LNG - Liquefied Natural Gas

[nazzysmith]

Check the AGM its in there.

Still on track for first gas in 2012

Next steps
- Finalise development approvals to enable commencement of construction
- Convert existing HOA's into definitive agreements.
- Raise project funding
- Secure Gas for Train 2

Cheers

 

[eddyeagle]

I am surprised at how much of a belting LNG has copped since its highs of $1.90 last year. Seems to be firmly locked in a downtrend at the moment. I'm thinking it may find some support around the 60c region but who knows at this rate!

 

[jonojpsg]

Right then, so LNG have sold out to AOE.

Following info from ann:

The sale price for the acquisition by Arrow is as follows:
●
Subject to provision of LNG Ltd shareholder approval to the sale, reimbursement of actual costs incurred to date on the Gladstone LNG Project, estimated at A$45 million;
●
US$10 million licensing fee for Arrow’s use of LNG Ltd’s OSMR ® technology for the first LNG train, with US$5 million to be paid by Arrow to LNG Ltd by 28 February 2010 and a further US$5 million payable at notice of readiness to proceed to construction of the first LNG train;
●
An additional US$10 million license fee is payable for each additional LNG train developed at the project site using the OSMR ® technology;
●
Milestone payments comprising:
o
A$24 million payable at the earlier of:

i) Arrow’s final investment decision for the first LNG train; and

ii) Arrow reaching its FID milestone date under its agreement with Shell;
o
A$24 million when the LNG project first produces 1 million tonnes per annum of LNG; ando
A$63.5 million when the LNG project first produces 3 million tonnes per annum of LNG.
Royalty payments comprising:
o
A royalty of 0.9%, adjustable based on the final development costs of the first LNG train (adjustable to a minimum of 0.7%) and related infrastructure and calculated on the difference between the prevailing oil price, at the time of each LNG shipment, and “US$60/bbl”oil price for the first 1.7 mtpa (MMBtu equivalent) of LNG produced in each contract year. The first LNG train has been designed to produce between 1.5 mtpa and 1.7 mpta. Refer to the below examples #;
o
A royalty of 0.9% calculated on the difference between the prevailing oil price, at the time of each LNG shipment and “US$50/bbl” oil price for the next 1.8 mtpa (MMBtu equivalent) of LNG produced; and
o
The royalties are for a period of 20 years from the first LNG shipment and are payable within 7 days of receipt of payment for the relevant LNG shipment.
#1 Example (production rate of 1.7 mtpa):
Assumptions: Oil price: US$80/bbl
LNG shipments: 1.7 mtpa (~88 million MMBtu)
USD/AUD: 0.80
Annual Royalty = (US$80 – US$60) *0.9% * 88 million
= US$16 million (or A$20 million)#2 Example (production rate of 3.5 mtpa):
Assumptions: Oil Price: US$80/bbl
LNG shipments 3.5 mtpa (~180 million MMBtu)
USD/AUD 0.80
Annual Royalty = (US$80–US$60)*0.9%*88 million
+ (US$80–US$50)*0.9%* (180 - 88) million
= US$41 million (or A$51 million)
●
Subject to the provision of LNG Ltd shareholder approval to the sale, a grant to LNG Ltd of 12.5 million options to acquire Arrow shares at an exercise price of $3.50 with a 14 May 2010 expiry date.

OK, so after sale completion they will have $85m cash and a current MC of $150m (@70c).

Add $24m to that when AOE get to FID which makes $109m.

Then in 2012 if all goes according to plan, another $5m, then once 1st train up and running $24m.

Then royalties of about $15m say (at 1MTpa startup) and that is based on $80pb oil!! and I have NO doubt that POO will be more like $100+ by then if not $150+. Note that royalties are based on price above a benchmark of $60pb so that at $100pb this effectively doubles the above royalty to $30m.

So, for an enterprise value of $65m we get an almost guaranteed $24m in the next year or so (to FID) + $30m payment in 2 years if and when 1st train gets running fully. Assume cash burn without costs of Fishermans Landing will be more like $5m a year so take out $15m for running the co till then giving a then EV of approx $26m (at end 2012).

