<PAGE>
As filed with the Securities and Exchange Commission on January 18, 2000
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 or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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)
Michael L. Harvey
President and Chief Executive 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. [_]
<PAGE>
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 securities to offering aggregate Amount of
be registered Amount to be price offering registration
Registered per share price fee
<S> <C> <C> <C> <C>
Common stock,
par value $.003
per share 14,934,255 $0.734/(1)/ $10,961,743/(1)/ $2,893.90
Common stock,
par value $.003
per share, to be
issued upon exercise
of warrants
2,264,468/(2)/ $1.208/(3)/ $ 2,735,477 $ 722.17
Total 17,198,723 --- $13,697,221 $3,616.07
</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 our common stock as
reported on The Nasdaq SmallCap Market on January 14, 2000 in accordance
with Rule 457(c) 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 information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
2
<PAGE>
Prospectus Subject to Completion
- ---------- January __, 2000
CHENIERE ENERGY, INC.
17,198,723 SHARES OF COMMON STOCK
This prospectus relates to the offer and sale of up to 17,198,723 shares of
common stock of Cheniere Energy, Inc. Of these shares, 14,934,255 are held by
stockholders and the other 2,264,468 are issuable upon the exercise of warrants
held by warrantholders. One or more of the selling stockholders may offer to
sell these shares from time to time. We will not receive any proceeds of these
sales, but if any of the warrants are exercised, we will receive payment for the
exercise price of the warrants.
Our 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 January 14, 2000 was $0.75 per share.
--------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------------------------------
The date of this prospectus is January __, 2000
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Cheniere Energy, Inc....................................... 5
Risk Factors............................................... 8
Where you can Find More Information........................ 14
Cautionary Statement Regarding Forward Looking Statements.. 16
Use of Proceeds............................................ 16
Selling Stockholders....................................... 17
Description of Securities.................................. 20
Plan of Distribution....................................... 22
Legal Matters.............................................. 23
Experts.................................................... 24
</TABLE>
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CHENIERE ENERGY, INC.
Cheniere is a Houston-based company formed for the purpose of oil and gas
exploration, development and exploitation. We are evaluating and generating
drilling prospects using a regional and integrated approach with a large 3-D
seismic database as a platform.
It is important for you to know that we have only recently established oil
and gas production, and though we have established proved reserves through
drilling in 1999, we will not fully evaluate these reserves until sometime in
the future and will not report the amount and value of these reserves until the
filing of our annual report for the year ended December 31, 1999.
Cheniere was formed in 1996 to fund the acquisition of a proprietary 3-D
seismic database along the transition zone in Cameron Parish, Louisiana. The
228-square-mile survey was acquired and processed during 1997. Interpretation
of the data yielded drilling prospects located onshore and in the state and
federal waters of offshore Louisiana. Leasing activity occurred over
identified prospects throughout these three jurisdictions during 1998 and 1999.
During 1999 we drilled exploration wells on six prospects: two were
discoveries and four were dry holes. Both discoveries are located on West
Cameron Block 49 in Louisiana state waters in approximately 25 feet of water.
Production of natural gas commenced from a common platform in September 1999.
Further drilling in the Cameron project area is scheduled for 2000 on leased
prospects, and multiple leads are under development for possible leasing in the
future.
To ensure continued access to high quality drilling prospects, we expanded
beyond the Cameron area and into the shallow waters of the Gulf of Mexico. We
hired additional management and technical expertise and licensed 8,700 square
miles of 3-D seismic data, which is currently being evaluated. We also made the
commitment to reprocess the entire seismic database and the resulting new data
set, being delivered over two years beginning in September, will provide us with
a higher resolution image of the subsurface than has previously been available.
The existing data set, in hand, and the reprocessed data set, as delivered,
provide us the framework with which to "capture" drilling prospects through
participation in industry prospects, through farm-ins and through leasing at the
area-wide federal and state lease sales. We expect to inventory prospects
sufficient to support a drilling program of one exploration well per month
during the year 2000.
Cheniere's common stock has been publicly traded since July 3, 1996 under
the name Cheniere Energy, Inc. Our corporate offices are located at 1200 Smith
Street, Suite 1740, Houston, Texas 77002, and our telephone number is (713) 659-
1361.
Business Strategy
The key to success in the exploration and production business is ensuring
that dollars invested add incremental reserve value. Simply put, the cost of
finding oil and gas must be less than the value received from the sale of those
reserves. In the current environment we believe we can best add reserve value
by exploring for new reserves, as opposed to buying existing reserves.
We operate on the Gulf of Mexico shelf (less than 300 feet of water depth)
and in adjacent onshore coastal areas of Texas and Louisiana.
We participate in drilling and developing prospects in three ways: (1)
participation in industry prospects, (2) farm-in to industry acreage and (3)
purchase of open leases. Initially, we are reviewing externally generated
prospects both inside and outside our 3-D seismic database. As our regional
mapping expands, we are internally generating drilling prospects that are
located on either held or open acreage. Those prospects located on held acreage
will be pursued via a farm-in agreement and those on open acreage will be
purchased at the area-wide lease sales.
5
<PAGE>
Officers and Directors
Charif Souki, a co-founder of Cheniere, is currently chairman of the board
of directors of the company and is a member of the stock option committee. Mr.
Souki is an independent investment banker with twenty years of experience in the
industry. In the past few years he has specialized in providing financing for
microcap and small capitalization companies with an emphasis on the oil and gas
industry. Mr. Souki received his B.A. from Colgate University and his M.B.A.
from Columbia University.
Walter L. Williams is currently vice chairman of the board of directors of
the company. Prior to joining the company, Mr. Williams spent 32 years with
Texoil, Inc., a publicly held Gulf Coast exploration and production company,
initially as a founder and later as its chairman and chief executive officer.
Prior to that time he was an independent petroleum consultant. Mr. Williams
received a B.S. in petroleum engineering from Texas A&M University and is a
registered engineer in Louisiana and Texas. He served on the board of directors
of Texoil, and has served as a director and member of the executive committee of
the board of the Houston Museum of Natural Science.
Michael L. Harvey is currently president, CEO and a director of Cheniere.
