Shares Drop As LNG Delays Magnolia Project

  • Oct 29, 2018 AEDT
  • Team Kalkine
Shares Drop As LNG Delays Magnolia Project

LNG plant as it has run into problems lining up Chinese customers due to the US-China trade war, ASX-listed LNG said on Monday it is delaying a final decision on whether to build its US-based Magnolia LNG plant. LNG shares closed down 23 per cent at 41.5¢ as much as 29 per cent to a one-year low.

LNG had planned to make a final investment decision by the end of 2018 on Magnolia to produce 8 million tons per year of liquefied natural gas. LNG's chief executive officer Greg Vesey said in a quarterly report ‘the company made that statement prior to the trade tensions that have manifested over the past months, which have caused headwinds for LNG transactions.’ Located in the US state of Louisiana, the company is now targeting final approval for Magnolia depending on how talks to line up contracts go in the first part of 2019, he said.   

Where it planned to begin exports in 2022, the company is developing two plants – Magnolia, and another in Nova Scotia in Canada. “It's strictly been about marketing to China, for us” Vesey told Reuters in May. In an escalating trade dispute with Washington, that was before Beijing imposed a 10 per cent tariff on US LNG how and when with China the trade issues will be resolved has varying views.

Over 1,000 billion cubic feet (bcf), the United States is on track to export gas as LNG in 2018. To fuel about 5 million US homes for a day one billion cubic feet is enough. According to Thomson Reuters vessel tracking and US Department of Energy data, China is on track to buy less than 100 bcf in 2018, purchased about 15 per cent of all US LNG shipped in 2017.

Saul Kavonic, oil and gas researcher for Credit Suisse in Sydney said, with repercussions for the scale and pace for the next wave of US projects, China which is the world's fastest growing LNG market has pivoted its long-term LNG procurement strategies away from the US because of the trade dispute.

The company closed first quarter of FY19 with the company’s total cash position at A$46.4 million and remains debt free as at September 2018. Net operating cash outflow was A$4.8 million during the three-months ended September 30, 2018, which compared with the net operating cash outflow ended June 30, 2018 of A$6.2 million for the three-months.

Liquefied Natural Gas Limited (ASX: LNG) is trading at a market price of $0.415 and has seen a performance change of 21.35% over the past 12 months.


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