Company Overview - Liquefied Natural Gas Limited is an Australia-based company engaged in developing liquefied natural gas (LNG) export terminal projects in the United States, Canada, and Australia. The Company operates through segments, including LNG Infrastructure, and technology and licensing. The LNG infrastructure business involves the identification and progression of opportunities for the development of LNG projects to facilitate the production and sale of LNG. It includes project development activities from pre-feasibility, detailed feasibility, and advancement of each project to final investment decision, construction activities, and production and sale of LNG via offtake arrangements with external parties. The LNG Infrastructure segment is based on Magnolia LNG project, Bear Head LNG project, and Fisherman's Landing LNG project. The technology and licensing business is involved in the development of LNG technology, through research and development activities.


LNG Details

FERC approval received to produce natural gas from Lake Charles, Louisiana terminal: Liquefied Natural Gas Ltd.’s (ASX: LNG) subsidiary, Magnolia LNG got the Federal Energy Regulatory Commission’s (FERC) approval (FERC Order) to develop and export natural gas from its liquefied natural gas (LNG) terminal in the Lake Charles District, State of Louisiana, USA.  Moreover, the Louisiana Department of Environmental Quality (LDEQ) even have air permit approval for the Magnolia LNG. FERC approved the installation of the Kinder Morgan Louisiana Pipeline LLC (KMLP Pipeline) for enabling the transportation of full feed gas volumes to the Magnolia LNG project.  This FERC approval indicates the management’s strong efforts to progress towards the Magnolia LNG project for a final investment decision.  Management reported that they are waiting for the US Department of Energy (DOE) for processing Magnolia LNG’s pending application to export LNG to countries which has no free trade agreement (FTA) with the United States. As per the Magnolia LNG project highlights, the group intends to develop four liquefaction production trains, with every train having a capacity of 2 mtpa or greater using its core OSMR® patented LNG process technology. The group reported that they intend to have two 160,000m³ full containment storage tanks, ship, barge and truck loading facilities as well as supporting infrastructure to use for the construction of the project. Meanwhile, KBR?SKE&C joint venture (KSJV) undertook the construction of the site under the turnkey EPC contract as LNG wants to focus on the Magnolia LNG’s offtake capacity sales, financing arrangements, and construction progress.
 
Bear Paw progress towards natural gas pipeline: The group’s 100% subsidiary Bear Paw Pipeline Corporation Inc. recently registered its Environmental Assessment (EA) with Nova Scotia Environment.  Bear Paw intends to develop a 62.5 km natural gas pipeline from Goldboro to the proposed Bear Head LNG liquefied natural gas (LNG) export facility in Point Tupper, Richmond County, Nova Scotia. This Goldboro to Point Tupper pipeline connects Bear Head LNG to the North American natural gas pipeline network as Bear Paw is targeting to enable LNG export facility on Cape Breton Island via this pipeline. The group’s wholly owned subsidiary, Bear Head LNG Corporation, made an agreement to buy further land from Nova Scotia Business Inc. (NSBI) to back its expansion plan in its proposed liquefied natural gas (LNG) facility on the Strait of Canso in Richmond County, Nova Scotia. With this move, Bear Head LNG would be able to enhance its capacity of the LNG facility from 8 million tonnes per annum (mtpa) to 12 mtpa in 2024, complying with the approval from the National Energy Board. Accordingly, Bear Head LNG would acquire further 72?acres of land directly to its present 255?acre site on the Strait of Canso. Bear Head LNG already got the approval from the US Department of Energy to export US?sourced natural gas to both nations that come under FTA arrangement as well as for nations which do not have free trade agreements (Non?FTA) with the US.  Bear Head LNG also got approval from Canada’s National Energy Board to export up to 12 million tonnes per annum of LNG. Moreover, Bear Head LNG already have the initial federal, provincial, and municipal regulatory approvals needed to start project construction. LNG intends to continue to boost its presence in Nova Scotia and accordingly started an office in Halifax to strengthen its local presence
 