Mr. Harvey began his career in 1973 with Shell Oil Company in corporate planning
and economics. He served as manager of land operations for General Crude Oil
Company from 1977 to 1979. Then, in 1979, he joined Roy M. Huffington, Inc. as
vice president. In 1987, Mr. Harvey founded Gulfstar Petroleum Corporation,
Gulfstar Operating Company and Gulfstar Energy, Inc. He served as president and
CEO of the companies until 1997, when Gulfstar Energy was merged into Domain
Energy Corporation (now Range Resources). He was executive vice president and a
director for Domain in 1998. In 1996 he co-founded Estrella del Golfo, LLC, and
continues to serve as chairman.
Ron A. Krenzke is currently executive vice president-exploration for
Cheniere. Prior to joining Cheniere, Mr. Krenzke was executive vice president
and chief operating officer of XPLOR Energy, Inc. Mr. Krenzke started his
career as a geophysicist in 1974 and has since held various technical and
management positions at Mobil Oil, Texas Eastern, Monsanto Oil, and Amerada
Hess. In 1990 he founded South Coast Exploration Company, where he served as
president and director, and Interactive Exploration Solutions, Inc. (INEXS),
where he served as director. In 1997 these companies were merged with XPLOR
Energy.
Keith F. Carney is currently executive vice president-corporate development
for Cheniere. He served as chief financial officer and treasurer of the company
from July 1996 through November 1997. Prior to joining Cheniere, Mr. Carney was
a securities analyst in the oil & gas exploration/production sector with Smith
Barney, Inc. from 1992-1996. From 1982-1990 he was employed by Shell Oil as an
exploration geologist, with assignments in the Gulf of Mexico, the Middle East
and other areas. He received a M.S. degree in geology from Lehigh University in
1982 and a M.B.A./Finance degree from the University of Denver in 1992. Mr.
Carney currently serves as a director of Pyr Energy.
Don A. Turkleson is currently chief financial officer, secretary and
treasurer of Cheniere. Prior to joining Cheniere, Mr. Turkleson was employed by
PetroCorp Incorporated from 1983 to 1996, as controller until 1986, then as vice
president-finance, secretary and treasurer. From 1975 to 1983 he worked as a
certified public accountant in the audit division of Arthur Andersen & Co. Mr.
Turkleson received a B.S. degree in accounting from Louisiana State University
in 1975. He is a director and past chairman of the board of Neighborhood
Centers, Inc.
William D. Forster, a co-founder of Cheniere, is currently a director of
Cheniere, a member of the audit committee and the stock option committee. Mr.
Forster is chairman and CEO of Stonington Corporation. He served as president
and CEO of Cheniere from July 1996 to September 1997. Mr. Forster was an
investment banker with Lehman Brothers from 1975 to 1990, serving as a managing
director for eleven years, initially in the oil and gas department for seven
years, and then in various other areas. In 1990, he founded his own private
investment bank, W. Forster & Co. Inc. Mr. Forster is a director of Equity Oil
Company, a Nasdaq National Market company. Mr. Forster holds a B.A. in
economics from Harvard College and an M.B.A. from Harvard Business School.
Kenneth R. Peak is currently a director of the company and a member of the
audit committee, the compensation committee and the stock option committee. Mr.
Peak is Chairman, president and CEO of Contango Oil & Gas Company, a Houston-
based oil and gas exploration and production company. Mr. Peak has been the
6
<PAGE>
president of Peak Enernomics, Incorporated, a company engaged in consulting
activities to the oil and gas industry, since forming the company in 1990. Mr.
Peak's energy career began in 1973 as a commercial banker in First Chicago's
energy group. In 1980, Mr. Peak became treasurer of Tosco Corporation and in
1982 chief financial officer of Texas International Company (T.I.). Mr. Peak's
tenure included serving as president of TIPCO, the domestic operating subsidiary
of T.I.'s oil and gas operations. Mr. Peak has also served as chief financial
officer of Forest Oil and as an investment banker with Howard Weil. Mr. Peak
served as an officer in the U.S. Navy from 1968 to 1971. Mr. Peak received a
B.S. in physics from Ohio University and a M.B.A. from Columbia University. He
currently serves as a director of NL Industries, Inc., and Cellxion, Inc.
Charles M. Reimer is currently a director of Cheniere and a member of the
audit committee and the stock option committee. He is also president of
British-Borneo Exploration Inc. Prior to joining British Borneo in November
1998, Mr. Reimer served as chairman and CEO of Virginia Indonesia Company
(VICO), the operator on behalf of Union Texas Petroleum Holdings, Inc. and LASMO
plc, of major oil and gas reserves and production located in East Kalimantan,
Indonesia. Mr. Reimer began his career with Exxon Company USA in 1967 and held
various professional and management positions in Texas and Louisiana. After
leaving Exxon, Mr. Reimer was named president of Phoenix Resources Company in
1985 and relocated to Cairo, Egypt to begin eight years of international
assignments.
7
<PAGE>
RISK FACTORS
We have a limited operating history during which we have continually incurred
losses and we may continue to incur losses.
We have a limited operating history with respect to our oil and gas
exploration activities, which were commenced in April 1996. From our inception
we have incurred losses and may continue to incur losses, depending on whether
we generate sufficient revenue from producing reserves acquired either through
acquisitions or drilling activities.
We have limited current oil and gas production and limited proved reserves,
which means that our success is highly dependent on the success of our
exploration program.
We established our initial oil and gas production in September 1999.
Through our drilling in 1999, we established "proved reserves," which means that
we have identified oil and gas reserves that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. The focus of
our business is exploratory drilling. Because almost all of our assets are
represented by investments to date in our exploration program, and we anticipate
investing additional amounts in the program, we are highly dependent on the
success of our exploration program.
We may need additional financing and may not be able to obtain it on terms that
are acceptable to us, which could harm our ability to conduct our business.
We presently have limited operating revenues, all of which are currently
dedicated to making payments on the Company's indebtedness. As of September 30,
1999, we had only $2,243,490 of current assets and a working capital deficit of
$5,210,555. Because of our low level of current assets, we may need additional
capital for a number of purposes, and our inability to obtain additional
financing could significantly harm our ability to conduct our business,
including our ability to take advantage of opportunities that come from our
exploration program. Our need for additional financing might include the
following:
- Additional capital will be required to pay for our share of costs
relating to the drilling of prospects and development of those that
are successful, to exercise lease options, and to acquire additional
oil and gas leases. The total amount of our capital needs will be
determined in part by the number of prospects generated within our
exploration program and by the working interest that we retain in
those prospects.
