Going to be one very intriguing remainder of 2018... not purely for the obvious, how many of those slippery BTAs can we capture but how our liquidity runway will be extended. Our capital, which has been managed in a conservative manner, should last till March 19' at the earliest (if burning average of 6mt per quarter) or June 19' at the latest (if burning at an average of 5.5mt per quarter - which is certainly feasible reflecting our last 2 quarter burn rates). The agreed scorecard and weightings for the MD/ CEO for calendar year 2018, which scorecard shall be used to assess performance relative to fiscal 2018 STI (short term incentive payments) are:
Signing of 4mtpa in binding offtake agreements with investment grade counterparties for MLNG (50%)
Consistent with the level of off-take marketing success, develop a firm commitment for the next capital infusion to support LNGL through 2021 (30%) - raise $30 Million.
Just where will that additional liquidity come from? Considering BTAs seem to be nearly on our doorstep, is it necessary to go to market soon to raise capital at presumably low levels, further diluting our SP worth or will management hold the fort till a BTA or 2 rolls in, a serious game changer which would put a rocket under the SP, elevating to multiple dollars, which in turn would present a plethora of options:
Lending institutions happy to come to the table knowing we're within touching distance of FID. Or an equity stake in MLNG by BTA offtaker. Wouldn't be to quick to discredit a CR but for the time being... A) we don't immediately need the capital/ can afford to wait a couple more quarters B) by that time it's not beyond the realm of possibility the SP could hit the $2 or more mark which would make the CR more valuable & acceptable.
Our credit raise history is as follows;
20/5/2015 --- 40 Million shares sold @ $4.35 worth $174M
30/7/2014 --- 14,873,186 Million shares sold @ $2.60 worth $38.6M
5/5/2014 --- 49.5 Million shares sold @ 55c worth $90M
13/12/2013 --- 35 Million shares sold @ 31c worth $10.85M
31/7/2013 --- 40 Million shares sold @ 20c worth $8M
9/11/2009 --- 14,325,600 Million shares sold @ $1.25 worth $17.9M
14/5/2009 --- 17 Million shares sold @ 56c worth $9.5M
11/12/2007 --- 17.5 Million shares sold @ 65c worth $11.37M
Lets take a look at one of our "perceived" rivals in the race to FID, Anadarko's 12mt Mozambique terminal - estimated project cost $20 Billion... has signed SPAs with PTT 2.6mt for 20yrs & EDF on Feb 20 18' 1.2mt for 15yrs. Steven Wilson, the company's Vice President and country manager in Mozambique, stated on April 26 2018 that, "We effectively have agreements in principle for the volumes we need. Now the intention is to follow the EDF transaction to be able to convert all those into binding sales and purchase agreements". Project has zero financing in place/ high CAPEX & OPEX and will take forever to become profitable. This will be the case for an array of mega projects with escalating costs hence the small to medium scale projects will have greater appeal to buyers... being seen as having higher probability of reaching a positive FID, lower investment requirements and accelerated commissioning schedules. And that leads to reduced uncertainty on the project execution timing.
LNG LTD... a measly $4.5B project while in terms of profability over time, the story reads like this;
1mtpa = 50,000,00 mmbtu
8mtpa = 400,000,000 mmbtu
Tolling fee of USD $2.50 (hopefully worst case scenario price)
= Total $1B revenue per annum (x 20yrs)
= Grand Total $20B over 20yrs
The remaining financial particulars;
Assuming construction will be completed within 4yrs, i've calculated that it will take a further 8.25yrs (could be sooner if achieve higher contract tolling fees) before construction costs/interest/company operating costs will be paid off and the company begins to see a ROI. Once commissioning begins, 8.25yrs will generate a cash flow of $8.25B which will cover those construction costs/interest/company operating costs accrued during that time. The maths reads as follows;
Stonepeak are committing $1.5B equity funding over a 12yr tenor (maturity date), beginning upon financial close @ an interest rate of 7% i believe. This equates to $105M per annum x 12yrs (4yrs through construction + further 8yrs) = $1.260B in interest repayments.