Bear Head LNG Site (Source: Company Reports)
 
Extended lease with the FLLNG Site Agreement: Gladstone LNG, the group’s wholly owned subsidiary prolonged the FLLNG Site Agreement for Lease with the Gladstone Ports Corporation (GPC) till March 31, 2017. The group even made an option to enhance on the same terms (with an inflation index) till March 31, 2018 indicating that the FLLNG Project continues to be a positive investment intention to them. With this move, management believes that they would be able to resume the development of the FLLNG Project. The group is also making strong efforts to pursue opportunities for gas supply to the FLLNG Project as well as negotiating with possible LNG buyers for the Asian market.
 

OSMR® LNG process technology (Source: Company Reports)
 
First half of 2016 highlights: The group reported a consolidated net loss after income tax for the first half of 2016 (without non?controlling interest) which reached $80.175 million as compared to $26.79 million in the prior corresponding period. LNG’s Project development expenditure rose from $24.98 million in first half of 2014 to $68.38 million in the first half of 2016 on the back of the expansion of its LNG project activity.  As per the Administration expenditure, it enhanced from $3.74 million in 1H14 to $7.54 million during the period due to growing general activity in the group, including staff numbers and office space, in the United States. Meanwhile, the expense of share?based payments issued to directors, employees and consultants rose to $12.58 million during the period from $3.449 million in 2014 given more long?term incentive (LTI) rights issuance, rising number of employees and a higher LNGL share price on grant date. The consolidated net loss were cut by pre?tax foreign exchange gains of $7.465 million, driven by the strengthening US dollar during the period.
 

First half of 2016 highlights (Source: Company Reports)
 
Outlook: The group has a cash of over $114 million as of January 2016 (inclusive of restricted and unrestricted funds) while the management believes that its current cash position would enable the business to survive through 2018. Meanwhile, the group intends to build more offtake agreements for its projects to leverage the growing global gas demand across the globe. The group is well positioned to implement its Energy Link strategy.
 
Stock Performance: The group is building a solid base to position itself in the booming LNG industry via its three LNG projects including Magnolia LNG, in Lake Charles, Louisiana, USA; Bear Head LNG in Richmond County, Nova Scotia, Canada; and Fisherman’s Landing LNG, in Queensland, Australia. These projects are progressing forward by receiving permissions and regulatory approval, as well as even finished project engineering to advanced stages, and are ready to progress to construction. The group’s OSMR patent technology platform offers competitive costs and efficiency edge. On the other hand, the shares of LNG fell over 64.81% in the last six months (as of April 19, 2016) and even declined by 31.3% during this year to date. This decrease was mainly due to the falling oil prices due to which the group’s efforts to sign sufficient binding offtake agreements have slowed down. However, LNG stock surged over 14% (as of April 19, 2016) in the last five days alone driven by the recovering commodity markets. The group is also positioning itself for future growth despite tough market conditions and accordingly focused on signing binding offtake agreements for Magnolia LNG. The group also placed a hold on its EPC?related contracts and completed residual engineering, regulatory, and permitting works on its projects. Meanwhile, the group appointed Mr. Gregory (Greg) M Vesey as Managing Director and Chief Executive Officer from April 4, 2016 while Mr. Maurice Brand, the founder would continue to be Executive Director, according to his present Employment Agreement, until his retirement by June 2017. We expect an upside in the stock going forward and give a “BUY” recommendation on LNG at the current price of $0.56
 
 
LNG Daily Chart (Source: Thomson Reuters)

---

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
Copyright
Copyright © 2016 Kalkine Pty Ltd ABN 34 154 808 312. No part of this website, or its content, may be reproduced in any form without the prior consent of Kalkine Pty Ltd.
Kalkine is a trading name of Kalkine Pty Ltd ABN 34 154 808 312, which holds Australian Financial Services Licence No. 425376.