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LNG liquefied natural gas limited

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All the info I am coming across indicates that the current...

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tt2000

5,039 Posts.

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14/10/16

16:07

Post #: 19869170
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Originally posted by tt2000 ↑

The biggest risks to shareholders unlocking value here is:

1. The signing of LNG offtake agreements - LNG are required to sign up 3.4mtpa on a 4mtpa train.
To date, LNG currently have only managed a 2mtpa agreement with Meridian LNG Holdings Corp with a condition precedent that financial close is reached prior to the end of this year. It is evident this will not occur, triggering the cp and Meridian LNG Holdings Corp will not be bound to that agreement.
So given LNG plan to proceed with 8mtpa capacity or 4 trains, they need to sign up 6.8mtpa worth of tolling agreements.
The signing of these agreements is dependent on the economics of LNG

2. LNG demand/suuply - The LNG market is currently oversupplied and will be for some time to come. So who is going to sign up and lock in a rate today, when they can buy using the spot rate? This here is why the demand /supply curve for LNG is crucial.
What the curve looked like 3 years ago, is completely different to what this curve looks like now - I am still interested to see which year LNG are using as their source. Its all well and good ramping those time-frames about demand and supply to shareholders, but the customers that they are trying to sign will be very familiar with the dynamic and most current state of demand /supply of LNG.

3. LNG's cash balance - LNG only had $72M cash at 30 June and burn through $13m cash per quarter. By the end of this year (only 90 days away) it will only have $46M cash. At this point, it is in managements best interests to spruik the share price and then conduct a capital raising - so they can justify their million dollar wages.

4. Ability to sign an equity sponsor and terms of this transaction.
Firstly LNG currently only have an agreement with Stonepeak for a 4mtpa development, meaning they need to find a funder for the additional 4mtpa - despite some unsubstantiated information on here regarding this, there has been no official announcement that Stonepeak have committed to the 8mtpa development.
The other huge risk here is what terms this equity comes under. To date, management have been extremely vague in their language being "Stonepeak will receive an approximate 50% interest in the MLNG Project (based on a pre‐ determined internal rate of return) in exchange for the Project equity funding"
This pre-determined rate of return has not been disclosed - theoretically it could be 400%.
The final risk here is that Stonepeak are able to deliver the funding and come through with the billions.

Don't get fooled into buying this based on what some spruikers say on here. If LNG fails to sign these agreements in this current oversupplied market, there will be better opportunities to buy LNG.

There is no need to discuss the upsides, as you will find a lot of bullish information on here. There is potential upside, but there is a lot of de-risking that will need to occur for LNG to unlock any value and it could start by management being transparent with the information that they have available.

Know the risks and make management work for their money. If they want to raise capital, make sure it comes at an expensive cost of equity capital.

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All the info I am coming across indicates that the current prices pose a threat to LNG being sold under long-term contracts.

Of course, don't expect GV to mention this, until it comes to why he couldn't deliver and comes knocking on investors for more money so he can pay himself his salary

LNG Price at posting: 63.5¢ Sentiment: Hold Disclosure: Held
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