IFF all this happens they will then be raking in potentially more (and could be a LOT more depending on POO) than that each year for sitting on their hands doing nothing

Sounds like another no brainer to me. Anyone care to comment?

 

[Wysiwyg]

Sounds like another no brainer to me. Anyone care to comment?

That read good to me too. Even now after the share price has tumbled from $1.90 there was considerable supply to subdue the demand. What does this mean? Are all the cards on the table? Overall market jitters? Some sophisticated analyst has put a nominal value on LNG?

Hard to imagine huge supply after the downtrend at this level but there sure were a lot not too keen to hold after the announcement.

 

[Riddick]

Just read through and agree with you both. I got in early (60c or so) and got out when it double peaked on lower volume around 1.80. Watched it tumble pretty much endlessly down since then trying to figure out what the hell was going on?

seemed to be an andless supply of seller willingly to continue seeling this one down. Like you said, it appears almost a no brainer if everything is on the table as I still believe this is a pretty good prospect. will watch closely over the coming days I guess and see what the populace thinks.

 

[eddyeagle]

LNG up 22% today as I write.

Anyone heard anything?

Is this something to do with Arrow Energy?

 

[snowking]

Id say it is on the back of Arrow's news. ESG and BOW are also up quite considerably, although BOW did announce a reserves upgrade.

Arrow's announcement seems to have re-ignited the gas sector...for the time being at least.

 

[JBR]

Gee didint take LNG long to drop all of its gains from Mondays price hike. Surely it cant go any lower than this can it. I know todays report was ordinary but this stock was $1.90 not long ago. Glad I got on the share purchase plan at $1.25.Can anyone see it coming back from this last drop today.

 

[AngusSmart]

Its been on my watch list for quiet some time now, @ $1 i was considering jumping in..

now its where it is i am really considering it for a long hold..

still tossing that up however....

 

[AngusSmart]

From today

In regards to the trading halt and the sale of the Lng plant at Gladstone to Arrow, Or as it stands now the Non sale to Arrow..


I do not hold LNG

 

[eddyeagle]

I'm sitting on quite a bit of a loss in % terms in LNG after the shareprice has been well and truly smashed and I'm trying to get my head around where the company is at right now.

From their latest announcement dated 10 May:

1. They have signed an agreement to lease the site at Gladstone;

2. They have been actively progressing, and are close to finalising, the basis of their proposed gas supply plan for the Company’s LNG project;

3. They are progessing discussions with potential strategic partners for the LNG project. To date a number of suitable parties have expressed a willingness to participate, including fulfilling the role of LNG buyer and participation in the Company’s proposed gas supply plans.


So obviously there is a fair bit of uncertainty at the moment after Arrow received the TO offer, but the way I read it, things sound positive, as they are planning to proceed with the project and it's a matter of finding a new gas supplier and LNG buyer, which are both progressing.

With the SP at current levels of around 40c, I am considering buying another parcel (averaging down i know) as a high risk high reward punt.

Would be interested to hear people's thoughts.

 

[curryinahurry]

First time poster. What i would like to know is where the gas is going to come from (since Arrow will not be supplying)?

 

[jonojpsg]

First time poster. What i would like to know is where the gas is going to come from (since Arrow will not be supplying)?

Hey curry and eddy,

Announcements over the last three days all look good - EPC price seems OK for what they're aiming for and the time frame of 30 months still puts them well ahead of the pack up there, which IMO is the most important thing for the company.

Gas will come from the number of players that have or are in the process of defining reserves...BOW, BLU, MEL are some that aren't necessarily tied up with the majors who are aiming to produce LNG there as well.

I have averaged down myself over the last week so worth looking at

 

[eddyeagle]

Thanks Jono,

It's an interesting situation. They seem to be moving ahead but at the same time, this project is nothing without a gas supply so they need to get that sorted!

It's a high risk investment, but the rewards could be significant if you believe they will get there!

 

[jonojpsg]

Thanks Jono,

It's an interesting situation. They seem to be moving ahead but at the same time, this project is nothing without a gas supply so they need to get that sorted!

It's a high risk investment, but the rewards could be significant if you believe they will get there!