- We may need funds for the repayment of $755,000 in short-term notes
payable which mature on March 15, 2000, $1,118,000 in short-term notes
payable which mature on May 5, 2000 and $3,100,000 in short term notes
payable which mature on June 30, 2000. If we are unable to obtain
sufficient new financings to pay off the notes or to further extend
their maturity, then we will be in default with respect to the notes
and the holders of such notes will have the right to seek immediate
repayment of the entire indebtedness due thereunder and enforce all
other rights at law or in equity. Such a default may also cause
defaults under other material contracts to which we are a party. Any
of the foregoing actions would have a material adverse effect on us.
- We may need funds for the payment of approximately $200,000 per month
related to deliveries of reprocessed 3-D seismic data.
- Should we 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 would
create the need for additional capital.
8
<PAGE>
Additional capital could be obtained from a combination of funding sources.
These potential funding sources include:
- borrowings from financial institutions,
- debt offerings, which would increase our leverage and add to our need
for cash to service such debt,
- additional offerings of our equity securities, which could cause
substantial dilution of our common stock, or
- sales of portions of our working interest in the prospects within our
exploration program, which would reduce future revenues from our
exploration program.
Our ability to raise additional capital will depend on the results of our
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 us from any source or that, if available, it will
be on terms acceptable to us.
Because of our lack of diversification, factors harming the oil and gas industry
in general, including downturns in prices for oil and gas, would be especially
harmful to us.
As an independent energy company, our 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. Circumstances that harm the
oil and industry in general will have an especially harmful effect on us. 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;
- political conditions in international oil producing regions;
- the extent of domestic production and importation of oil in 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 and gas.
It is likely that adverse changes in the oil market or the regulatory
environment would have an adverse effect on our ability to obtain capital from
lending institutions, industry participants, private or public investors or
other sources.
We experience intense competition in the oil and gas industry, which may make it
difficult for us to succeed.
The oil and gas industry is highly competitive. If we are not able to
compete effectively, we will not succeed. A number of factors may give our
competitors advantages over us. For example, most of our current and potential
competitors have significantly greater financial resources and a significantly
greater number of experienced and trained managerial and technical personnel
than we do. There can be no assurance that we will be able to compete
effectively with such companies. Moreover, the oil and gas industry competes
with other industries in supplying the energy and fuel needs of industrial,
commercial and other consumers. Increased competition causing over supply and
depressed prices could greatly affect our operating revenues.
9
<PAGE>
We are subject to significant operating hazards and uninsured risks, one or more
of which may create significant liabilities for us.
Our oil and gas operations are subject to all of the risks and hazards
typically associated with the exploration for, and the development and
production of, oil and gas. In accordance with customary industry practices, we
intend to maintain insurance against some, but not all, of these risks and
losses. The occurrence of a significant event not fully insured or indemnified
against could seriously harm us. Moreover, no assurance can be given that we
will be able to maintain adequate insurance in the future at rates we consider
reasonable. Risks in drilling operations include cratering, explosions,
uncontrollable flows of oil, gas or well fluids, fires, pollution and other
environmental risks. Our 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.
We are subject to significant exploration risks, including the risk that we may
not be able to find or produce enough oil and gas to generate any profits.
Our exploration activities involve significant risks, including the risk
that we may not be able to find or produce enough oil and gas to generate any
profits. There can be no assurance that the use of technical expertise as
applied to geophysical or geological data will ensure that any well we drill
will discover oil or gas. Further, there is no way to know in advance of
drilling and testing whether any prospect will yield oil or gas in sufficient
quantities to make money for us. In addition, we are highly dependent on
seismic activity and the related application of new technology as a primary
exploration methodology. This methodology, however, requires greater pre-
drilling expenditures than traditional drilling strategies. Even when fully
used and properly interpreted, 3D seismic data can only assist us in identifying
subsurface structures and hydrocarbon indicators, and will not allow us to
determine conclusively if hydrocarbons will in fact be present and recoverable
in such structures. There can be no assurance that our exploration efforts will
be successful.
We may not be able to acquire the oil and gas leases we need to sustain
profitable operations.
There can be no assurance that we will be successful in acquiring farmouts,
seismic permits, lease options, leases or other rights to explore for or recover
oil and gas. Consequently, the area covered by our 3D seismic data that could
be explored through drilling could be reduced if these leases, permits, options
and the like are not acquired. Both the United States Department of the
Interior and the State of Louisiana award oil and gas leases on a competitive
bidding basis. Further, non-governmental owners of the onshore mineral
interests within the area covered by our exploration program are not obligated
to lease their mineral rights to us except where we have already obtained lease
options. Other major and independent oil and gas companies with financial
resources significantly greater than ours may bid against us for the purchase of
oil and gas leases.
If we are unable to obtain satisfactory turnkey contracts, we may have to assume
additional risks and expenses when drilling wells.
We anticipate that any wells drilled in which we have an interest will be
drilled by established industry contractors under turnkey contracts that limit
our financial and legal exposure. Circumstances may arise, however, where a
turnkey contract is not economically beneficial to us or is otherwise
unobtainable from proven industry contractors. In such instances, we may decide
to drill wells on a day-rate basis, subjecting us to the usual drilling hazards
such as cratering, explosions, uncontrollable flows of oil, gas or well fluids,
fires, pollution and other environmental risks. We would also be liable for any
cost overruns attributable to drilling problems that otherwise would have been
covered by a turnkey contract.
10
<PAGE>
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 non-turnkey
basis, all risk and expense, including cost overruns, of drilling a well to
total depths lies with the operator.
Existing and future United States governmental regulation, taxation and price
controls could seriously harm us.
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 harm us. Present, as
well as future, legislation and regulations could cause additional expenditures,
restrictions and delays in our business, the extent of which cannot be predicted
and which may require us to limit substantially, delay or cease operations in
some circumstances. In most areas where we plan to conduct activities, there
are statutory provisions regulating the production of oil and natural gas which
may restrict the rate of production and adversely affect revenues. We plan 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 Department strictly regulates the exploration,
development and production of oil and gas reserves in the Gulf of Mexico. Such
regulations could seriously harm our 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 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 seriously harm us. In addition, our 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 could have a general harmful
effect on our operations.
