07/07/2014 - 11:16

US gas fuels LNGL growth

07/07/2014 - 11:16

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FEATURE: After rocketing to a $1 billion market capitalisation this year, Liquefied Natural Gas Ltd has been going from strength to strength.

US gas fuels LNGL growth
RAPID: Maurice Brand expects to start construction on LNGL’s Magnolia project in the US next year. Photo: Attila Csaszar

After rocketing to a $1 billion market capitalisation this year, Liquefied Natural Gas Ltd has been going from strength to strength.

ASX-listed Liquefied Natural Gas Ltd would be the envy of many of its West Perth peers, having enjoyed a nine-fold increase in its share price this year.

Strong support from cashed-up institutional investors in the US, where LNGL is developing its Magnolia project, has propelled the company’s stock from less than 30 cents at the turn of the New Year to last week’s price of about $2.26.

“We were surprised by the support we have got in such a short timeframe,” LNGL founder, managing director and chief executive officer Maurice Brand told Business News.

“We knew it would come eventually but it did happen a little quicker than we thought.”

The Magnolia project comprises four 2 million tonnes per annum natural gas processing trains in the US state of Louisiana.

While the company has no gas reserves in its asset portfolio, it will instead service the producers in the country’s burgeoning shale gas industry by liquefying third-party gas for shipping to international markets.

Magnolia is LNGL’s second attempt at establishing a liquefaction plant for toll-treating natural gas, after initially scouting a location at Gladstone in Queensland in the 2000s.

The site, Fisherman’s Landing, at the Port of Gladstone, is located near Curtis Island where more than $60 billion worth of LNG projects is under construction.

The company identified the potential of the area after listing on the ASX in 2004 with an issue of 8 million shares at 20 cents each.

Mr Brand said the company had anticipated the gas boom early on.

“We had a belief that it would become quite significant,” he said, adding that the company was the first with an LNG project in Gladstone.

LNGL’s focus on the fledgling Queensland market helped push its share price to as much as $1.81 in 2009.

However, soon after, the Fisherman’s Landing project stalled as the company encountered issues around pipeline infrastructure and securing gas from local producers.

Following the challenges faced in the emerging Australian LNG market, Mr Brand began to consider alternative sites for a toll-treating LNG facility and in 2012 identified the mature US natural gas market as a frontrunner.

“The company needed to look at what it could do if Gladstone and Fisherman’s landing never went ahead,” Mr Brand said.

“The US is blessed with a lot of shale gas and it has an extraordinarily pipeline system – you can basically move gas all through North America.

“So it gives you the wonderful opportunity to do something a bit different and more creative when you are not reliant on billions dollar of upstream investment on exploration and pipelines,” Mr Brand said, referring to the LNG developments around Curtis Island.

Much of the engineering and technical work completed at Fisherman’s Landing was applied to Magnolia, which is now subject to final approval from the US energy regulator (anticipated next year).

Upon approval, Mr Brand expects to make a final investment decision and start construction on the plant soon after.

“We are very pleased with our progress but there is still a lot to do and we are pretty confident that we can maintain the schedule through to financial close and begin construction in the middle of next year – that’s our goal,” Mr Brand said.

In the meantime, the company is focused on awarding the remaining engineering, procurement and construction contracts after naming South Korea’s SKE&C as lead contractor.

Mr Brand is also working to secure agreements with local gas producers, which he said were well advanced.

In addition to LNGL’s stellar run on the ASX this year, the company also completed a $49.5 million capital raising in June, which was managed by Foster Stockbroking.

The raising was the fourth largest by a WA-based company for the June quarter.

On the back of this strong support, Mr Brand said he intends to complete a US listing.

He said it made sense to have a dual listing or some other structure in the country, given LNGL’s high US investor base.

“We are contemplating some form of a listing in the US next year. We would think that maybe up to 50 per cent, perhaps even more, of our shares would be held by US investors,” Mr Brand said.

Despite LNGL’s immediate focus on Magnolia, Mr Brand said the company was confidently pushing ahead with gas options at Fisherman’s Landing.

The company has also hinted at replicating Magnolia in other parts of North America as the region, particularly the US, relishes the shale gas boom.

Mr Brand, whose stake in LNGL was worth around $14 million at last week’s prices, attributed the company’s success to its move into the thriving US market.

“We are in the right country (the US) at the right time and at the right location,” Mr Brand said.

“Those things are very important for success and no matter how hard you work you need a little bit of that to go your way.”

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