Edgar Filing: CHENIERE ENERGY INC

Filed Pursuant to Rule 424(b)(1)
Registration No. 333-61238
Prospectus
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CHENIERE ENERGY, INC.

3,025,012 SHARES OF COMMON STOCK

This prospectus relates to up to 3,025,012 shares of common stock of
Cheniere Energy, Inc. to be sold from time to time by the selling stockholders
listed in this prospectus. Of these shares, 2,050,000 are held by stockholders
and the other 975,012 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. The securities offered by this prospectus were issued
to the selling stockholders in transactions exempt from registration under the
Securities Act of 1933, as amended. 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 American Stock Exchange under the symbol
"CXY." The last reported sales price of the common stock on The American Stock
Exchange on May 24, 2001 was $2.26 per share.

--------------------------------------

See "Risk Factors" beginning on page 6 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 May 25, 2001

TABLE OF CONTENTS

Cheniere Energy, Inc................................................. 3
Risk Factors......................................................... 6
Where you can Find More Information.................................. 12
Cautionary Statement Regarding Forward Looking Statements............ 13
Use of Proceeds...................................................... 13
Selling Stockholders................................................. 13
Description of Securities............................................ 15
Plan of Distribution................................................. 17
Legal Matters........................................................ 18
Experts.............................................................. 18

CHENIERE ENERGY, INC.

Cheniere is a Houston-based company engaged in oil and gas exploration,
development and exploitation. We evaluate and generate drilling prospects using
a regional and integrated approach with a large 3D seismic database as a
platform.

Cheniere was formed in 1996 to fund the acquisition of a proprietary 3D
seismic database along the transition zone in Cameron Parish, Louisiana. The
228-square-mile survey was acquired jointly by Cheniere and an industry partner
and processing was completed 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 from 1998 to 2000 and continues.

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 8,800 square
miles of 3D seismic data. We also made the commitment to reprocess the entire
seismic database, and the resulting new data set will provide us with a higher
resolution image of the subsurface than has previously been available. In March
2000, we entered into a Joint Exploration Agreement with Samson Offshore
Company, whereby Samson acquired an option to participate at a 50% working
interest level in any prospects we generate within an area of mutual interest in
the Gulf of Mexico through September 2001.

On September 15, 2000 we reached an agreement with Warburg, Pincus Equity
Partners, L.P., a global private equity fund based in New York, to fund
exploration and development in the shallow waters offshore Louisiana through a
newly formed private corporation, Gryphon Exploration Company. We contributed
to Gryphon: (i) our license to 3D seismic data covering the shallow waters
offshore Louisiana in the Gulf of Mexico; (ii) our interest in a Joint
Exploration Agreement with Samson Offshore Company; (iii) certain offshore
leases, including a prospect we were drilling offshore Louisiana, and (iv)
certain other assets, all in exchange for all of the common stock of the
subsidiary and cash. Warburg invested $25,000,000 and received voting preferred
stock, with an 8% accruing dividend, convertible into 63.2% of Gryphon's common
stock. We have also agreed, under certain circumstances, to contribute to
Gryphon our proportionate share of an additional $75,000,000 investment.

Between July 2000 and November 2000, we acquired licenses to approximately
6,750 miles of 3D seismic data in the shallow waters offshore Texas in the Gulf
of Mexico in separate transactions with Seitel Data Ltd. We committed to
reprocess all of this data beginning in October 2000 and continuing through the
final delivery of reprocessed data, which is expected to occur in October 2001.
We plan to add exploration staff and infrastructure and engage an exploration
partner with the intent of commencing exploration drilling offshore Texas during
2001.

In addition to our plan to add exploration staff, in December 2000, we
entered into an agreement with Aurora Exploration, LLC to assist us in the
interpretation of our 3D seismic data sets and in our prospect generation
activities. The initial term of the agreement ran through March 2001, but has
been extended on a month-to-month basis and may be extended for an additional
term if both parties agree. Aurora will focus its efforts in certain areas of
the Gulf of Mexico shelf, using a portion of our recently licensed seismic data
from offshore Texas.

Cheniere has been publicly traded since July 3, 1996 under the name
Cheniere Energy, Inc. Our corporate offices are located at 333 Clay Street,
Suite 3400, 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 in the Gulf of Mexico region, including the coastal areas
onshore and state and federal waters offshore Texas and Louisiana. We believe
that the current industry environment presents a window of opportunity whereby
oil and gas pricing is relatively strong, while the costs of drilling and
completing wells are relatively low.