We may experience Year 2000 problems, which could cause disruptions of our
operations.
The Year 2000 presents significant issues for many computer systems.
Much of the software in use today may not be able to accurately process data
beyond the year 1999. The vast majority of computer systems process
transactions using two digits for the year of the transaction, rather than the
full four digits, making such systems unable to distinguish January 1, 2000 from
January 1, 1900. Such systems may encounter significant processing inaccuracies
or become inoperable when Year 2000 transactions are processed. Such matters
could impact not only us in our day-to-day operations but also our financial
institutions, customers and vendors as well as state, provincial and federal
governments with jurisdictions where we maintain operations.
We are currently addressing Year 2000 issues and are presently
focusing on our internal business systems and processes. It has been our
strategy to use, wherever possible, industry prevalent products and processes
with minimal customization. As a result, we do not expect any extensive in-
house hardware, software or process conversions in an effort to be Year 2000
compliant nor do we expect Year 2000 compliance related costs to be material to
our operations. To the date of this filing, we are not aware of any significant
problems being experienced at our company related to Year 2000.
While it is the our goal to be Year 2000 compliant, there can be no
assurance that there will not be a material adverse effect on Cheniere as a
result of a Year 2000 related issue. Our business partners may present the area
of greatest risk to us, in part because of our limited ability to influence
actions of third parties, and in part because of our inability to estimate the
level and impact of noncompliance of third parties. Additionally, there are
many variables and uncertainties associated with judgments regarding any
contingency plans we develop.
There is only limited trading in our common stock, which makes our stock more
difficult to sell than the stock of companies with more active markets.
11
<PAGE>
There is only limited trading in our common stock, which makes our stock
more difficult to sell than the stock of companies with more active markets.
During 1999, the average daily trading volume of our common stock on The Nasdaq
SmallCap Market was approximately 78,000 shares. The completion of this
offering of the common stock provides no assurance that the trading market for
the common stock will become more active.
We have not paid dividends and do not expect to in the foreseeable future, so
our stockholders will not be able to receive a return on their investment
without selling their shares.
We have not paid dividends since our inception and do not expect to in the
foreseeable future, so our shareholders will not be able to receive a return on
their investments without selling their shares. We presently anticipate that
all earnings, if any, will be retained for development of our business. Any
future dividends will be subject to the discretion of our board of directors and
will depend on, among other things, future earnings, our operating and financial
condition, our capital requirements and general business conditions.
Our stockholders could experience dilution in the value of their shares because
of additional issuances of shares.
Any issuance of common stock by us may result in a reduction in the book
value per share or market price per share of our outstanding shares of common
stock and will reduce the proportionate ownership and voting power of such
shares. We have 65,000,000 authorized shares of stock, consisting of 60,000,000
shares of the common stock, and 5,000,000 shares of preferred stock. As of
January 11, 2000, approximately 33% of the shares of the common stock remained
unissued. The board of directors has the power to issue any and all of such
shares without shareholder approval. It is likely that we will issue shares of
the common stock, among other reasons, in order to raise capital to sustain
operations, to exchange for or to repay our $755,000 in short-term notes payable
and/or to finance future oil and gas exploration projects. In addition, we have
reserved 8,467,802 and 2/3 shares of the common stock for issuance upon the
exercise of outstanding warrants and 2,550,000 shares of the common stock for
issuance upon the exercise of stock options. As of January 11, 2000, there are
2,179,944 and 2/3 issued and outstanding options to purchase common stock. To
the extent that outstanding warrants and options are exercised, the percentage
ownership of common stock of our stockholders will be diluted. Moreover, the
terms upon which we will be able to obtain additional equity capital may be
adversely affected because the holders of outstanding warrants and options can
be expected to exercise them at a time when we would, in all likelihood, be able
to obtain any needed capital on terms more favorable than the exercise terms
provided by such outstanding securities. In the event of the exercise of a
substantial number of warrants and options, within a reasonably short period of
time after the right to exercise commences, the resulting increase in the amount
of the common stock in the trading market could substantially adversely affect
the market price of the common stock or our ability to raise money through the
sale of equity securities
We depend on key personnel and could be seriously harmed if we lost their
services.
We depend on our executive officers for our various activities. We do not
maintain "key person" life insurance policies on any of our personnel nor do we
have employment agreements with any of our personnel. The loss of the services
of any of these individuals could seriously harm us. In addition, our future
success will depend in part upon our ability to attract and retain additional
qualified personnel. We currently have 17 full-time employees.
We depend on industry partners and could be seriously harmed if they do not
perform satisfactorily, which is usually not within our control.
12
<PAGE>
Because we have few employees and limited operating revenues, we will be
largely dependent upon industry partners for the success of our oil and gas
exploration projects for the foreseeable future. We could be seriously harmed
if our industry partners do not perform satisfactorily on projects that affect
us. We may often have no control over factors that would influence their
performance.
We are controlled by a small number of principal stockholders who may exercise a
proportionately larger influence on Cheniere than our shareholders with smaller
holdings.
We are controlled by a small number of principal stockholders who may do
things that are not in the interests of our shareholders with smaller holdings.
Together, William D. Forster, a director, and BSR Investments, Ltd. own
approximately 17% of the outstanding common stock. BSR Investments, Ltd. is
controlled by the mother of Charif Souki, chairman of our board of directors.
Accordingly, it is likely that Mr. Forster, a director, and BSR Investments,
Ltd. will have a significant influence on the election of our directors and on
our management, operations and affairs, including the ability to prevent or
cause a change in control of the company.
Anti-takeover provisions of the certificate of incorporation, bylaws and
Delaware law could adversely impact a potential acquisition by third parties
that may ultimately be in the financial interests of our shareholders.
Our certificate of incorporation and bylaws and the Delaware General
Corporation Law contain provisions that may discourage unsolicited takeover
proposals. These provisions could have the effect of inhibiting fluctuations in
the market price of our shares that could result from actual or rumored takeover
attempts, preventing changes in our management or limiting the price that
investors may be willing to pay for shares of common stock. 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 us to indemnify directors and officers to the fullest extent
permitted by applicable law and impose restrictions on business combinations
with some interested parties.
