Palm Beach, FL 12/14/11 (StreetBeat) -- Cheniere Energy (AMEX: LNG) tumbled 9 percent in premarket trading Wednesday after the natural gas company announced plans to sell 33 million shares in a public offering.The announcement comes two days after Cheniere said it would export U.S. natural gas to India from a terminal it is building in Louisiana.
India's GAIL Ltd. will buy 3.5 million tons per year of liquefied natural gas. The gas will be pumped from U.S. fields, turned into liquid form and then loaded onto cargo vessels destined for India. The deliveries will begin in 2016.
Cheniere said it plans to use the net proceeds of the share sale to pay back debt. The offering's underwriter will have an option to buy an additional 4.95 million shares to cover over-allotments.
Citi's Faisel Khan said he expects the offering to raise about $300 million and that most of the proceeds will go toward paying off a term loan that's due early next year. He backed his "Buy" rating for Cheniere, but cut his price target by $3 to $16 to reflect the increase in the company's share count.
"We suspect Cheniere was unable to arrive at alternative financing arrangement and therefore went with the more conservative equity offering," Khan wrote.
"While we are disappointed with the size and dilution of the offering, the announcement removes some of the overhang surrounding Cheniere's refinancing risk for next year."
Shares of Cheniere Energy Inc., based in Houston, dropped 84 cents to $8.50, after falling 70 cents, or 7 percent to close at $9.34 on Tuesday.
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