Well, well... the sleeping giant has finally been awoken! A very...

Well, well... the sleeping giant has finally been awoken! A very welcomed announcement (DeltaOE Vietnam) and respite from the doom & gloom, bewilderment and disheartened feelings that has surrounded our company’s inability to sign that elusive, anchor SPA while watching the SP dissipate into near oblivion!

Shorters have been revelling in the demise, a few long termers waving the white flag while GV’s leadership qualities to bring Magnolia to life have come under fire. As challenging as it’s been at to watch how this arduous journey has unfolded thus far, the strong fundamentals and very bright, long term future for LNG has always remained in tact. Our time has truly arrived, right in the nick of time... fortunate/ greatful to be at this advanced stage of shovel readiness in comparison to our US rivals (some still seeking regulatory approvals, some equity financing, some low cost EPC contracts), who are really in a fierce fight to catch this 2nd wave! As I’ve made known before, the major oil companies (able to take FID on balance sheet) or expansion projects or existing brownfield import facilities (to be converted to export) have always had the upper hand over our small, risky greenfield proposition. However, the defiant red ant appears on track to soldier on to construction... an incredible achievement when it happens considering our story and where it all began!

In my view, one of two “ must “ requirements had to be met by LNG LTD in 2019 for the board and CEO to have my continued support heading in-to 2020. One, the obvious signing of a SPA but if that did not come to fruition, re-domiciling to the US was an absolute neccesity. The NASDAQ listing announcement (a couple of years to late) was significant as it signalled to me the company was grabbing the bull by it’s horns to create/ maximise shareholder value while more importantly, still optimistic & serious with its intent on seeing the Magnolia dream become reality! Why make the switch if prospects were dimming?? It’s going to be exciting moment listing on the NASDAQ, the 2nd largest stock exchange in the world (by global market capitalisation), finally being valued against our direct peers.

Liquidity has dwindled to $21.7m in which case we’ll have enough capital through till approx April if management continue to “consistently” burn at an average of $6-7m per quarter. One of the company’s performance goals for fiscal year 2019 was to raise liquidity (minimum $5m) without dilution to overall company value. MM did a fantastic job of the last capital raise and I believe they will be up to the task this time round. A second goal was to sign 8 MOUs! In the last investor conference call dated 22nd May, GV made a statement praising his marketing team for doing an “outstanding job” and potential customers have commented on that as well. At the time I pondered fleetingly, how could you make such a big call in light of where the battered SP was and the tumultuos journey long termers have endured. However... another voice in my head was saying he genuinely means it even though (MB) his eye catching words/ predictions in the past may not have materialised. Making an unsubstantiated claim like that without proof is brave unless the marketing team has delivered with MOUs in the bank. I’m of the belief they have, having readied contracts for SPA signings once trade war has been resolved. I strongly believe LNG LTD has leveraged our partnership with IDG. If it was business as usual and the trade hostilities that came in-to play July last year had never happened in the first place, SPAs would of been locked in already! My confidant agrees, “ Yes, I have no doubt in my mind that we would be under construction right now under your scenario with a globally diverse portfolio, not just China! “ Take it as you will! Unfortunately circumstances out of our control over the last 5yrs since switching aspirations from Fisherman’s Landing to Lake Charles (LC office inaugurated Feb 2014) have curtailed our ambitions of seeing Magnolia reach construction.

Firstly, the great oil crash that was triggered in 2014... Brent Crude hit a year high $115.19 closing out the year at $55.27. In 2015 it reached a year high $66.33 closing the year at $37.28! Add to the mix an oversupplied LNG market from 2015 through 2019 resulting in no US company signing a SPA contract between Oct 28 15’ - Jan 16 18’. Followed by the US China trade war arriving July 2018 putting an overall freeze on buyers commiting to long term contracts. All the while weak LNG spot prices lingering in the background; IOC bought a cargo for delivery in August 19’ from Trafigura at $3.69 per mmbtu/ CNOOC bought a cargo for delivery in Sept from Vitol at $3.90 per mmbtu. The JKM (Asian benchmark spot price) fell to a record low $3.65 on May 26 2009 while at this time last year the price in Asia was at $10 per mmbtu. All above factors have painted a clear picture of a severely depressed macro environment since 2015. There are times when the LNG industry moves at a fast tempo and there are times when it moves at a snails pace. That’s the cyclical nature of the business!

Will give you an understanding of the accumulative volumes of LNG supply that reached FID every year by worldwide exporters. During the boom times between 2002-2005 & 2011-2015, 106.1mt & 130.5mt was sanctioned respectively. 2019 has already been the greatest year ever for FIDs!

