issued
in connection with the transactions (the "Reorganization") contemplated in the
Agreement and Plan of Reorganization (the "Reorganization
15
<PAGE>
Agreement") dated April 16, 1996 between Cheniere Operating and Bexy
Communications, Inc., to the initial subscribers for common stock of Cheniere
Operating and their transferees, other than shares held by BSR Investments, Ltd.
and William D. Forster, (ii) 898,500 shares issued in connection with the
Reorganization to holders of common stock of Cheniere Operating issued in May
and June 1996 pursuant to Regulation D, (iii) 1,993,971 shares issued during the
period from July 1996 to April 1998 pursuant to Regulation D,(iv) 363,333 shares
issued from August 1996 to December 1996 pursuant to Regulation S, (v) 141,666
and 2/3 shares issuable upon the exercise of warrants exercisable on or before
June 14, 1999, at an exercise price of $3.00 per share, (vi) 68,000 shares
issuable upon the exercise of warrants exercisable on or before May 15, 1999, at
an exercise price of $3.00 per share, (vii) 12,500 shares issuable upon the
exercise of warrants exercisable on or before August 8, 1998, at an exercise
price of $3.125 per share, (viii) 100,000 shares issuable upon the exercise of
warrants exercisable on or before September 1, 1999, at an exercise price of
$3.125 per share, (ix) 64,500 shares issuable upon the exercise of warrants
exercisable on or before June 14, 1999, at an exercise price of $3.00 per share,
(x) 50,000 shares issuable upon the exercise of warrants exercisable on or
before March 31, 2000, at an exercise price of $3.125 per share and (xi)
1,333,334 shares issuable upon the exercise of warrants exercisable on or before
December 31, 2001, at an exercise price of $2.375 per share. For more
information concerning the Shares and the transactions pursuant to which they
were or will be issued, see "Issuance of Securities to Selling Stockholders."
COMMON STOCK
As of April 8, 1998, there were 14,967,866 shares of the Common Stock
outstanding. All of such outstanding shares of Common Stock are fully paid and
nonassessable. Each share of the Common Stock has an equal and ratable right to
receive dividends when, as and if declared by the Board of Directors of Cheniere
out of assets legally available therefor and subject to the dividend obligations
of Cheniere to the holders of any Preferred Stock then outstanding.
In the event of a liquidation, dissolution or winding up of Cheniere, the
holders of Common Stock are entitled to share equally and ratably in the assets
available for distribution after payment of all liabilities, and subject to any
prior rights of any holders of Preferred Stock that at the time may be
outstanding.
The holders of Common Stock have no preemptive, subscription, conversion or
redemption rights, and are not subject to further calls or assessments of
Cheniere. There are no sinking fund provisions applicable to the Common Stock.
Each share of Common Stock is entitled to one vote in the election of directors
and on all other matters, submitted to a vote of stockholders. Holders of
Common Stock have no right to cumulate their votes in the election of directors.
See "Possible Anti-Takeover Provisions."
16
<PAGE>
PREFERRED STOCK
As of the date of this Prospectus, there were no shares of Preferred Stock
outstanding. Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors, without further approval of the
stockholders, is authorized to fix the dividend rates and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences and
any other rights, preferences, privileges and restrictions applicable to each
series of Preferred Stock. The purpose of authorizing the Board of Directors to
determine such rights, preferences, privileges and restrictions is to eliminate
delays associated with a stockholder vote on specific issuances. The issuance
of Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of
Cheniere.
WARRANTS
Cheniere has issued and outstanding certain warrants described herein
(collectively, the "Warrants"). Cheniere is registering the Common Stock
issuable upon the exercise of such Warrants pursuant to the registration
statement of which this Prospectus is a part.
Cheniere has issued and outstanding 141,666 and 2/3 warrants (collectively,
the "June Warrants"), each of which entitles the registered holder thereof to
purchase one share of Common Stock. The June Warrants are exercisable at any
time on or before June 14, 1999, at an exercise price of $3.00 per share
(subject to customary anti-dilution adjustments). The June Warrants were
originally issued by Cheniere Operating and were converted to warrants of
Cheniere following the Reorganization. The June Warrants were issued to a group
of 11 investors in connection with a private placement of unsecured promissory
notes of Cheniere Operating in the aggregate principal amount of $425,000. In
connection with the payment of an additional promissory note to one such
investor, Cheniere has issued to such investor an additional warrant to purchase
64,500 shares of the Common Stock (on the same terms as the June Warrants), in
accordance with the terms of the original Note Agreement, which expires on June
14, 1999.
In consideration of certain investment advisory and other services to the
Company, pursuant to warrant agreements each dated as of August 21, 1996,
Cheniere issued to C.M. Blair, W.M. Foster & Co., Inc. and Redliw Corp. warrants
to purchase 13,600 and 54,400 shares of Common Stock, respectively
(collectively, the "Adviser Warrants"). The Adviser Warrants are exercisable at
any time on or before May 15, 1999 at an exercise price of $3.00 per share
(subject to customary anti-dilution adjustments).