The $3B loan we'll take on from lending institutions @ lets say 6% avg equates to $180M x 12.25yrs = $2.205B in interest repayments.
Now we include the $4.5B project cost repayment + company operating costs which i've put a $24M per annum price tag on, burning an average of $6M per quarter x 8.25yrs = $198M. Only need to take into consideration 8.5yrs instead of 12.5yrs because of the $66M award payment Stonepeak grants us upon FID + capital raise of $30M which will see us through the 4yr construction phase.
Overall financial standing ---> $1.26B + $2.205B + $4.5B +$198M = $8.163B construction cost/interest/company operating costs over 12.25yrs. Generated cash flow over 8.25yrs = $8.25B
Moving on to a different picture... thought ya'll might be interested in the holdings of our Number One shareholder, the myth, the legend and one of the world's most respected "value investors", Mr Seth Klarman! He is a vocal proponent of long-term investing and continues to hold strong since buying way back in May 2014.
Baupost currently holding 62,340,529 shares while the company's buy-ins are as follows;
20/5/2015 -- Buy 24,343,949 @ $4.35
8/1/2015 -- Buys 1,500,000 @ $2
8/1/2015 -- Buys 121,439 @ $2
17/12/2014 -- Buys 836,648 @ $1.96
11/12/2014 -- Buys 1,185,176 @ $2.24
10/12/2014 -- Buys 550,000 @ $2.49
9/12/2014 -- Buys 104,344 @ $2.49
2/12/2014 -- Buys 45,474 @ $2.49
28/10/2014 -- Buys 1,200 @ $2.99
24/10/2014 -- Buys 9,515 @ $3
23/10/2014 -- Buys 7,627 @ $3
21/10/2014 -- Buys 40,795 @ $2.99
17/10/2014 -- Buys 548,456 @ $3
16/10/2014 -- Buys 318,638 @ $2.85
15/10/2014 -- Buys 31,169 @ $2.82
15/10/2014 -- Buys 417,268 @ $2.88
14/10/2014 -- Buys 533,831 @ $2.89
Total 6,251,580 @ Avg of $2.63
10/10/2014 -- Buys 1,275,000 @ $2.77
9/10/2014 -- Buys 570,000 @ $2.46
9/10/2014 -- Buys 2,000,000 @ $2.83
7/8/2014 -- Buys 300,000 @ $3.45
6/8/2014 -- Buys 500,000 @ $3.33
5/8/2014 -- Buys 1,200,000 @ $3.46
Total 5,845,000 @ Avg of $3.05
15/5/2014 - 6/6/2014 -- Buys 20,150,000 @ 80c - $1.62
5/5/2014 -- Buys 5,750,000 @ 55c
Stonepeak's headline on the front page of their website reads - "We invest in what we believe are low-risk traditional infrastructure assets with inflation protection and favourable cash flow profiles. We leverage deep industry expertise with a view to implement operational improvements to enhance value".
Baupost is holding strong - position unchanged since last buy on 20/5/2015. Wouldn't you think Mr Klarman would sell down his position if factors towards reaching a positive FID were looking bleak?? He certainly knows whats going on behind closed doors!!
Oil creeping towards $80 a barrel.
We're approaching the end of the cyclical LNG "bust cycle" with the next boom just around the corner in late 2018 or 2019 (<-- my prediction). This aligns with potential customers (Chinese, Lithuanians) rocking up to our Houston HQs while also in general seeing a dramatic increase in interest. Then GV coming out in the March Quarterly saying, "The progress we made toward selling LNG capacity at Magnolia during the third quarter of LNGL's fiscal year will prove to be extremely valuable toward finalising sale agreements". This far down the track, knowing how impatient and frustrated long-term holders are, i truly don't believe he would use such words to reel investors in. There would be no point.
So my conclusion... You've got to be brave to cut your losses and jump ship at this moment in the game, with so many ominous signs! Always had to be in this for the long haul... our time in the sun is coming!
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