Oman, Qalhat Train 3 3.7mt 2002
Egypt, Idku Train 1 & 2 7.2mt 2002
Nigeria, NLNG Train 4 & 5 8.2mt 2002
Total 19.1mt

Russia, Sakhalin 2 Train 1 & 2 9.6mt 2003
Australia, Darwin Train 1 3.6mt 2003
Australia, NWS Train 5 4.4mt 2003
Total 17.6mt

Equatorial Guinea Train 1 3.7mt 2004
Nigeria, NLNG Train 6 4.1mt 2004
Qatar, QatarGas 2 Train 1 & 2 15.6mt 2004
Total 23.4mt

Qatar, QatarGas 3 Train 1 7.8mt 2005
Qatar, QatarGas 4 Train 1 7.8mt 2005
Indonesia, Tangguh Train 1 & 2 7.6mt 2005
Yemen, Yemen LNG Train 1 7.2mt 2005
Qatar, RasGas 3 Train 6 & 7 15.6mt 2005
Total 46mt

Algeria, Skikda Train 1 4.5mt 2006
Total 4.5mt

Australia, Pluto Train 1 4.3mt 2007
Peru, Peru LNG Train 1 4.5mt 2007
Total 8.8mt

Algeria, Arzew Train 2 4.7mt 2008
Total 4.7mt

Australia, Gorgon Train 1& 2 10.4mt 2009
Papua New Guinea, PNG LNG Train 1 & 2 7mt 2009
Total 17.4mt

Australia, QCLNG Train 1 & 2 8.6mt 2010
Total 8.6mt

Australia, Gladstone Train 1 & 2 7.8mt 2011
Australia, Pacific Trains 1 & 2 9mt 2011
Australia, Wheatstone Train 1 & 2 9mt 2011
Australia, Prelude Train 1 3.6mt 2011
Indonesia, Donggi-Senoro Train 1 2mt 2011
Total 31.4mt

Australia, Ichthys Trains 1 & 2 9mt 2012
Malaysia, PFLNG 1 1.2mt 2012
USA, Sabine Pass Trains 1 & 2 9mt 2012
Total 19.2mt

Malaysia, Bintulu Train 9 3.6mt 2013
Russia, Yamal Trains 1-3 16.5mt 2013
USA, Sabine Pass Trains 3 & 4 9mt 2013
Total 29.1mt

USA, Cameron Trains 1-3 13.5mt 2014
USA, Cove Point Train 1 5.3mt 2014
USA, Freeport Train 1 & 2 10.2mt 2014
Malaysia, PFLNG 2 1.5mt 2014
Total 30.5mt

USA, Freeport Train 3 4.4mt 2015
USA, Corpus Christi Train 1 & 2 9mt 2015
USA, Sabine Pass Train 5 4.5mt 2015
Cameroon, Kribi Train 1 2.4mt 2015
Total 20.3mt

USA, Elba Island Train 1 2.5mt 2016
Indonesia, Tangguh Train 3 3.8mt 2016
Total 6.3mt

Mozambique, Coral South Train 1 3.3mt 2017
Total 3.3mt

USA, Corpus Christi Train 3 4.5mt 2018
Canada, LNG Canada Trains 1 & 2 14mt 2018
Russia, Portovaya Train 1 2mt 2018
Mauritania/ Senegal Train 1 2.5mt 2018
Total 23mt

USA, Sabine Pass Train 6 4.8mt 2019
USA, Golden Pass Trains 1-3 15.6mt 2019
USA, Calcasieu Pass Trains 1-9 10mt 2019
Mozambique, Anadarko 12.88mt 2019
Russia, Arctic 2 Trains 1-3 20mt 2019
Total 63.3mt

Critics over the past couple of years have chipped away at GV refusing to acknowledge and accept the underlying factors that have hurt, held back aspiring US exporters from securing FID. Facts are facts, thats what we’ve been up against... rightfully valid excuses not a smokescreen management have used to hide behind their failure to sign up customers!

When you have dirt cheap LNG flooding the market, resulting in an oversupplied yet strong spot market, I can imagine how tricky/ tough negotiations would be with potential buyers trying to coerce and convince them of a particular price tag by 2024/25. Buyers are understandably seeking the lowest price possible while we have to stick to our guns at a certain price point to make sure those contracts are financeable with the bank while also taking into account a fair SH return.

Figures rolling in from Tellurian predicting between 100 - 250mt supply needed by 2025;
https://www.naturalgasintel.com/articles/119259-weak-global-lng-prices-nearing-inflection-point-says-tellurians-gentle
LNG LTDs numbers say 80mt required by 25’ and 165mt by 2030 concluding... there’s more than adequate demand to share around amongst the vast array of worldwide developers vying to reach FID.

This MOU we have secured with DeltaOE is the real deal, a bankable lock and perfect cornerstone SPA when it eventuates! This partnership is strong in comparison to previous agreements with minnows Meridian, VGS... A) US Department of Commerce has approved the Bac Lieu project onto its Commercial Advocacy Program B) It has the support of the Vietnamese Government who are encouraging LNG-to-power terminals to replace coal to fulfill the country’s energy needs. Prime Minister Phuc approved Vietnam’s first 3mt LNG terminal in Thi Vai, due to start construction in October. C) Floating terminal deemed “ critical infrastructure “ with an end user already in place be it Bac Lieu Province - persuant to a PPA of course.

