CEO Departure Good News for LNG Stock
Cheniere Energy, Inc. (NYSEMKT:LNG) has ousted CEO Charif Souki and it just might be what the doctor ordered for LNG stock.
This announcement came just days after U.S. activist investor Carl Icahn increased his stake in the group’s capital—about 14% from the eight percent he originally acquired last summer. Judging by the fact that Cheniere is about to become the first company to export liquefied natural gas (LNG) from the United States, Icahn may have pushed the right buttons by illustrating how activist investors can sometimes influence companies in the right direction. (Source: “Cheniere expects to ship first U.S. LNG export cargo in Jan,” Reuters, October 26, 2015.)
Indeed, Souki, exorbitant salary and all, does not leave behind a shell; he leaves at the very height of his achievement, as the company has finally reached the point where it will sell natural gas from Louisiana to Europe. Last August, Cheniere Energy and Energie de France (EDF) signed a comprehensive supply agreement for liquefied natural gas. EDF will receive as many as 26 freighters’ worth of LNG by 2018, equivalent to 100 million BTUs. They will be transported from the Sabine Pass LNG terminal in Texas to the LNG terminal in Dunkirk at prices set by the TTF based in the Netherlands. (Source: “Cheniere signs deal to sell 24 LNG cargoes to France’s EDF,” Reuters, September 21, 2015.)
Cheniere Energy Stock Set to Return to March 2015 Highs of $90
Not only was Souki Cheniere Energy’s CEO since 2002, but he was also one of the co-founders and he chaired the company’s board of directors since 2008. He prompted the company’s shift in 2010, reversing its model from importing LNG to producing and exporting, banking on the then shale gas revolution that was in full swing. Cheniere decided to use its existing terminal and storage tanks to liquefy the gas in order to export it after a total investment of $25.0 billion.
Souki made the headlines, perhaps for the wrong reasons; he was the highest paid executive in the S&P 500 at $142 million annually, of which $133 million was in shares. Following legal action by the shareholders last spring, the company decided to suspend the compensation in shares until 2017 and to reduce Mr. Souki’s salary to a symbolic dollar this year. Souki has since sold about one-third of his shares, totaling approximately $116 million, according to Bloomberg.
Cheniere’s board of directors was unanimous in demanding its CEO step down. Neal Shear will provisionally fill in for Charif Souki as acting CEO, while Andrea Botta, a member of the company’s board of directors, will assume the presidency with immediate effect. (Source: “Cheniere Names Neal Shear Interim CEO as Board Replaces Souki,” Bloomberg, December 13, 2015.)
The company will immediately start looking for a new permanent CEO. Shortly after the announcement, Icahn congratulated the board for having had the “guts” to replace Mr. Souki and move the company in a much different direction than the now ex-CEO wanted.
The U.S. Department of Energy (DOE) has approved other projects, too, for LNG stock, one of which involves Cameron LNG in Louisiana (no less than a $10.0-billion facility) and the second being a smaller-scale project with Carib Energy in Florida. In all, since last August, three LNG projects have been approved and Cheniere Energy’s Sabine Pass in Louisiana is the main one. In early August, the DOE changed its rules for the necessary permits, speeding up the pace of approval. Cheniere’s Sabine Pass is the first project to be ready and it should start soon; the Cameron field project will follow in 2019. (Source: “Undeterred by Global Glut, U.S. Pushes Ahead on LNG Exports,” OilPrice, December 1, 2015.)