In connection with the July and August 1996 placement of 508,400 shares of
the Common Stock pursuant to Regulation S promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), Cheniere issued warrants to purchase
12,500 shares of Common Stock to one of two distributors who placed the shares
(the "Commission Warrants"). Such Commission Warrants are exercisable on or
before the second anniversary of the sale of the shares of Common Stock at an
exercise price of $3.125 per share (subject to customary anti-dilution
adjustments).
17
<PAGE>
In August 1996, the Company sold 100,000 units, each unit consisting of 5
shares of Common Stock and a warrant to purchase one share of Common Stock.
Each warrant is exercisable on or before September 1, 1999 at an exercise price
of $3.125 per share (subject to customary anti-dilution adjustments).
In December 1997, the Company issued Bridge Warrants to purchase 1,333,334
shares of Common Stock on or before December 31, 2001 at an exercise price of
$2.375 per share. The Bridge Notes mature on March 15, 1998 and may be
extended, at the option of the Company, to September 15, 1998. If the Company
exercises its option to extend the maturity of the Bridge Notes, the Company has
agreed to issue additional Bridge Warrants to purchase 266,667 shares of Common
Stock with respect to each month that the Bridge Notes remain outstanding beyond
March 15, 1998. However, the Common Stock issuable upon the exercise of any
such additional Bridge Warrants may be issued by the Company upon an extension
of the maturity of the Bridge Notes is not being registered pursuant to the
registration statement of which this Prospectus is a part. See "Issuance of
Securities to Selling Stockholders."
In conjunction with a private placement of Common Stock in March 1997 the
Company issued 50,000 warrants to a financial advisor. The warrants were issued
in March 1998 at an exercise price of $3.125 per share and are exercisable on or
before March 31, 2000.
The Warrants do not confer upon the holders thereof any voting or other
rights of a stockholder of Cheniere.
POSSIBLE ANTI-TAKEOVER PROVISIONS
The Amended and Restated Certificate of Incorporation of Cheniere (the
"Charter") contains certain provisions that might be characterized as anti-
takeover provisions. Such provisions may render more difficult certain possible
takeover proposals to acquire control of Cheniere and make removal of management
of Cheniere more difficult.
As described above, the Charter authorizes a class of undesignated
Preferred Stock consisting of 5,000,000 shares. Preferred Stock may be issued
from time to time in one or more series, and the Board of Directors, without
further approval of the stockholders, is authorized to fix the rights,
preferences, privileges and restrictions applicable to each series of Preferred
Stock. The purpose of authorizing the Board of Directors to determine such
rights, preferences, privileges and restrictions is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of
Cheniere.
Cheniere is incorporated under the laws of the State of Delaware. Section
203 of the Delaware General Corporation Law prevents an "interested stockholder"
(defined as a stockholder owning 15 percent or more of a corporation's voting
stock) from engaging in a business combination with such corporation for a
period of three years from the time such stockholder became an interested
stockholder unless (a) the corporation's board of directors had earlier approved
either the business combination or the transaction by which the stockholder
became an interested stockholder, or (b) upon attaining that
18
<PAGE>
status, the interested stockholder had acquired at least 85 percent of the
corporation's voting stock (not counting shares owned by persons who are
directors and also officers), or (c) the business combination is later approved
by the board of directors and authorized by a vote of two-thirds of the
stockholders (not including the shares held by the interested stockholder).
Cheniere is currently subject to Section 203.
In addition, William D. Forster, Co-Chairman of the Board of Directors of
the Company, and BSR Investments, Ltd. ("BSR"), an entity under the control of a
member of the immediate family of Charif Souki, Co-Chairman of the Board of
Directors of the Company, own in the aggregate approximately 36.0% of the
outstanding shares of the Common Stock. Accordingly, it is likely that Mr.
Forster and BSR will have the ability to effectively prevent or cause a change
in control of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is U.S. Stock
Transfer Corporation.
PLAN OF DISTRIBUTION
Shares of Common Stock covered hereby may be offered and sold from time to
time by the Selling Stockholders. The Selling Stockholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Stockholders may sell the Shares
being offered hereby: (i) on the Nasdaq SmallCap Market, or otherwise at prices
and at terms then prevailing or at prices related to the then current market
price; or (ii) in private sales at negotiated prices directly or through a
broker or brokers, who may act as agent or as principal or by a combination of
such methods of sale. The Selling Stockholders and any underwriter, dealer or
agent who participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act. The Company has agreed to
indemnify the Selling Stockholders against certain liabilities arising under the
Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Stockholders (and, if acting as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the Selling Stockholders. Broker-dealers may agree with
the Selling Stockholders to sell a specified number of shares at a stipulated
price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for the Selling Stockholders, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or by a
combination of such methods of sale or otherwise at market prices prevailing at
the time of sale or at negotiated prices, and in connection with such resales
may pay to or receive from the purchasers of such shares commissions computed as
described above.
19
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Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), any person engaged in the distribution of
the Common Stock may not simultaneously engage in market making activities with
respect to Cheniere for a period of five business days prior to the commencement
of such distribution. In addition and without limiting the foregoing, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of shares of
Common Stock by the Selling Stockholders.
