LNG 0.00% 4.3¢ liquefied natural gas limited

Well chaps, it's ugly. Really, really ugly. Down 25% since the...

  1. 130 Posts.
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    Well chaps, it's ugly. Really, really ugly. Down 25% since the $1m p.a. man from Houston, fresh from Twittering about ScoMo, came with absolutely nothing to a investor's conference call other than "market malaise" and "that's a great question" retorts. Geez, if i had a dollar for every time he has said that. Actually I would trade the dollar for a half decent answer or action that would protect shareholder wealth. The rhetoric of weeks before that "China isn't the only game" and we are marketing to everyone in the world is again another, albeit watered down slant, on previous editions such as "advanced discussions with 3x capacity".

    Look across the fence at Venture Global - EPC cost in mid $500's with Bechtel, consistent record of SPA's signed in 2018 and into 2019 and $1.5bn equity commitment from our old mates StonePeak. Oh and pre-construction works already underway and FERC timetable that is some 9 months inside what our Management said it could be done in.Yes some of this is luck, but a lot is old fashioned execution on a strategy and managing risk.

    This board has a lot to answer for - and I have heard nothing from any of them around Plan B's, strategy sessions held, challenging GV and management around the commercialisation strategy which has failed to meet timetables for the last 5 years. You now have a market cap of $180m against cumulative development costs of >$400m (just going on retained losses assuming they have expensed the bulk). I heard Tim on the conference call ask about US listing vs Aus - my response is it doesn't matter - the market in either country doesn't believe in the ability of management. This company is a showcase of failed initiatives - Fisherman's Landing, HOA's with various parties, Meridian.

    I think a lot of investors on these LNG forums, including myself, who probably cant let go - be it pride, cost base, or genuine disbelief as to why this cant get to FID. But as we stand here today, I heard very little from GV effusing confidence in options outside of China - Europe doesn't work, Asia is where it is, but Korea and Japan are not buying new supply. And I think he made a throw away mention of Middle East. Nothing on India - remebering that old HOA we have in the cupboard.

    And the unique selling proposition of shovel ready is all but gone as everyone else has caught up in terms of approvals. And if you look at Venture Global, Bechtel (who build most LNG facilities) can do modular at a similar price.A capital raising is inevitable and to my mind will happen soon. It will have to be a rights issue - I cant see them getting new insto money or IDG doubling down. The challenge will be who underwrites it.

    But where does this company go from here..? I don't know. But if history is anything to go by with this company, it could miss another LNG wave. If I was to have a wild guess, I would say someone might come and take a good chunk of the project equity on Magnolia. Perhaps Woodside or another IOC seeking fast tracked upstream options, maybe even the Japanese... Much easier than doing a corporate takeover - there is no risk of being gazumped on project equity as doesn't need shareholder approval, interlopers or takeover mechanisms in the Corporations Act.

    And if you think about GV's consistent excuse - which is right - it is a domino effect with customers. However you need a big foundation customer. A foundation customer will want something for it - usually equity upside. But the problem with LNG, as it has always been, is that smaller offtakers dont want to commit, as they dont have the confidence that the balance will be filled behind them That's why GV keeps saying once the first goes, it will help with the balance fall into place. But again, you need a big "first" SPA and that in what I have seen with other greenfield LNG developments comes when the offtaker is an industrial equity participant in the LNG facility. We have always tried to go it "alone" and it hasn't worked. GV did concede the other day that the project equity is on offer - so I would, again, watch this space.

    And to always play both sides of the coin, for those Google news hunters, GNL Talcahuano (re-gas terminal in Chile) has got all approvals and is talking about construction by the end of the year. It is funded by Stonepeak also. The interesting question will be, who will get to the supply contract - Magnolia or Calcasieu Pass...? It is about 2mpta capacity.


 
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