The Cupboards been closed for too long; Here’s why I won't be surprised to see the LNG SP go down
Regarding the Company’s Strategy: Since late 2016 LNG has decided to refocus its strategy, more on selling the OSMR technology. Recently they have been putting out the same old marketing spiel that they have been putting out at least since 2009 when they were talking up Fisherman’s Landing (You know the spiel: Capital efficiency; Lower costs & environmental impacts; Shorter timelines; Higher efficiency etc. etc.)
They have also been talking up LNG’s management and how experienced they all are eg. “As the Vice President of Chevron Gas Supply and Trading, Vesey was responsible for Chevron’s Global LNG, natural gas and natural gas liquids marketing and trading activity based in Houston. One advantage that he has been able to call upon is instant recognition of his work prior to moving to LNG Limited in 2016, especially when seeking out potential clients and long term deals” etc etc. In fact nearly the exact same spiel about the technology and management has been on the following five different websites from 02/03/17 to 12/04/17.
02/03/17:
https://issuu.com/businessreviewusa/docs/bro_brusa_liquefied_natural_gas_lim
09/03/17:
https://issuu.com/constructionglobal/docs/cd-march2017-3
14/03/17: http://www.businessreviewusa.com/Liquefied-Natural-Gas-Limited-LNGL/profiles/216/Capital-Efficiency
31/03/17:
http://www.energydigital.com/company/lng-limited-capital-efficiency
12/04/17:
http://www.losangelesdailynews.net/liquefied-natural-gas-limited-lngl-company-profile/
This management team talks themselves up so much on these sites that I find it incredulous. They portray themselves as top level professionals and yet they just seem to put out the same tripe. This strategy shows they are targeting investors / partners (more than offtakers) who I imagine will be a lot more savvy than I was when I invested in this company, so I fail to understand this approach as it just seems amateurish to me.
Regarding Equity: The Edison Report stated that they assume the equity required to develop Magnolia is not fully covered, although they assume that LNGL and Stonepeak will be able to come to an arrangement to extend their agreement. If this is not successful, LNGL would need to source another external investor, or perhaps suffer material share dilution to raise the required capital. The original agreement with Stonepeak foresaw funding the project to 4mtpa.
Management is looking to increase this to cover larger capacity and believes that an announcement may come in the second (calendar) quarter 2017.
Regarding the NTP: At the Conference Call GV stated “None of our potential customers have brought up the NTP as a concern”; and “Construction time will take 55 months to project completion”. The Edison Report stated that the company indicated that a FERC Notice to Proceed will likely be staged, with modular notices issued as and when the engineering components/designs are finalized.
The company expects the initial Partial Notice to Proceed (for site preparation) in the near future.
Regarding Flexibility of Contracts: At the Conference Call GV stated “most buyers LNG have been in conversations with are aware of pricing and accepting of twenty year terms; no one is horse trading”
Regarding BTA’s: At the Conference Call GV stated “LNG are progressing toward 8mtpa offtake” and feel confident getting this is a matter of “when, not if”. The Edison Report stated that the company is in discussion with potential partners for over three times the 8mtpa capacity, and on the update webcast, the management disclosed that it is in discussions with potential offtakers for contracts which total more than three times the 8mtpa capacity of Magnolia. The Edison Report also stated: The non binding offtake agreement with Meridian LNG has been further extended to 30 November 2017, and on 23 January, Magnolia LNG announced a non-binding heads of agreement with VGS for sales to an LNG important terminal in India. The agreement provides for 20-year Free-on-Board (FOB) sales of up to 4mtpa, conditional on a number of factors. So we don’t actually have and signed investment grade BTA’s.
Regarding the Conference Call: In the March 31
st Conference Call, GV gave a synopsis of the company saying: “
All three projects are in an advanced development stage”. Really!!!! I could post an unrendered picture of Fisherman’s Landing if you like, so you can decide if it’s in an advanced stage of development or not, by the way you know there's no supply or offtake right??
Finally: If the company is in as good a situation as they keep making out, and they
are in discussions regarding 24mtpa of offtake, and expecting FID around July this year, they wouldn't need to be marketing that same old tripe on all those websites, they would be approaching investors directly. If you think I'm wrong, have a look yourselves and see what you honestly think.
