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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 9, 1998
Cheniere Energy, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-9092 95-4352386
(Commission File Number) (IRS Employer Identification No.)
Two Allen Center
1200 Smith Street Suite 1740
Houston, Texas 77002-4312
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(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (713) 659-1361
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None
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(Former name or former address, if changed since last report)
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Item 5. Other Events
The company announced that it has received the binding award of an independent
panel of arbitrators reviewing claims against the company and counterclaims by
the company related to certain rights and obligations pursuant to an Exploration
Agreement. The Exploration Agreement between Cheniere and Zydeco Exploration,
Inc. governs the activities of the two companies in connection with their
jointly owned 3-D Seismic Program in Cameron Parish, Louisiana.
The panel confirmed Cheniere's 50% ownership in the proprietary 3-D Seismic
Data, including the right to possess field tapes and all volumes of such data
acquired prior to December 31, 1997. The panel also confirmed Cheniere's right
to review Zydeco's seismic interpretations within the area of mutual interest
("AMI") and to purchase an interest of up to 50% in any prospects generated by
Zydeco in the AMI, including the right to acquire ownership of all processing
volumes conducted after December 1997 related to such prospects. The
arbitration panel confirmed Zydeco's right to manage the exploration process for
a period of 90 days after it declares a prospect's assembly and development to
be complete. In addition, the panel affirmed Cheniere's right to generate
prospects and manage the exploration process for any prospect generated by
Cheniere and rejected by Zydeco (subject to Zydeco's right to acquire a 50%
interest in any lease acquired by Cheniere).
Ownership of the existing prospects was also determined by the panel. All
ownership in prospects acquired by either party, where the non-acquiring party
declined to participate, was confirmed to belong to the acquiring party.
Consequently, Cheniere has 100% ownership in six prospects, Cheniere and Zydeco
have 50% ownership each in three prospects and 25% each in another prospect, and
Zydeco has 100% ownership in one Federal lease which covers a portion of one
prospect.
In addition, the panel decreed that all prospects on leases acquired by Zydeco
in the June 1998 Louisiana state lease sale must be offered to Cheniere and that
Cheniere would have 30 days from such offer to review the prospects and elect or
decline to participate.
The panel found that in future state lease sales, Zydeco may require Cheniere to
advance its 50% share of the proposed bid at the time of the sale or forfeit its
right to acquire an interest in such leases, but only if the lease relates to a
prospect which Zydeco has notified Cheniere is completely assembled and
developed, and only if adequate decision making data is provided 30 days prior
to the sale.
The panel has found that certain activities related to the selling of prospects
are the equivalent of marketing, sale or licensure of the proprietary seismic
data acquired under the Exploration Agreement. In the event such marketing,
sale or licensure of data occurs, the Exploration Agreement provides that 100%
of the proceeds related to seismic data will be directed to Cheniere until
Cheniere recoups $13,500,000 of its investment; thereafter the proceeds will be
shared 50/50 between Cheniere and Zydeco.
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The panel found that Zydeco was not authorized to issue cash calls to Cheniere
for seismic costs incurred after December 31, 1997. Accordingly, $1,115,143 in
billings made by Zydeco to Cheniere were not allowed under the Exploration
Agreement and Cheniere has no liability for such costs as billed. The panel
also stated that some portion of such costs may be appropriately charged to
Cheniere as a component of prospects in which Cheniere elects to acquire an
interest. The panel also found that Zydeco owes the joint venture account
$271,132 and that certain equipment acquired by Zydeco with joint venture funds,
including a Hewlett Packard SPP1600 supercomputer, is the joint property of the
parties.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHENIERE ENERGY, INC.
By:/s/ DON A. TURKLESON
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Don A. Turkleson
Chief Financial Officer, Treasurer and Secretary
Date: December 14, 1998
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