13
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any of these documents at the public reference rooms maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Securities and Exchange
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. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
filings are also available to the public from commercial documents retrieval
services and at the Internet website maintained by the Securities and Exchange
Commission at http://www.sec.gov.
Our common stock is quoted on The Nasdaq SmallCap Market. You may also
read our reports, proxy and information statements and other information at The
Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
This prospectus is part of the registration statement that we filed with
the Securities and Exchange Commission to register the shares of common stock
referred to above being offered. This prospectus does not contain important
information that you can find in our registration statement and in the annual,
quarterly and special reports, proxy statements and other documents that we file
with the Securities and Exchange Commission.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with it, which means that we can disclose in
this prospectus important information to you by referring you to other documents
that have been or will be filed with the Securities and Exchange Commission.
The information below is incorporated in this prospectus by reference and is an
important part of this prospectus, except where any of the information has been
modified or superseded by the information in this prospectus or in information
incorporated by reference in this prospectus. Also, information that we file
after the date of this prospectus with the Securities and Exchange Commission
will automatically be incorporated in this prospectus and update and supersede
this information. We incorporate by reference the documents listed below and
any future filings made with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
all of the securities offered by this prospectus are sold:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
- Our Quarterly Reports on Form 10-Q for the three months ended
March 31,
1999, June 30, 1999 and September 30, 1999;
- Our Proxy Statement dated April 30, 1999.
14
<PAGE>
We will provide you, without charge, a copy of the documents incorporated by
reference in this prospectus. We will not provide a copy of the exhibits to
documents incorporated by reference, unless those exhibits are specifically
incorporated by reference into those documents. You may obtain documents
incorporated by reference in this prospectus by requesting them in writing or by
telephone from:
Cheniere Energy, Inc.
1200 Smith Street, Suite 1740
Houston, Texas 77002-4312
Attn: Don A. Turkleson, Chief Financial Officer
(713) 659-1361
You should rely only on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of the shares in any state
where the offer is not permitted. You should not assume that the information in
this prospectus, in any prospectus supplement or in any document incorporated by
reference herein is accurate as of any date other than the date on the front of
those documents.
15
<PAGE>
CAUTIONARY STATEMENT
REGARDING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements made by us or on our behalf. We and our
representatives may from time to time make written or verbal forward-looking
statements, including statements contained in this report and other filings with
the Securities and Exchange Commission and in reports to our stockholders.
All statements, other than statements of historical facts, included in this
prospectus that address activities, events or developments that we intend,
expect, project, believe or anticipate will or may occur in the future are
forward-looking statements. These statements include, among others:
- statements regarding our business strategy, plans and objectives;
- statements expressing beliefs and expectations regarding our ability
to successfully raise the additional capital necessary to meet our
obligations under our current exploration agreements;
- statements expressing beliefs and expectations regarding our ability
to secure the leases necessary to facilitate anticipated drilling
activities;
- statements expressing beliefs and expectations regarding our ability
to attract additional working interest owners to participate in the
exploration and development of our exploration areas; and
- statements about non-historical year 2000 information.
These forward-looking statements are, and will be, based on management's
then current views and assumptions regarding future events.
Actual results could differ materially from estimates and other forward-looking
statements. Important factors that could affect us and cause materially
different results are discussed under the heading "Risk Factors."
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by
this prospectus. Warrants for which the underlying common stock in being
registered in this registration statement are exercisable at various prices
ranging from $0.875 to $2.875 per share. The detailed terms of our warrants are
set forth under "Description of Securities - Warrants." We expect to use any
proceeds we receive from the exercise of warrants for oil and gas exploration
activities, working capital and/or general corporate purposes.
16
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of January 18, 2000 by each selling
stockholder. Beneficial ownership is determined in accordance with the rules
and regulations of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Information with respect
to beneficial ownership is based on information as of January 18, 2000 and
assumes that there is outstanding an aggregate of 40,212,472 shares of common
stock. Warrants to purchase shares of common stock which are currently
exercisable or will become exercisable within 60 days of January 18, 2000 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, Cheniere 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. The table assumes the sale of all shares offered
hereby and no other purchases or sales of Cheniere's common stock. All warrants
shown in the applicable column are immediately exercisable.
<TABLE>
<CAPTION>
Amount of Shares
Offered
Hereby
-----------------------------
Shares of
Common Stock
Shares Number Underlying
Name of Beneficially of Shares Warrants to Shares Beneficially
Selling Owned Prior of Common Purchase Owned After
Stockholder To Offering Stock Common Stock The Offering
- ----------- -------------------- ----------- ------------ -------------------