We are attempting to acquire and drill prospects during this period of
opportunity. We employ a technical approach in the prospect generation and
evaluation process to manage the risk of exploration drilling. That approach
integrates 3D seismic, geologic and engineering data over large areas. Our
technical understanding is translated into prospect capture in three ways:
participation in industry prospects, farm-ins on industry acreage and purchase
of open leases.

We operate on the Gulf of Mexico shelf (less than 300 feet of water depth)
and in adjacent onshore coastal regions. We have elected to operate in this
area because the Gulf is a proven producing area where improved technology can
help find previously undiscovered fields.

Technical Approach

To be successful we must drill prospects with favorable risk/reward
characteristics. The technical approach we use to generate and evaluate
drilling prospects distinguishes us from many of our competitors. The approach
is regional and integrated, and it utilizes newly reprocessed 3D seismic data.

A regional 3D seismic approach to prospecting is distinguished from a
"postage stamp" approach, whereby a company owns scattered patches of 3D data
coincident with its leases. The understanding gained from each postage stamp
cannot be extended laterally as a means of identifying prospective drilling
areas. Regional 3D coverage, however, provides a blanket coverage that permits
the study all of the successes (producing fields) and all of the failures (dry
holes) as a means of determining what works and what does not in a given area.

An interdisciplinary approach is critical in reducing the risk of dry
holes. Subsurface geology and field engineering data must be integrated
together with 3D data interpretations to develop as complete a picture as is
possible. This approach is time consuming, but we have made a commitment to
perform the necessary technical work up front as a means of reducing dry hole
expenditures.

Drilling Activities

In 1999, we drilled and completed two natural gas discovery wells located
in offshore Louisiana. Both wells were tied into a common platform and began
production during September 1999. We own a 30% working interest and a 45%
working interest in the two wells. During 2000, we drilled an additional
exploration well in the waters of offshore Louisiana. We assigned our interest
in this well to Gryphon, which completed the well.

Officers and Directors

Emanuel Batler is currently a director and a member of the audit committee
and the compensation committee. Mr. Batler was vice president of Philips
Electronics Industries Ltd., the Canadian division of the Dutch-based Philips
Company, with responsibility for marketing as well as for corporate mergers and
acquisitions. Subsequently, he founded and was president of Glentech
Investments, a venture capital company active in both the United States and
Canada. After negotiating the sale of this business, Mr. Batler was active from
1974 to 1995 in the commodity futures business, managing firms in Toronto, Hong
Kong and Chicago. Since 1970, Mr. Batler has also been chairman of the board of
Eclectic Management Sciences, Ltd., a private holding company that controls
several operating businesses.

Nuno Brandolini is currently a director and a member of the audit committee
and the compensation committee. Mr. Brandolini has served as chairman and chief
executive officer of Scorpion Holdings, Inc. since 1995. Prior to forming
Scorpion Holdings, Mr. Brandolini served as managing director of Rosecliff,
Inc., a leveraged buyout fund co-founded by Mr. Brandolini in 1993. Before
joining Rosecliff, Mr. Brandolini was a vice president at Salomon Brothers, Inc.
where he was an investment banker involved in mergers and acquisitions in the
Financial Entrepreneurial Group. Mr. Brandolini has also worked for Lazard
Freres in New York and was president of The Baltheus Group, a merchant banking
firm, and executive vice president of Logic Capital Corp., a venture

capital firm. He currently serves on the board of private and public companies
such as Arabella, Pac Pizza LLC, Sonex Research, The Original San Francisco
Toymakers and WalkAbout Computers. Mr. Brandolini was awarded a law degree by
the University of Paris, and received an M.B.A. from the Wharton School.

Keith F. Carney is currently executive vice president-corporate
development. 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 Corporation.

Jonathan S. Gross is current vice president of exploration. Prior to
joining Cheniere, Mr. Gross served as geophysicist, economist and project
manager for Zydeco Energy Inc. from January 1998 through May 1999. From 1981 to
1998 he was employed as a geophysicist and exploration team leader by Amoco
Production Company with assignments in the Gulf of Mexico, Texas Gulf Coast
Onshore, North Africa, Trinidad, the Michigan Basin, the Arkoma basin and other
areas. He received a B.A. degree in geology from the University of Chicago in
1981. Mr. Gross is a certified petroleum geologist through the American
Association of Petroleum Geologists and he is a member of the Society of
Exploration Geophysicists. He is a director of the Jewish Community Center of
Houston, a United Way agency.

