A crisis of investor confidence has engulfed aspiring US gas exporter Liquefied Natural Gas Ltd., wiping more than 20 per cent from the value of the former market darling this week alone.
The worsening global energy price outlook and delays in signing up customers appear to have combined to erode the market's belief in the Perth-based company's ability to pull off its $US2.2 billion ($3 billion) Magnolia LNG project in Louisiana.
After being among the top market performers in the 2014 and 2015 financial years, LNG Ltd has been at the bottom of the pile of energy stocks this half, slumping 80 per cent.
At Wednesday's close of 77.5¢, investors that bought shares in LNG Ltd's $174 million equity raising in May at $4.35 per share have suffered an 82 per cent loss.
But managing director Maurice Brand said on Wednesday that "fundamentally nothing has changed" with the project and voiced confidence it would achieve its target of reaching a final investment decision in the first half of 2016.
"I have absolutely no doubt it will happen," Mr Brand said. "Otherwise we wouldn't be putting all the resources into it that we are doing to close out the agreement that we have been working on. There's considerable effort going into it."
LNG Ltd had targeted three critical milestones this quarter, which investors have been closely watching to gauge progress on the Magnolia project. Two of them – a construction contract and a key regulatory milestone – have been achieved but crucial agreements with customers beyond one signed up already have yet to be locked in.
The company is aiming to sign up customers to "tolling" contracts for use of capacity at the LNG export terminal that would help underwrite construction. But the slump in global LNG prices has undermined the whole concept of US LNG exports, despite rock-bottom Henry Hub gas prices, causing some commentators to question whether the contracts can be locked in at all.
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Last updated: Wed Dec 16 2015 - 9:28:27 PM VIEW FULL QUOTE Company Profile
To develop and operate liquefied natural gas plants, using as its feedstock stranded gas, being discovered natural gas reserves for which to date no identifiable markets have been established or flare/vented gas, being gas that is vented into the atmosphere. http://www.LNGlimited.com.au
Oil, Gas & Consumable Fuels (101020)
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Mr Brand said he believed the doubters were wrong.
"There's a bit of impatience that we haven't done it but at the end of the day we are well advanced on our negotiations with tolling agreements and soon as it's signed I can tell you we'll certainly be telling everyone ASAP," Mr Brand said.
"At the end of the day, until [the contracts] are signed, there will be a of people that share that view. We understand that."
Matin Carolan at Foster Stockbroking, which acted as lead manager to LNG Ltd's May placement, put this week's share price slump partly down to US tax-loss selling by investors, in addition to the delays in the customer deals.