The Selling Stockholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act if any such broker-dealers
purchase shares as principal.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Common Stock may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
The Company will keep this Registration Statement or a similar registration
statement effective until the earliest to occur of (i) the date that all
securities registered pursuant to the Registration Statement of which this
Prospectus is a part have been disposed of in accordance with the plan of
disposition indicated herein, (ii) the date that all securities registered
pursuant to the Registration Statement of which this Prospectus is a part have
become eligible for sale pursuant to Rule 144(k) under the Securities Act. No
sales may be made pursuant to this Prospectus after such date unless the Company
amends or supplements this Prospectus to indicate that it has agreed to extend
such period of effectiveness. There can be no assurance that the Selling
Stockholders will sell all or any of the shares of Common Stock offered
hereunder.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, counsel to the
Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report on Form 10-K for the year ended August 31, 1997,
have been audited by Merdinger, Fruchter, Rosen & Corso, P.C., independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The Registrant will bear no expenses in connection with any sale or other
distribution by the Selling Stockholders of the shares being registered other
than the expenses of preparation and distribution of this Registration Statement
and the Prospectus included in this Registration Statement. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
the Securities and Exchange Commission ("SEC") registration fee.
SEC registration fee $ 5,000
Legal fees and expenses 8,000
Accounting fees and expenses 1,000
Miscellaneous expenses 5,000
-------
Total $19,000
=======
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Certificate of Incorporation and By-laws provide for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the Delaware General Corporation Law. The
Registrant has also entered into agreements with its directors and officers that
will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors to the fullest extent not prohibited by law. In addition, the
Registrant carries director and officer liability insurance.
In connection with this offering, the Selling Stockholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the Selling Stockholders and contained
herein.
21
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Item 16. Exhibits.
Exhibits.
4.1 Specimen Common Stock Certificate of Cheniere (Incorporated by
reference to Exhibit 4.1 of the Company's Registration Statement
under the Securities Act of 1933 on Form S-1 filed on August 27,
1996 (File No. 333-10905))
5.1 Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
23.1 Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (included in
Exhibit 5.1)
23.2 Consent of Merdinger, Fruchter, Rosen & Corso, P.C.
24.1 Powers of Attorney (included on signature page)
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
this offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Cheniere Energy, Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Houston, State of Texas, on April 9, 1998.
CHENIERE ENERGY, INC.
By: /s/ WALTER L. WILLIAMS
-----------------------------------
Walter L. Williams
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Walter L.
Williams and Don A. Turkleson, and each of them acting individually, as his or
her attorney-in-fact, each with full power of substitution, for him or her in
any and all capacities to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ WALTER L. WILLIAMS President, Chief Executive April 9, 1998
- ---------------------------- Officer and Director
Walter L. Williams (Principal Executive Officer)
/s/ DON A. TURKLESON Chief Financial Officer April 9, 1998
- ---------------------------- (Principal Financial and
Don A. Turkleson Accounting Officer)
/s/ WILLIAM D. FORSTER Co-Chairman of the Board April 9, 1998
- ----------------------------
William D. Forster
/s/ CHARIF SOUKI Co-Chairman of the Board April 9, 1998
- ----------------------------
Charif Souki
/s/ KENNETH R. PEAK Director April 9, 1998
- ----------------------------
Kenneth R. Peak
/s/ CHARLES M. REIMER Director April 9, 1998
- ----------------------------
Charles M. Reimer
/s/ EFREM ZIMBALIST, III Director April 9, 1998
- ----------------------------
Efrem Zimbalist, III
23
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INDEX OF EXHIBITS
5.1 Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
23.1 Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (included in
Exhibit 5.1)
23.2 Consent of Merdinger, Fruchter, Rosen & Corso, P.C.
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<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF MAYOR, DAY, CALDWELL & KEETON, L.L.P.]
April 8, 1998
Cheniere Energy, Inc.
1200 Smith Street, Suite 1740
Houston, Texas 77002
Ladies and Gentlemen:
We have acted as counsel for Cheniere Energy, Inc., a Delaware corporation
(the "Company"), in connection with the registration of up to an aggregate of
5,575,804.66 (the "Shares") of Common Stock, par value $0.003 per share, of the
Company ("Common Stock"), to be sold by certain selling stockholders of the
Company as described in the Company's Registration Statement on Form S-3, filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended ("Registration Statement"). In such capacity, we have familiarized
ourselves with the Articles of Incorporation, as amended to date, and Bylaws of
the Company, as amended to date, and have examined all statutes and other
records, instruments and documents pertaining to the Company that we have deemed
necessary to examine for the purposes of this opinion.
Based upon our examination as aforesaid, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware; and
2. The Shares are duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name in the Registration Statement at each place in which it appears.
Sincerely,
/s/ Mayor, Day Caldwell & Keeton, L.L.P.
Mayor, Day, Caldwell & Keeton, L.L.P.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS
CHENIERE ENERGY, INC.
As independent public accountants, we hereby consent to the incorporation by
reference of our report in the Cheniere Energy, Inc. Annual Report on Form 10-K
for the year ended August 31, 1997 (and to all references to our firm) in this
Registration Statement on Form S-3.
/S/ MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
April 9, 1998
New York, New York