John K. Howie is currently a director of the Company. Mr. Howie has served
as a vice president of EnCap Investments, LLC, since July 1999. Prior to this
position he was a senior investment associate at Range Resources Corporation
(previously Domain Energy Corporation), an acquisition coordinator with Domain
Energy Corporation (previously Tenneco Ventures), and senior petroleum engineer
with Amoco Production Company and Apache Corporation. Mr. Howie received a B.S.
in Chemical Engineering from New Mexico State in December 1981.

Charles M. Reimer is currently president and chief executive officer of the
Company and a director. Through May 2000, he served as 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.

Charif Souki, a co-founder of Cheniere, is currently chairman of the board
of directors of the company. 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.

Don A. Turkleson is currently vice president, chief financial officer,
secretary and treasurer of Cheniere. Prior to joining the company, 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.

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.

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
until the quarter ended June 30, 2000 and subsequently, 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 have limited oil and gas production. Through our drilling in 1999 and
2000, we have 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. As of March 31, 2001, we had
$1,773,311 of current assets and a working capital deficit of $1,634,608.
Because of our low level of current assets, we may need additional capital for a
number of purposes, and if we were unable to obtain additional financing it
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 will need funds for the payment of approximately $8,000,000 related
to future deliveries of reprocessed seismic data through December
2001.

- We may need capital to fund our pro-rata share of the capital calls by
Gryphon that are approved by Gryphon's board of directors. Our share
of such future capital calls could total up to $27,600,000. If we
elect not to fund our pro-rata portion of such capital calls, and
Warburg funds its portion, as they would be entitled, we will suffer
dilution of our holdings in Gryphon. If we subscribe to our pro-rata
portion of such capital calls but fail to fund, we would lose our
ability to subscribe to any future capital calls and would suffer
dilution of our holdings in Gryphon. It is anticipated that Gryphon
will make cash calls for additional funds during 2001. On April 5,
2001, we received a cash call from Gryphon in the amount of
$10,000,000, $3,680,000 net to our interest. We have declined to
participate in this cash call. Warburg contributed the full
$10,000,000, as they were entitled, on May 15, 2001, and our interest
in Gryphon was reduced from 36.8% to 29.4%.

- We will need funds for the payment of a transfer fee related to the
assignment to Gryphon of its seismic license over the Offshore
Louisiana Project Area. We are obligated to pay a transfer fee of up
to $2,500,000, in ten installments of $250,000, which would become
payable after one month of production from each of ten separate
successful wells completed by Gryphon within its 8,800-square-mile
data set.

- 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, thus would create
the need for additional capital.

Additional capital could be obtained from a combination of funding sources.
These potential funding sources include:

- Cash flow from operating activities,

- 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,

- sales of portions of our working interest in the prospects within our
exploration program, which would reduce future revenues from our
exploration program,

- sale to an industry partner of a participation in our exploration
program, including sale of a license to the approximate 6,800 square
miles of seismic data in our offshore Texas project area, which would
reduce future revenues from our exploration program, and

- sale of all or a portion of our producing oil and gas properties,
which would reduce future revenues.

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.

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 States of Louisiana and Texas 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.

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. 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.

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.

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.
Between March 5, 2001 and May 17, 2001, the average daily trading volume of our
common stock on The American Stock Exchange was approximately 8,000 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 stockholders 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 125,000,000 authorized shares of stock, consisting of
120,000,000 shares of the common stock, and 5,000,000 shares of preferred stock.
As of May 17, 2001, approximately 90% 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 and/or to finance future oil and gas exploration projects. In
addition, we have reserved 2,850,288 shares of the common stock for issuance
upon the exercise of outstanding warrants and 1,500,000 shares of the common
stock for issuance upon the exercise of stock options. As of May 17, 2001, there
are 862,361 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 12 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.

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 stockholders 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 stockholders with smaller holdings.
BSR Investments, Ltd. ("BSR") is an entity controlled by the mother of Charif
Souki, our chairman. BSR owns approximately 11% of our outstanding common stock.
Accordingly, it is likely that BSR will have a significant influence on the
election of directors and on our management, operations and affairs, including
the ability to prevent or cause a change in control of our company.

Anti-takeover provisions of our 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 stockholders.

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.

A significant portion of our value is derived from our ownership interest in
Gryphon, over which we exercise no day-to-day control.