Number Percent Number Percent
<S> <C> <C> <C> <C> <C> <C>
Adams, Dennis L. 320,000 * 180,000 90,000 50,000 *
Alba Limited 205,000 * 160,000 45,000 *
Apex Investment Fund Ltd. 1,200,000 3.0% 800,000 400,000 *
Arabella 2,545,000 6.2% 1,690,000 855,000 4.2%
Argentiere Holdings, Inc. 300,000 * 300,000 *
Azure Energy Fund Inc. 3,000,030 7.5% 3,000,030 *
Bank Insinger de Beaufort NV 600,000 1.5% 600,000 *
Banque SCS Alliance S.A. 800,000 2.0% 700,000 100,000 *
Batler, Emanuel 75,000 * 50,000 25,000 *
Bemel & Ross Profit Sharing Plan 20,000 * 10,000 10,000 *
Bisgeier, Mark David 6,000 * 6,000 *
Borenstein, Richard N. 138,399 * 11,579 50,987 75,833 *
Brander, Martin 49,286 * 20,000 29,286 *
Brown, Hart 13,000 * 13,000 *
BSR Investments, Ltd. 4,111,445 10.1% 110,000 55,000 3,946,445 11.1%
Connaught Global Ltd. 300,000 * 75,000 75,000 150,000 *
Cullman, Joseph F. 3rd 72,168 * 22,834 11,417 37,917 *
Davidson, Ronald 10,000 * 10,000 *
Forster, Gail Daly 131,765 * 17,368 76,480 37,917 *
Freedman, Gary E. Trustee of the Freedman Family Trust 10,000 * 10,000 *
u/t/d 5/25/82
Gardner, David A. 300,000 * 200,000 100,000 *
Gisborne Capital Limited 300,000 * 300,000 *
Guildford Manor, Ltd. 600,000 1.5% 150,000 450,000 1.2%
Hellmold, Ralph O. 262,833 * 6,250 256,583 1.1%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Amount of Shares
Offered
Hereby
------------------------------
Shares of
Common Stock
Shares Number Underlying
Name of Beneficially of Shares Warrants to Shares Beneficially
Selling Owned Prior of Common Purchase Owned After
Stockholder To Offering Stock Common Stock The Offering
- ----------- -------------------- ------------ ------------- -------------------
Number Percent Number Percent
<S> <C> <C> <C> <C> <C> <C>
Israel, Robert I. 69,199 * 5,789 25,493 37,917 *
Kessler, Douglas, W. P.C. 53,617 * 11,300 5,650 36,667 *
Koutsoubos, Ted 80,000 * 50,000 30,000 *
Lathbury Investments Ltd. 300,000 * 75,000 75,000 150,000 *
Leeds, Don & Gail Leeds 200,000 * 200,000 *
Leff, David M., TTEE of the David Leff Family Trust 10,000 * 10,000 *
u/t/d 2/3/88
Lessman, Andrew 1,816,667 4.5% 1,100,000 716,667 1.8%
Lloyds TSB Bank plc 60,000 * 60,000 *
Marcus, Michael P. 600,000 1.5% 600,000 *
Massabni, Antoine 525,000 1.3% 425,000 100,000 *
MDC Group, Inc. 200,000 * 200,000 *
Merback, Arden 32,571 * 15,000 17,571 *
Merback, Joe 50,000 * 50,000 *
MM & B Holdings, LLC 1,383,834 2.6% 188,001 1,195,833 5.6%
Moshen, Eli 139,571 * 120,000 19,571 *
Neel, John S. Jr. 147,566 * 11,579 50,987 85,000 *
Offshore Energy Services, Inc. 800,000 2.0% 800,000 *
Rehme, Robert G. & Phyllis K. 30,000 * 30,000 *
Robinson, Joe Sam, Jr. 630,769 1.6% 320,263 89,227 221,279 1.0%
Robinson, Mixon 221,429 * 100,000 121,429 *
Schley, Evander D. 5,000 * 5,000 *
Silver Creek Investments Ltd BVI 750,000 1.9% 750,000 *
Smisson Family Investments LLP 180,000 * 180,000 *
Smisson, Hugh F. III 507,333 1.3% 335,473 63,734 108,126 *
Smisson, La Wahna Rigdon 99,000 * 99,000 *
St. Cloud Investments, Ltd BVI 750,000 1.9% 750,000 *
Sturm, Alan 95,000 * 50,000 25,000 20,000 *
The Glenn Golenberg Intervivos Trust Dtd. 4/27/93 150,000 * 150,000 *
Three D Holdings Ltd. 550,000 1.4% 150,000 400,000 *
Union Finance International Corporation 745,000 1.8% 75,000 670,000 *
Vivaldi, L.L.C. 100,000 * 100,000 *
Wagstaff, Michael J. 67,949 * 5,789 25,493 36,667 *
Williams, Betty Brown 20,000 * 20,000 *
---------- ---------
TOTALS 14,934,255 2,264,468
* Less than 1%.
</TABLE>
18
<PAGE>
ISSUANCE OF SECURITIES TO SELLING STOCKHOLDERS
The shares of common stock being registered pursuant to the registration
statement of which this prospectus is a part include:
. 14,003,165 shares issued in private placements during the period from
June 1999 to December 1999
. 800,000 shares issued in consideration for oil and gas well services
to be provided in the future
. 131,090 shares issued in connection with extensions of the maturity
dates of short-term senior notes payable
. 687,067 shares issuable upon the exercise of warrants issued in
private placements
. 382,401 shares issuable upon the exercise of warrants issued in
connection with extensions of the maturity dates of short-term senior
notes payable
. 1,195,000 shares issuable upon the exercise of warrants issued in
consideration for consulting services
On June 30, 1999, we sold 2,296,000 shares to twenty investors at a price
of $1.00 per share pursuant to Regulation D adopted by the Securities and
Exchange Commission. On July 6, 1999, we issued 150,000 shares to two investors
pursuant to a price adjust feature of their April 1999 purchase of 300,000
shares bringing the effective purchase price from $1.00 to $0.67 per share. The
sale was made pursuant to Regulation D adopted by the Securities and Exchange
Commission.
In the period from September 30, 1999 to October 10, 1999 we sold 1,074,134
units to ten investors at a price of $1.10 per unit. Each unit was comprised of
one share of common stock and one half warrant to purchase one share of common
stock, adding up to 1,074,134 shares of common stock and warrants to purchase
537,067 shares of common stock. Warrants issued in connection with these sales
of units are exercisable on or before the third anniversary date of the date the
units were sold at an exercise price of $1.50 per share.
In November and December 1999, we sold 10,483,031 shares of common stock to
twenty two investors at a price of $0.33 1/3 per share pursuant to Regulation D.
On August 10, 1999, in consideration for oil and gas well services to
be provided in the future, we issued 800,000 shares to one investor at a price
of $1.50 per share pursuant to Regulation D adopted by the Securities and
Exchange Commission.
In October 1999, in consideration of the extension of the maturity dates on
certain senior short-term notes payable, we issued 81,750 shares to nine
investors at a price of $1.00 per share pursuant to Regulation D adopted by the
Securities and Exchange Commission. In December 1999, in consideration of the
extension of the maturity dates on certain senior short-term notes payable, we
issued to seven investors 49,340 shares of common stock at a price of $0.33 1/3
per share and warrants to purchase 382,401 shares of common stock at a price to
be determined in the future, between $0.75 and $1.00 per share, on or before
December 16, 2004 pursuant to Regulation D adopted by the Securities and
Exchange Commission.
In July 1999, in connection with a price adjustment provision for units
previously issued, we issued to two investors warrants to purchase 150,000
shares of common stock at a price of $1.00 per share on or before April 12,2004.
