Paradigm's Barry Dawes response to Slugcatcher deserves some...

Paradigm's  Barry Dawes  response to Slugcatcher deserves some applause....

Dear Slug,

LNG Ltd has a tolling arrangement with a number of offtake partners who will deliver gas all around the world with emphasis on Europe and South America and also to Asia where markets are seeking pricing diversification with some exposure to Henry Hub.

At Magnolia, the tolling arrangement is a fixed fee for 20 years that gives $US760 million pa (essentially EBITDA) for the project.

LNG has no exposure to gas price or supply (clearly this is abundant) and no exposure to gas sales as it is a take or pay fixed tolling price arrangement.

LNG would earn about $A0.50/share for its [approximately] 50% share at full capacity of 8MMtpa.

The OSMR technology is simply existing off-the-shelf technology from other industries giving a different configuration to most gold plated LNG projects and one that uses 30% less gas in the compression/liquefaction process than existing technologies.

SKEC has essentially underwritten the construction with a fixed price contract and KBR (Kellogg Brown and Root) are the US partners.

These players clearly have no fears about the technology.

The value for LNG will be achieved when ex-Macquarie Bank infrastructure partners at Stonepeake deliver by June 30 this year the $US660m in equity that the project needs against the debt component that BNP Paribas will arrange.

LNG also has the Bear Head 8MMtpa LNG project in Nova Scotia which it still owns 100% and has the Fisherman’s Landing project at Gladstone as well.

The value in these projects is still developing but so far so good.

The stock is well supported by US investors who have made very high returns from the Cheniere group companies building export LNG capacity. I have heard of price targets from these investors of $US15-20/share.

Apart from probably the Thorney Group, Australian institutions are absent from the register because they clearly know better than being aboard the best performing stock on the ASX last year.

As to who will buy the gas, the analyst doesn’t understand that LNG has enquiry for double its capacity at Magnolia and more from Bear Head. He may have Wall Street/Hong Kong bear disease and may not have done all his homework.