Liquefied Natural Gas Limited

Healthy Quarterly Activity Update (30 June 2018): During the fourth quarter ended June 2018, Liquefied Natural Gas Limited (ASX: LNG) posted the net operating cash outflow of A$6.2 Mn compared with the net operating cash outflow of A$5.7 Mn for the three months ended March 31, 2018. LNG’s total cash balance as at June 30, 2018 was of A$50.7 Mn (inclusive of $3.2 Mn of restricted cash), which compares to A$27.5 Mn as at March 31, 2018. This reflects an outflow of A$6.2 Mn, non-cash impact of A$0.9 Mn from currency fluctuation, and net cash inflows of A$28.5 Mn associated with the Share Placement to IDG Energy Investments and the sale of Gladstone LNG. Further, the company remains debt-free at the end of the June 2018 quarter. Meanwhile, LNG’s liquidity management plan is in place and is on course to fund operating requirements into mid of 2020. LNG contemplates the continuity of normal business activity in delivering its goals of reaching financial investment decisions, constructing, and operating its liquefaction projects. The company has an ability to extend the available liquidity beyond existing capacity, which is however dependent upon the future successful raising of incremental funding through any one or a combination of the successful marketing of offtake capacity and the resulting financing of one or more of its projects, marketing of the OSMR technology and services and the sale of equity and/or debt or the sale of assets. In the meantime, the share price has risen 61.73 per cent in the past three months and by 7.38 per cent in the past one week (as at July 26, 2018). As of now, the stock is trading at the higher level, while the group has potential to grow further underpinned by rise in demand of LNG across the globe, we give a “Hold” recommendation on the stock at the current market price of $ 0.680 (up by 3.817 per cent on July 27, 2018).


Yearly Net LNG Imports / Exports as at 2035 (Source: Company Reports)
 

Santos Limited

Sustainable Dividends and Strategic Mid-Term Agreement with PetroChina: Santos Limited (ASX: STO) disclosed that the PNG LNG Project co-venturers inked a mid-term LNG sale and purchase deal with PetroChina International for the supply of liquefied natural gas (LNG) starting in July FY18. The objective of the deal is to supply LNG around 0.45 MTPA over a three-year period from the LNG project in Papua New Guinea. As per the agreement, the total contracted volumes taken from the LNG are 7.0 MTPA in which 6.6 MTPA have been already committed under the long-term contracts to others such as JERA, Osaka Gas, Sinopec, and CPC. On the behalf of the PNG LNG project participants, ExxonMobile who is a world’s largest publicly traded international oil and gas company is negotiating with several other parties for potential mid-term LNG supply agreements with respect to spot sales. The management expects that these arrangements are to be concluded in the upcoming period and will support the earnings in future. The group has a 13.5 per cent stake in PNG LNG.


Quarterly Comparative Performance (Source: Company Reports)

Recently, the group released its second quarter results in which the company had cash and cash equivalents of US$1.5bn with total debt of US$3.9bn.During the quarter, the company introduced new dividend policy in which the company will target a range of 10% to 30% payout of free cash flow per annum. Meanwhile, the share price climbed up 20.19 per cent in the past six months and trading close to 52-week high level. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 6.380 (up by 1.109 per cent on July 27, 2018).

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