Golden Pass LNG (GPX) export terminal; Source: Golden Pass LNG

‘Lead contractor’ files for bankruptcy protection to tackle financial woes arising from $10 billion US LNG project

U.S.-headquartered turnkey engineering, construction, maintenance, turnaround, and fabrication services provider Zachry Holdings (ZHI) and some of its subsidiaries have initiated a voluntary court-supervised Chapter 11 bankruptcy protection process to address the financial challenges stemming from ExxonMobil and QatarEnergy’s Golden Pass LNG (GPX) export terminal project in Sabine Pass, Texas.

Golden Pass LNG (GPX) export terminal; Source: Golden Pass LNG

While explaining that the Chapter 11 process provides time and flexibility to resolve issues related to the Golden Pass LNG export terminal project, the U.S. player underlines that this move is intended to strengthen its overall financial position as it continues to serve its customers across the energy, chemicals, power, manufacturing, and industrial industries. According to the company, work at all remaining job sites is going ahead without interruption.

John B. Zachry, Chairman and CEO of ZHI, commented: “We have built a strong business over the last 100 years by providing our customers the highest quality turnkey engineering, construction, maintenance, turnaround, and fabrication services. Since beginning work on the Golden Pass LNG project in 2019, we have maintained our usual high standards of excellence and gone above and beyond to accommodate the schedule and demands of GPX and its shareholders, QatarEnergy and ExxonMobil.

“As the project’s lead contractor, we have navigated significant challenges and disruptions stemming first from the COVID-19 pandemic and, more recently, international geopolitical issues. These unforeseen disruptions have resulted in significant financial strain while meeting targets and keeping the project appropriately staffed.”

U.S. firm heading for the exit

After filing voluntary petitions for a court-supervised restructuring under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, Zachry Holdings expects that its cash on hand and cash generated from operations will provide sufficient liquidity to meet its ongoing business obligations during the court-supervised process.

“We have been transparent with GPX and its shareholders as we have attempted to reach a mutually agreeable resolution to these issues. Because we have been unable to find a path forward, we have been forced to take action to protect our business. The process we are starting today provides us mechanisms to initiate a structured exit from the GPX project. It also enables us to take certain actions that will improve our performance and better position our business for the future,” added ZHI’s CEO.

Furthermore, the U.S. firm confirms that it has filed several customary motions seeking court authorization to continue to support its ongoing operations during the court-supervised process, thus, subject to the approval of these motions, the firm does not expect this process to impact employee wages, health and welfare benefits plans, or qualified retirement savings plans.

As ZHI expects to receive court approval for these requests, it also intends to pay vendors and suppliers in full under normal terms for goods and services provided during the bankruptcy case. While White & Case LLP is serving as the legal advisor to the company, M3 Advisory Partners is acting as the financial and restructuring advisor.

“All other projects and company efforts continue to perform in line with expectations, and we will continue serving our customers while maintaining our commitment to quality and safety as we move through this process,” emphasized Zachry.

After QatarEnergy and ExxonMobil hammered out the details to independently market LNG produced at the terminal, ExxonMobil LNG Asia Pacific (EMLAP) was provided with the exclusive rights to market 30% of Golden Pass LNG volumes with QatarEnergy Trading marketing the remaining 70%. Last year, Jumbo-SAL-Alliance, a joint venture between Jumbo Shipping and SAL Heavy Lift, completed the transport of modules for the project.

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Recently, the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy, based its expectations of a boost in natural gas trade on three LNG export projects coming on stream by the end of 2025, including Golden Pass LNG, which is expected to be put in service next year with the first two trains of the planned three-train LNG export facility.

With a $10 billion investment in infrastructure on the Gulf Coast, Golden Pass LNG joint venture highlights that this export project is anticipated to add natural gas liquefaction and export capabilities to the existing terminal in Sabine Pass, giving rise to hundreds of direct jobs and lending a helping hand in bringing cleaner energy from Texas to power the world.

Located about 10 miles south of Port Arthur in Jefferson County, Texas on the Sabine-Neches Waterway, the project’s area is said to serve as an excellent location for an LNG terminal due to Port Arthur being perceived as one of few deepwater ports along the Gulf Coast suitable for LNG carriers. Golden Pass’ estimated annual send-out capacity will be around 18 million tons of LNG.