Yep, need the gas definitely I reckon though that the smaller CSG players will be jumping at the chance to sell their gas to someone and LNG needs it, so it provides an opportunity for those who are too small to supply the massive 10Mtpa+ projects that all the majors are planning.

Guess it depends though on finding reserves in a company that can get them into production in time for mid 2013??

 

[jonojpsg]

Yep, need the gas definitely I reckon though that the smaller CSG players will be jumping at the chance to sell their gas to someone and LNG needs it, so it provides an opportunity for those who are too small to supply the massive 10Mtpa+ projects that all the majors are planning.

Guess it depends though on finding reserves in a company that can get them into production in time for mid 2013??

OK, I'm not sure of the etiquette re this one, but from an email I've just received from the MD;

We are being overlooked by the media at present because we have no gas arrangements, however that will change later this month when we announce our gas plans

Feel free to advise mods if this breaches any "proper" rules of company communications

I'm loading up anyway, as the SP was justifiably sitting around $1 before Arrow decided to jump ship and if LNG can get this project up and running by mid 2013, they will be at least two years ahead of any competition, which will give them a huge advantage, especially given that they have multiple stages up to 3 trains @1.75Mtpa, so could feasibly have all these running before the others get theirs going...

With gas supply locked in, IMO the SP will run back up over $1 fairly quickly

 

[Wysiwyg]

OK, I'm not sure of the etiquette re this one, but from an email I've just received from the MD;

Well I'm sure of the etiquette and it stinks. Good manners, "respect" and confidentiality are qualities lacking more so these days. I did have a fairly correct upbringing though but that was over thirty years ago. Maybe attitudes have changed these days with more of a focus on the dollar.

Well that's what I think anyway.

 

[jonojpsg]

Well I'm sure of the etiquette and it stinks. Good manners, "respect" and confidentiality are qualities lacking more so these days. I did have a fairly correct upbringing though but that was over thirty years ago. Maybe attitudes have changed these days with more of a focus on the dollar.

Well that's what I think anyway.

Hey Wys, thanks for the feedback. I'm happy for mods to take the post off, it's just that the main thrust of the email query that I sent to LNG was re poor media coverage for them, so I figured that if they got some coverage on here that would be appreciated?

Anyway, mods take the post off if you think it should be

 

[maxdoubt]

@jonojpsg - from a newby poster. Why do I get the impression you've been unfairly judged? Was the MD's email stamped TOP SECRET? Hardly. Yes, good manners, respect and confidentiality - in fact ethics generally are thin on the ground these days. However, I don't think your post was anything other than a candid sharing of your own research as a member of the public with LNG. Isn't that the very heart and soul of what this forum is supposed to be about?? Dare say the mod thinks the same. 'stinks'.....eh?....indeed!! I hold LNG and appreciated your post.

 

[eddyeagle]

Just had a look at their latest presentation. It doesnt look bad. They are continuing with their plans. Yet the SP is still under the pump!

A couple of slides:


LNG Limited – An Overview
Focused on exploiting mid‐scale LNG opportunities
Team of world‐class professionals
OSMR ® liquefaction and membrane tank technology with clear competitive advantages
Gaining long‐term access to suitable project sites and associated infrastructure
Strategic positioning to access gas resources
Will deliver Gladstone LNG – WHY?
CSG available – multiple potential gas suppliers
LNG buyers available ‐ multiple possible strategic partners identified
Capital costs ~ US$ 300 tpa*, based on 3.5 mtpa
Shorter timelines ~ 30 months from FID to First LNG
Energy efficiency ~ 30% higher
Environmental impact CO2 ~ 30% lower
Repeatable business model
Australia – three options under consideration
PNG – two options under consideration



Key Proposition
LNG Limited is in the business of developing high margin mid‐scale LNG projects
Gladstone LNG remains the company’s strategic focus
Next steps
Implement gas supply plan
Secure strategic partners
Current and future projects have strong economics and will be characterised by
Lower capital costs
Shorter development and construction timelines
Higher energy efficiency
Lower carbon emissions and lower overall environmental impact
High‐calibre project partners and a driven team of experienced professionals will underpin
our success
Repeatable formula is underpinned by proprietary engineering, site selection, partner
selection, and financing
Project expansion, upstream integration and regional diversification underpin future growth
options