Liquefied Natural Gas Ltd (LNGL) has two LNG liquefaction projects in development with planned start-ups in 2018/19. The company is using its own patent protected technology (OSMR®), which should lead to lower capex and opex costs. Lump sum turn-key contracts are being finalized, while tolling fees arrangements mean that cash flows from the projects are predictable (and material). Despite the significant share price rise in the last 18 months, our modelling indicates that there is significant value accretion available for investors. Our risked DCF approach implies a value of A$3.7/share (US$10.9/ADR), but a NAV over time reveals that this could increase to over A$9/share (US$27/ADR) in 2019.

Financial close fort Magnolia in 2016

The company has made good progress. Although the financial close has slipped to 2016 (from mid-2015), the first production is still targeted as late-2018, as LNGL will begin early works on the site after the FID, due in 2015. Binding agreements with the tolling partners and an EPC are still awaited, but the company is confident of finalizing these in the coming months.

Tags: Liquefied Natural Gas Limited