In July 1999, as consideration for assistance in the private placement of
our securities, we issued to a consultant warrants to purchase 50,000 shares of
common stock at a price of $1.50 prior to June 30, 2002. In September 1999, in
consideration for consulting services, we issued to a consultant warrants to
acquire 200,000 shares of our common stock at prices of $1.375, $1.875, $2.375
and $2.875 per share for each of four blocks of 50,000 shares, exercisable
within five years of the date of issuance. In December 1999, as
consideration for assistance in the private placement of our securities, we
issued to two consultants warrants to purchase 945,000 shares of common stock at
a price of $1.00 prior to the third anniversary of the issuance.
19
<PAGE>
DESCRIPTION OF SECURITIES
We have 65,000,000 authorized shares of stock, consisting of 60,000,000
shares of the common stock, having a par value of $.003 per share, and 5,000,000
shares of preferred stock, having a par value of $.0001 per share.
COMMON STOCK
As of January 18, 2000, there were 40,212,472 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 out of
assets legally available therefor and subject to dividend obligations 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.
PREFERRED STOCK
As of the date of this private placement memorandum, 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 some
circumstances, make it more difficult for a third party to gain control of
Cheniere.
WARRANTS
We have issued and outstanding warrants to purchase 8,467,802 and 2/3
shares of common stock.
We have issued and outstanding 141,666 and 2/3 warrants, each of which
entitles the registered holder thereof to purchase one share of common stock.
These warrants are exercisable at any time on or before June 14, 2000, at an
exercise price of $3.00 per share and are subject to customary anti-dilution
adjustments. These warrants were originally issued by Cheniere Energy Operating
Co., Inc. (now a wholly owned subsidiary of Cheniere) and were converted to
warrants of Cheniere following the 1996 reorganization of the company. These
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 other warrants, in accordance with the terms of the original note
agreement, which expires on June 14, 2000.
In consideration of investment advisory and other services to Cheniere,
pursuant to warrant agreements each dated as of August 21, 1996, we 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. These warrants are exercisable
at any time on or before May 15, 2000 at an exercise price of $3.00 per share
and are subject to customary anti-dilution adjustments.
In connection with the December 1997 bridge financing, we issued 100,000
shares of common stock and four-year warrants to purchase 1,333,334 shares of
common stock at $2-3/8 per share. We issued additional warrants to purchase
1,600,000 shares of common stock on September 15, 1998 in consideration for the
extension to that date. We
20
<PAGE>
extended the notes again in September 1998 to a maturity date of December 15,
1998, which date was further extended to January 15, 1999 at our option. In
connection with the extension to December 15, 1998, we offered two alternatives
of consideration. Holders of $3,000,000 of the notes elected to reduce the
exercise price of their warrants to $1.50. The holder of $1,000,000 of the notes
elected to reduce the exercise price of its warrants to $2.00 per share, to
extend the term of such warrants to five years from the latter of September 15,
1998 or the date of issue, to receive additional warrants to purchase as many as
387,500 shares of common stock and to receive 50,000 shares of common stock. On
March 15, 1999 we decreased the exercise price by $0.25 per share on all
warrants issued in connection with the bridge financing. In connection with
extensions of the maturity dates from October 1999 to December 1999 and then to
March 2000, we issued 132,342 shares of common stock and warrants to purchase
382,401 shares of common stock at a price to be determined in the future,
between $0.75 and $1.00 per share, and extended the term of all warrants related
to then outstanding notes payable to December 16, 2004.
In conjunction with a private placement of common stock in March 1997 we
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.
In conjunction with the issuance of $180,000 senior term notes payable in
June 1998, we issued warrants to purchase 83,334 shares of common stock at an
exercise price of $2.00 per share. Such warrants are exercisable on or before
June 4, 2002 at an exercise price of $2.00 per share and are subject to
customary anti-dilution adjustments.
In the period from August 31, 1998 through December 15, 1998, we sold
1,950,000 units, each unit consisting of one share of common stock and one half
warrant to purchase one share of common stock, in the aggregate, 1,950,000
shares of common stock and warrants to purchase 975,000 shares of common stock.
Each warrant is exercisable on or before the second anniversary of the date the
units were sold at an exercise price of $2.00 per share and are subject to
customary anti-dilution adjustments.
In April 1999, we sold 300,000 units to three investors at a price of $1.00
per share pursuant to Regulation D adopted by the Securities and Exchange
Commission. Each unit was comprised of one share of common stock and one
warrant to purchase one share of common stock, adding up to 300,000 shares of
common stock and warrants to purchase 300,000 shares of common stock. Warrants
issued in connection with these sales of units are exercisable on or before the
second anniversary date of the date the units were sold at an exercise price of
$1.00 per share.
In June 1999, we issued 1,000,000 warrants to our president and chief
executive officer and 200,000 warrants to another member of our board of
directors, both of whom were instrumental in negotiating our license of 8,700
square miles of 3D seismic data in the Gulf of Mexico. Warrants issued in
connection with this transaction are exercisable on or before the fifth
anniversary of the date the transaction closed at an exercise price of $1.50 per
share.
Effective in July 1999, we issued 50,000 warrants exercisable at $1.50 per
share on or before June 30, 2004 as consideration for assistance in the private
placement of securities. We also issued 150,000 warrants exercisable at $1.00
per share on or before July 5, 2004 in connection with a pricing adjustment to
the number of units sold in April 1999.
In September and October 1999, we sold 1,074,134 units to ten investors at
a price of $1.10 per unit pursuant to Regulation D adopted by the Securities and
Exchange Commission. Each unit was comprised of one share of common stock and
one half warrant to purchase one share of common stock, adding up to 1,074,134
shares of common stock and warrants to purchase 537,067 shares of common stock.
Warrants issued in connection with these sales of units are exercisable at an
exercise price of $1.50 per share on or before the third anniversary date of the
date the units were sold. Also in September 1999, we issued to a consultant
warrants to purchase 200,000 shares of common stock on or before September 27,
2004 at exercise prices per share of $1.375 for 50,000 shares, $1.875 for 50,000
shares, $2.375 for 50,000 shares and $2.875 for 50,000 shares. In November and
December 1999, as consideration for assistance in the private placement of
securities, we issued 945,000 warrants exercisable at $1.00 per share on or
before the third anniversary of the issuances.
The warrants do not confer upon the holders thereof any voting or other
rights of a stockholder of Cheniere.
