waiting for lng to bottom out, page-4

Question 1: How likely is it that Magnolia will be able to start delivering liquefied natural gas from Magnolia as scheduled (say within 3 months)?
Based on the landmarks already achieved (including the equipment purchase arrangements made with Chart, Siemens etc) my view is that LNGL is on track with its plans for Magnolia. Unless there is a unforeseen calamity one could conclude that the likelihood of success would be very high ( >90% ) for 2 trains and high ( >80%) for the second 2 trains.
Question 2: What should the value of the shares be when Magnolia is in production?
The future earnings of LNGL can be calculated from the BTA pricing structures. According to Fosters: “Magnolia valuation maintained at US$9b unrisked. Using our key assumptions set out in our April 2015 note, we set our un-risked 4 train case at US$9.0b on a 100% basis. The near term risk to our valuation would be a material change in capital costs with the EPC contract now expected in the December quarter. In our LNGL valuation we include a risked valuation of A$3.3 billion or A$6.92/sh and assume 55% LNGL ownership”
Note though that once in production the value will be fully de-risked and are more likely to be around $12.68 AUD (This does not include any value for Bear Head).
Question 3: What about Bear Head?
The most critical issue for Bear Head is to secure the supply of gas. Bear Head will not be in a position to sign any BTA unless the gas supply is secured. However the stakes are high also for Canada and Nova Scotia which means that whilst at this point the gas deliver a surprise, and when this occurs Bear Head has the ability to easily double the value of LNGL. At this point of time it is still more responsible to assign zero or minimal value to Bear Head.
Question 4: What about Gladstone/Fisherman’s Landing (FL)
Right now FL should be rated at zero value. At the same time a surprise should never be ruled out. MB and his team are very good at delivering surprises and FL have one advantage over all competitors: OSMR technology which could enable LNGL to produce LNG competitively in Australia if somehow a supply of gas can be secured.
Question 5: What about the LNG share price in the short term (say next 3 months)?
Who knows! To a large degree this depends on the overall world stock market. If it crashes so will we, if it goes the other way so will we. It is worth remembering that you only lose if you sell at the time you have a paper loss (and the reverse it of course true). All I know is that I don’t think LNGL would have placed orders for heat exchangers and turbines just in case they might be needed. I think these commitments were made because LNGL knows they will be needed to start producing LNG as planned. I also suspect this is why Meridian signed the first BTA, which is why I hope to accumulate some more LNG shares at what I believe will prove to be bargain prices.