Interestingly, Bobby Quintos, Engineering MD of Delta Offshore Energy, is Houston based having founded petroleum and natural gas company ARGO Group in 2004. It was established to address the needs of emerging and frontier market’s entry into the LNG to Power industry. We focus on countries with little or no natural gas infrastructure, or low gas demand for electricity generation which make traditional high CAPEX solutions i.e. LNG onshore terminals or an FSRU, uneconomically infeasible. We have ongoing origination projects in the Philippines, Vietnam, the Caribbean, Argentina and Colombia. ARGO Group can provide end to end solutions to this niche market including power purchase agreement (PPA) consulting and negotiations, build own transfer (BOT) solutions, gas sales and purchase agreements (GSPA) consulting and negotiations with LNG suppliers, technical pre-feasibility studies and financial model forecasting for power sales.

Bobby spent 2 years in Corpus Christi, Texas, for EPCI new construction of oil and gas platforms for the Gulf Of Mexico. Has 32yrs experience as an executive with oil and gas majors - including senior leadership position with BP for offshore onshore Exploration and Production Division, managing operations for 7 major oil production platform assets in the Gulf Of Mexico with a combined value of $8B. Also was in charge of LNG Logistics and Operations for the $3B BP Tangguh export facility in Indonesia (working with our very own JB).

Here’s a couple of photos, videos to get ya’ll fired up;
https://www.deltaoe.com/about https://www.deltaoe.com/news
Prime Minister Nguyen Xuan Phuc hosted a reception in Hanoi on Oct 3 2018 for Spencer Damien White, Managing Director of Delta Offshore Energy Pty Ltd. At the reception, PM Nguyen Xuan Phuc applauded DeltaOE’s investment in a gas-fuelled electricity project in the Mekong Delta province of BAC Lieu, affirming that ministries, sectors and local authorities will support the implementation of the project. “ Under the terms of our agreements, the Government of Vietnam has committed to delivering all of the agreements, licensing, permits and other approvals required to make the project bankable within 12 months “ - DeltaOE quotes. Not exactly sure when the company filed all applications for inclusion in the National Master Power Plan but after correspondence with Spencer White (MD Projects DeltaOE), it was in late 2018 (Bac Lieu Province first selected DeltaOE to bring forward the LNG terminal in early Oct last year) while he also said only one outstanding approval remains! The Oct 31st term sheet deadline for DeltaOE to execute SPA makes logical sense as it falls closely within the year timeline set out by the government for approval.

Cautiously feel optimistic a significant trade deal might be on the cards by year’s end or a smaller, goodwill, interim deal letting LNG of the hook. Impossible to foresee with Mr Trump being such a loose cannon! China’s Ministry Of Commerce recently stated, “ both sides will make consultations in mid-September in preparation for meaningful progress in the ministerial-level talks in October “.“ Meaningful progress “ is an expression that hasn’t been used at all since negotiations fell apart in May!

Hu Xijin, editor-in-chief of the Global Times, a tabloid under the People’s Daily, the official newspaper of the Communist Party of China, released a tweet on Sept 5 stating, “ China and the US announced a new round of trade talks and will work to make substantial progress. Personally I think the US, worn out by the trade war, may no longer hope for crushing China’s will. There’s more possibility of a breakthrough between the two sides “. His Twitter account has been followed by Wall Street traders and market participants for insight on the trade war. Hu has been spot on in recent developments in the escalated conflict. Most recently, he had warned about Chinese retaliation against President Trump’s tariffs just hours before the Chinese Government made the official announcement!

A blog called Taoran Notes on Chinese social media WeChat has been followed by analysts covering China and market investors for clues on the trade battle. Run by a state owned newspaper called Economic Daily, the blog has been cited by US media including Bloomberg News for additional colour from the Chinese perspective. In a 1500 character report on May 6 19’, Taoran warned the US not to fantasise about China making concessions that will damage its own interests. The comment was later republished by the WeChat account of the People’s Daily, a rare move for the official newspaper of the Communist Party. “ There’s no winner in a trade war... if someone cannot see this after a year of battling, the reality will teach him (Trump) over and over again, until he realises it “ - Taoran commented. While the hawkish statements aren’t unusual, it stood in contrast against the tight lipped Chinese media. Then on Sept 5, in a 1200 word commentary, Taoran said its “very likely” there will be “new developments” in the upcoming round of negotiations. “ Taoran Notes must be backed by the government, otherwise how come it is allowed to publish comments on trade when nobody else can? The government is managing public expectations “ - Hong Hao, chief strategist at Bocom International Holdings Co in Hong Kong. Hong started to follow Taoran Notes as a way to read the tea leaves of China’s negotiation strategy.

The 13th round of negotiations are shaping as a pivotal moment in seeing if there’s breakthrough developments towards settling a historic pact or the stalemate rolls on with the war intensifying. If indeed I’m correct, Chinese tariffs on LNG “could” possibly vanish and we wake up one morning soon, BANG BANG..... a couple of Chinese SPAs announced! Either way, I’m convinced and have faith they are in waiting!

In the Boss & LNG we trust!

JK.