We own 100% of the common stock of Gryphon (29.4% effective ownership after
conversion of Gryphon's preferred stock), and a significant portion of our value
is derived from this investment. However, we are a passive investor; we do not
participate in the day-to-day management of Gryphon and have no ability to
effect a change of control of Gryphon. Accordingly, Gryphon's management team
could make business decisions without our consent that could impair the value of
our investment in Gryphon.

We may have to take actions that are disruptive to our business strategy to
avoid registration under the Investment Company Act of 1940.

The Investment Company Act of 1940 requires registration for companies that
are engaged primarily in the business of investing, reinvesting, owning, holding
or trading in securities. A company may be deemed to be an investment company if
it owns "investment securities" with a value exceeding 40% of the value of its
total assets (excluding government securities and cash items) on an
unconsolidated basis, unless an exemption or safe harbor applies. Securities
issued by companies other than majority-owned subsidiaries are generally counted
as investment securities for purposes of the Investment Company Act. Our equity
interests in Gryphon could be counted as investment securities. Therefore, we
could be considered an investment company in the future if we do not obtain an
exemption or qualify for a safe harbor. As a result, fluctuations in the value
of, or the income and revenues attributable to us from our ownership of,
interests in companies we do not control could cause us to be deemed an
investment company. Registration as an investment company would subject us to
restrictions that are inconsistent with our fundamental business strategy. We
may have to take actions, including buying, refraining from buying,

selling or refraining from selling securities or other assets, when we would
otherwise not choose to in order to continue to avoid registration under the
Investment Company Act.

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 American Stock Exchange. You may also
read our reports, proxy and information statements and other information at The
American Stock Exchange, 86 Trinity Place, New York, New York 10006.

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,
2000;
- Our Quarterly Report on Form 10-Q for the three months ended March 31,
2001, and
- Our Proxy Statement dated April 30, 2001.

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.
333 Clay Street, Suite 3400
Houston, Texas 77002-4102
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.

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 2001 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 is being
registered in this registration statement are exercisable at prices ranging from
$1.75 to $4.00 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 ongoing activities related to oil and gas
exploration activities, working capital and/or general corporate purposes.

SELLING STOCKHOLDERS

The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of May 17, 2001 by each of the
selling stockholders. 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 May 17, 2001 and
assumes that there is outstanding an aggregate of 12,797,393 shares of common
stock. Warrants to purchase shares of common stock which are currently
exercisable or will become exercisable within 60 days of May 17, 2001 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, we believe based on information furnished by each selling
stockholder that the person named in the table below 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.

Shares of
Common Stock
Shares Beneficially Underlying Shares Beneficially
Owned Prior Number of Warrants to Owned After
to Offering Shares of Purchase the Offering
---------------------- ------------------------
Name of Selling Stockholder Number Percent Common Stock Common Stock Number Percent
------------------------------------------- ----------- --------- ---------------- --------------- ----------- ----------

Bald Eagle Fund, Ltd. 17,500 * 15,000 2,500 - *
Robert M. Baylis 216,667 1.7% 100,000 16,667 100,000 *
Michael E. Bock 143,750 1.1% 37,500 37,500 68,750 *
BSR Investments. Ltd. 1,454,495 11.2% 50,000 8,334 1,396,161 10.8%
Keith Carney 88,542 * 25,000 4,167 59,375 *
Tony W. Church 14,584 * 12,500 2,084 - *
Connecticut Investment Group 87,500 * 75,000 12,500 - *
Delaware Charter Guarantee & Trust
Co. TTEE FBO Anthony J. Pace IRA 145,834 1.1% 125,000 20,834 - *
Jonathan S. Gross 11,896 * 2,000 334 9,562 *
Groten Management, Ltd. 500,000 3.8% 250,000 250,000 - *
Paul M. Highum 58,334 * 50,000 8,334 - *
Jon Hughes 58,334 * 50,000 8,334 - *
Kensington Partners L.P. 122,500 * 105,000 17,500 - *
Kensington Partners L.P. II 5,834 * 5,000 834 - *
MDC Group 100,000 * - 50,000 50,000 *
William E. Mayer Holdings, Inc. 145,834 1.1% 125,000 20,834 - *
Ellis Lonnie McCain 106,250 * 37,500 37,500 31,250 *
Michael C. Mewhinney 58,334 * 50,000 8,334 - *
Edwin H. Morgens 145,834 1.1% 125,000 20,834 - *
Edmond N. Morse 58,334 * 50,000 8,334 - *
Petrie Parkman & Co. 62,500 * - 62,500 - *
Thomas A. Petrie 145,834 1.1% 125,000 20,834 - *
James M. Piccone 58,334 * 50,000 8,334 - *
Charles M. Reimer 336,726 2.6% 50,000 258,334 28,392 *
Rita Souki 112,250 * 85,500 14,250 12,500 *
John L. Strauss 58,334 * 50,000 8,334 - *
Nicholas J. Sutton 58,334 * 50,000 8,334 - *
H. James Toffey 87,500 * 75,000 12,500 - *
Don A. Turkleson IRA 57,292 * 25,000 4,167 28,125 *
Wallington Investment Holdings, Ltd. 304,826 2.4% 250,000 41,667 13,159 *

