Liquified Natural Gas Limited

LNGL receives Notice of Intent from FERC for production capacity increment:Perth based company, Liquified Natural Gas Limited (ASX: LNG) is engaged in developing LNG export terminal projects in the United States and Canada. The company recently received a notice of intent (NOI) from the United States Federal Energy Regulatory Commission (FERC) that the agency will prepare a supplement environmental impact statement (EIS) for the incremental 0.8 million tonnes per annum (mtpa) production capacity increase application for the Company’s wholly owned subsidiary, Magnolia LNG LLC (Magnolia).This development will provide confidence to the company in building the safest low-cost and most efficient LNG export facility on the U.S. Gulf Coast.

March’19 Quarter Key Highlights:During the period, Magnolia LNG, LLC received notice from the United States Department of Energy (DOE) that the agency had granted authorization for Magnolia to expand its export capacity to 8.8 million tonnes per annum (mtpa) of LNG to countries that have free trade agreements (FTA) with the United States. The Company continued to examine technical improvements in the OSMR® technology and plant modular design to further reduce costs. On March 28, 2019, LNG Limited changed its registered office address to Level 25, 20 Bond Street, Sydney, New South Wales 2000, Australia.

At the end of the March quarter period, LNGL maintained a total cash position at $28.7 Mn with no debt.Its net operating cash outflow was reported at $7.9 Mn, as compared to $10.5 Mn net operating cash outflow in December’18 quarter.

H1FY19 (ended on December 31, 2018) Financial Performance:Revenues from ordinary activities increased by 158% pcp to $0.439 Mn. Loss from ordinary activities after tax attributable to members increased by 27% pcp to $16.9 Mn.


H1FY19 P&L Statement (Source: Company Reports)

What To Expect:As per the release, the Company’s liquidity management plan remains well in place to fund its operating requirements into the second quarter of 2020. LNGL’s ability to extend available liquidity beyond existing capacity is 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; the sale of equity and/or debt; or the sale of assets. The management believes it has options for raising incremental capital and that execution of its plans will enable the extension of existing liquidity as and when required. However, the management acknowledges the risks and uncertainty of raising additional capital which in case of failure, would impose negative implications to the business.

Stock Recommendation: It is currently trading close to its 52 weeks low level, therefore the probability to bounce back from the present level increases. The company maintains a decent cash position, which can be supported by the current ratio for H1FY19, which stands at 10.91x, better than the industry median of 1.25x, which implies the company is in a better position to address its short-term obligations. LNGL’s share generated negative YTD return of 47.57%. Hence, considering the aforesaid facts and current trading level, we give a “Speculative Buy” rating on the stock at the current market price of $0.275 per share (up 1.852% on June 12, 2019).

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