21
<PAGE>
POSSIBLE ANTI-TAKEOVER PROVISIONS
The amended and restated certificate of incorporation of Cheniere contains
provisions that might be characterized as anti-takeover provisions. Such
provisions may render more difficult possible takeover proposals to acquire
control of Cheniere and make removal of management of Cheniere more difficult.
As described above, the certificate of incorporation 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 some
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
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 at least one of the following conditions is met:
. the corporation's board of directors had earlier approved either the
business combination or the transaction by which the stockholder
became an interested stockholder,
. upon attaining that 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
. 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.
The Delaware General Corporation Law defines an interested stockholder as a
stockholder owning 15 percent or more of a corporation's voting stock. Cheniere
is currently subject to Section 203.
In addition, William D. Forster, a director, and BSR Investments, Ltd., an
entity controlled by the mother of Charif Souki, chairman of our board of
directors, own in the aggregate approximately 17% of the outstanding shares of
the common stock. Accordingly, it is likely that Mr. Forster and BSR
Investments will have the ability to effectively prevent or cause a change in
control of Cheniere.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is U.S. Stock
Transfer Corporation.
PLAN OF DISTRIBUTION
We have agreed to bear some expenses of registration of the shares offered
by this prospectus under federal and state securities laws.
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 Cheniere in making decisions with respect to the timing, manner
and size of each sale. The selling stockholders may sell the shares being
offered by this prospectus:
. 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
22
<PAGE>
. 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 federal 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. Cheniere has agreed to
indemnify the selling stockholders against some liabilities arising under the
federal 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 in the over-the-counter
market, in negotiated transactions or by a combination of such methods of sale
or otherwise. These transactions would be at market prices prevailing at the
time of sale or at negotiated prices. These transactions may involve crosses and
block transactions and may involve sales to and through other broker-dealers,
including transactions of the nature described above. In connection with such
resales the broker-dealers may pay to or receive from the purchasers of the
shares commissions computed as described above.
Under the rules and regulations under the Securities Exchange Act of 1934,
the selling stockholders may be persons engaged in the distribution of the
common stock and may not simultaneously engage in market making activities with
respect to Cheniere for a period of five business days prior to the commencement
of the distribution. In addition, the selling stockholders will be subject to
applicable provisions, rules and regulations under the Securities Exchange Act
of 1934, including 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 some 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 some states, if applicable,
the common stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in some 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.
Cheniere will keep this registration statement or a similar registration
statement effective until the earlier to occur of
. the date that all securities registered under this registration
statement have been disposed of in accordance with the plan of disposition
indicated above or
. the date that all securities registered under this registration
statement have become eligible for sale under Rule 144(k) under the
Securities Act.
No sales may be made pursuant to this prospectus after the earlier of these
two dates unless Cheniere amends or supplements this prospectus to indicate that
it has agreed to extend such period of effectiveness.
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
Cheniere.
23
<PAGE>
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
1998, have been so incorporated in reliance on the report, which contains an
explanatory paragraph relating to Cheniere's ability to continue as a going
concern as described in Note 13 to the consolidated financial statements, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Cheniere 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 registration fee.
SEC registration fee $ 3,572
Legal fees and expenses 10,000
Accounting fees and expenses 5,000
Miscellaneous expenses 1,428
Total $20,000
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 some circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933. Cheniere's certificate of incorporation and by-laws
provide for indemnification of Cheniere's directors, officers, employees and
other agents to the extent and under the circumstances permitted by the Delaware
General Corporation Law. Cheniere has also entered into agreements with its
directors and officers that will require Cheniere, among other things, to
indemnify them against some liabilities that may arise by reason of their status
or service as directors to the fullest extent not prohibited by law. In
addition, Cheniere carries director and officer liability insurance.
In connection with this offering, the selling stockholders have agreed to
indemnify Cheniere, its directors and officers and each such person who controls
Cheniere, against any and all liability arising from inaccurate information
provided to Cheniere by the selling stockholders and contained herein.
Item 16. Exhibits.
Exhibits.
4.1 Specimen Common Stock Certificate of Cheniere (Incorporated
by reference to Exhibit 4.1 of Cheniere'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 PricewaterhouseCoopers LLP
24.1 Powers of Attorney (included in Page II-3)
Item 17. Undertakings.
Cheniere 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.
II-1
<PAGE>
(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 Cheniere's annual report pursuant to Section
13(a) or Section 15(d) of the Securities 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 Cheniere pursuant to the foregoing provisions, or otherwise, Cheniere has
been advised that in the opinion of the Securities and Exchange Commission 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 Cheniere of expenses
incurred or paid by a director, officer or controlling person of Cheniere 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, Cheniere 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 January 18, 2000.
CHENIERE ENERGY, INC.
By: /s/ MICHAEL L. HARVEY
-------------------------
Michael L. Harvey
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, Michael L.
Harvey 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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ MICHAEL L. HARVEY President, Chief Executive January 13, 2000
- --------------------------------- Officer and Director
Michael L. Harvey (Principal Executive Officer)
/s/ DON A. TURKLESON Chief Financial Officer January 13, 2000
- --------------------------------- (Principal Financial and
Don A. Turkleson Accounting Officer)
/s/ CHARIF SOUKI Chairman of the Board January 13, 2000
- ---------------------------------
Charif Souki
/s/ WILLIAM D. FORSTER Director January 13, 2000
- ---------------------------------
William D. Forster
/s/ KENNETH R. PEAK Director January 13, 2000
- ---------------------------------
Kenneth R. Peak
/s/ CHARLES M. REIMER Director January 13, 2000
- ---------------------------------
Charles M. Reimer
/s/ WALTER L. WILLIAMS Vice Chairman of the Board January 13, 2000
- ---------------------------------
Walter L. Williams
</TABLE>
II-3
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF MAYOR, DAY, CALDWELL & KEETON, L.L.P.]
January 18, 2000
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
17,198,723(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 Certificate 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 currently outstanding are, and the Shares underlying
warrants when delivered for sufficient consideration and pursuant to the
provisions of the warrants will be, 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 ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 15, 1999, except as to Note 12
which is as of March 26, 1999, relating to the financial statements, which
appears in Cheniere Energy, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
January 17, 2000
Houston, Texas