-------------- ---------------
2,050,000 975,012
============== ===============

_______________________

* Less than 1%.

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: (a) 250,000 shares of
common stock and warrants to purchase 250,000 shares we issued in September 2000
in conjunction with a bridge financing; (b) warrants to purchase 175,000 shares
of common stock we issued to financial consultants and investor relations
consultants in October 2000 and May 2001; (c) warrants to purchase 250,000
shares of common stock we issued to our president and chief executive officer in
October 2000; and (d) 1,800,000 shares of common stock and warrants to purchase
300,012 shares of common stock we issued at a price of $2.00 per unit in private
placements in December 2000 and February 2001.

In September 2000, we issued warrants to purchase 250,000 shares of common
stock in conjunction with a $2,000,000 bridge financing facility. The warrants
are exercisable on or before September 6, 2003 at an exercise price of $4.00 per
share. Also in September 2000, we issued 250,000 shares of common stock in
payment of $500,000 of short-term notes payable.

In October 2000, in connection with the investment of $25,000,000 into our
subsidiary, Gryphon Exploration Company, we issued to our financial advisers
warrants to purchase 125,000 shares of common stock at an exercise price of
$1.75 per share on or before October 12, 2004. In May 2001, we issued to
consultants who assisted in the listing of our common stock on The American
Stock Exchange warrants to purchase 50,000 shares of common stock at a price of
$3.00 per share on or before May 1, 2005.

Also in October 2000, in connection with his employment by Cheniere, we
issued to our president and chief executive officer warrants to purchase 250,000
shares of common stock at an exercise price of $1.75 per share on or before
October 12, 2004.

On December 22, 2000 we sold 1,550,000 units and on February 26, 2001 we
sold 250,000 units consisting of one share of our common stock and a warrant to
purchase one-sixth of a share of our common stock, adding up to 1,800,000 shares
of common stock and warrants to purchase 300,012 shares of common stock.
Warrants issued in connection with these sales of units are exercisable on or
before December 31, 2003 at an exercise price of $3.00 per share.

DESCRIPTION OF SECURITIES

We have 125,000,000 authorized shares of stock, consisting of 120,000,000
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 May 17, 2001, there were 12,797,393 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 the dividend obligations to the
holders of any preferred stock then outstanding.

In the event of our liquidation, dissolution or winding up, 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 prospectus, 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 2,850,288 shares of
common stock.

In connection with private placements in December 2000 and February 2001,
we issued warrants to purchase 300,012 shares of common stock at $3.00 per share
on or before December 31, 2003 subject to customary anti-dilution adjustments.

In May 2001, we issued to consultants who assisted in the listing of our
common stock on The American Stock Exchange warrants to purchase 50,000 shares
of common stock at a price of $3.00 per share on or before May 1, 2005.

The warrants do not confer upon the holders thereof any voting or other
rights of a stockholder.

POSSIBLE ANTI-TAKEOVER PROVISIONS

Our amended and restated certificate of incorporation 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 our management more difficult.

As described above, our 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 our 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.

We are 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, BSR Investments, Ltd., an entity controlled by the mother of
Charif Souki, our chairman of our board of directors, owns approximately 11% of
the outstanding shares of the common stock. Accordingly, it is likely that 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 American Stock Exchange, or otherwise at prices and at terms
then prevailing or at prices related to the then current market price; or

- 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. We have 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 on public stock exchange, 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 for us by Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas.

EXPERTS

The consolidated financial statements incorporated in this prospectus by
reference to Cheniere's Annual Report on Form 10-K and the Gryphon Exploration
Company audited financial statements included in Cheniere's Form 10-K for the
fiscal year ended December 31, 2000 have been so incorporated in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.