US delivers breakout for LNG
LNG is all the rage, particularly for shareholders of the namesake West Perth company that has seen its market capitalisation explode from also-ran into a $523 million stock over the past year on hopes it will soon start liquefying gas.
Liquefied Natural Gas Limited (LNGL) shares have soared from 16c to $1.36 on Friday, a near-tenfold increase that ranks as one of the best performances on the Australian Securities Exchange.
"I don't think the word creeping is appropriate, rocketed maybe," laughs managing director Maurice Brand, the one-time Energy Equity Corp boss who set up LNGL as the vehicle to commercialise his vision for mid-scale LNG plants and floated the fledgling company in 2004.
Today, Mr Brand's 6.17 million LNGL shares are worth $8.4 million as his team's vision gains increased traction with investors, particularly in the US. About a third of LNGL's register is in the hands of US institutions, part of the reason the company's shares are trading at levels not seen since mid-2009.
Unlike then, when LNGL's focus was on establishing a 3.8 million-tonne-a-year LNG operation at Fisherman's Landing in Gladstone, opposite Curtis Island where $60 billion of coal-seam gas processing plants are being built, Mr Brand has taken his ambition to the US State of Louisiana.
LNGL wants to build up to four processing trains, each capable of producing 2mtpa of LNG, in the port of Lake Charles.
Approvals with US authorities including the vital Federal Energy Regulatory Commission are advanced.
Common in the gold mining industry, where there are independently owned processing mills toll-treating other companies' ore, LNGL's Magnolia project is something of a rarity in the LNG market.
LNGL will not own gas fields nor have LNG offtake contracts. Its role will be to accept third-party gas, delivered through the Kinder Morgan Louisiana Pipeline, and run it through the liquefaction process, before handing the volumes to their owner for shipping to overseas markets.
There is a rush on for companies in the US to capitalise on cheap domestic gas prices and export the fuel to LNG markets in Europe and Asia, a move seen as a threat to Australia's industry.
Magnolia's start-up cost for a two-train 4mtpa operation is $US2.2 billion. First LNG output is slated for mid-2018.
LNGL has signed term sheets with four gas owners and Mr Brand says he would ideally like four to six parties to run their gas through Magnolia's four trains.
It has also signed a deal with Stonepeak Partners for the infrastructure private equity firm to stump up $US660 million in equity funding, alongside 70 per cent of yet-to-be arranged debt. In return, Stonepeak will earn a half share of Magnolia.
Like the construction job, which is to go to South Korea's SK Engineering and Construction, the funding and toll-treatment deals need to be finalised. A lot of balls remain up in the air for LNGL as it sets about reaching its target of financial close in the middle of next year, after which construction can start.
On Monday, LNGL shareholders will be asked to approve the bulk of a $49.5 million share placement, announced last month and priced at 55c. The cash raised should see LNGL through to financial close.
"I think our time has come," Mr Brand said.
"We have put the hard yards in, we have been doing this for 10 years.
"Companies have a bit of a life, sometimes up, sometimes down. We now feel we are in the right location and the right country and the right time to deliver Magnolia.
"I couldn't be happier, to be honest."
