This Gas CEO Is Cashing in on Shares, Not Shale

  • Natural gas company's CEO disposes of 1.77 million shares
  • Tally of $116 million tops $98.2 million for all of last year

Cheniere Energy Inc. has yet to export a drop of liquefied natural gas and Chief Executive Officer Charif Souki is making more cash from selling company stock than ever.

The co-founder of the soon-to-be gas exporter has sold $116 million of shares in 2015, reducing his stake by a third, according to data compiled by Bloomberg from filings. Of the 1.77 million shares he sold, 1.55 million were for personal profit and the rest withheld by the company to cover his taxes on vesting shares.

Souki was the highest-paid executive in the U.S. two years ago because of the company’s stock grants, drawing lawsuits from irate investors. He’s been selling the shares as they tumble 40 percent this year, a victim of the shale gas glut weighing on the commodity market. Prices dropped 5.3 percent Monday.

Activist investor Carl Icahn has boosted his stake in Cheniere to 13.83 percent, according to a filing on Monday. In August, he said he planned to discuss issues including executive compensation with management after disclosing an 8.2 percent stake.

“A substantial portion of his net worth is tied up in the stock and this is a company that went through a very long time where it was a question of whether it was going to make it or not,” William Frohnhoefer, an analyst at BTIG LLC in New York, said of Souki in an interview. “It’s probably prudent from a personal wealth management perspective to diversify.”

Faith Parker, a spokeswoman for Cheniere, didn’t respond to telephone calls and e-mails seeking comment.

Scheduled Sales

Last year, Souki generated $98.2 million by selling 1.38 million shares, including 570,000 withheld to offset taxes. In January, Souki boosted the number of shares he sells monthly through a 10b5-1 trading plan to 50,000 from 30,000. In a filing last week, he disclosed his latest intention to sell 50,000 shares. Souki also has been selling more outside the plan, with the biggest volume coming in August.

Cheniere’s executive compensation has been tied to successful progress in its multibillion-dollar export projects, such as securing long-term contracts to help cover those costs. Such practices aren’t unusual for startup companies, as Cheniere described itself when it was incorporated.

Souki, 62, joined the Houston-based company’s board when it was reorganized in 1996 and took over as sole chairman in 1999 while working as an independent oil and gas investment banker, filings show. He stepped up selling in 2012 as the shares rebounded from their low of 95 cents in October 2008 at the depths of the financial crisis. Cheniere surged to a closing high of $84.46 on Sept. 18, 2014, before slumping to $42.16 on Monday, the least since February 2014.

Souki had as many as 9.4 million shares as recently as early 2013, according to a filing, after Cheniere awarded him 6.3 million shares that year. He earned the stock for meeting milestones in the construction and financing of the company’s Sabine Pass export terminal on the border of Texas and Louisiana.

The developer initially built a plant at Sabine Pass to import liquefied gas after declining U.S. production contributed to higher prices. Then drilling efficiencies allowed producers to tap gas reserves much more cheaply, and shale unleashed so much gas that the U.S. started approving export terminals.

Cheniere was the first company to receive authorization from the Energy Department to export gas to countries with which the U.S. doesn’t have a free trade agreement. Next month, Cheniere is poised to ship the first cargo of shale gas out of the country as it brings Sabine Pass online.

As Souki sold stock for an average of $67.89 a share over the past two years, the market value of his holdings has fallen by 69 percent from a peak of $501 million in the third quarter of 2014. In 2013, Souki disposed of 2.67 million shares worth $89.5 million, but more than 60 percent were held back to meet tax liabilities tied to restricted stock.

Shareholder Suits

Four investors sued in 2014, claiming Cheniere had disregarded its bylaws during a shareholder vote that put those shares into a compensation pool by ignoring abstentions instead of counting them in the “no” column.

In a settlement earlier this year, the company agreed not to ask investors for more shares for the pool until 2017, and to seek stockholder approval for any additional payouts from it. The company paid $5.5 million for the plaintiffs’ legal fees without admitting any wrongdoing, a filing shows.

Souki’s base salary was reduced to $1 as of Dec. 15, 2014. The company said he would forgo his annual cash bonus from 2015 through 2018 and instead get long-term performance-based incentive awards.

Cheniere found an uncommon way to make those payouts to Souki, who now owns 3.5 million shares, while honoring its settlement agreement. In April, it awarded him 1.1 million phantom stock units worth $84.7 million at the time. The units track with Cheniere’s stock, but pay out in cash over three years.

Before it's here, it's on the Bloomberg Terminal.