Shares in Liquefied Natural Gas Limited (ASX: LNG) (LNGL) are up 12% at midday today, following a 25% fall yesterday.
The catalyst for today's price jump is a welcome rebound in the oil price overnight and a key announcement to the ASX.
The announcement provided details on Magnolia LNG's (an LNGL subsidiary) proposed engineering, procurement and construction (EPC) contract with SK E&C.
Magnolia LNG is the company charged with developing LNGL's flagship 8mtpa LNG tolling and export facility in Lake Charles, Louisiana, USA. This latest development marks a crucial step for the project in meeting its expected financial close in mid-2015 and will enable the company to progress towards project financing.
The total cost for the full 8mtpa facility remains at $US3.5 billion, equating to $US440 per tonne, including an estimated cost of $US1.014 billion to progress from phase one (4mpta) to phase two (8mtpa). Between now and 31 March 2015, the company and SK E&C will continue to develop, finalise and agree on the provisional sum and the final cost for phase two.
The company has forwarded the contract to its project finance and legal advisors as well as its lender's technical consultant for final review.
Should you buy LNGL?
As I noted yesterday, during the company's dramatic selloff, LNGL remains a high-risk/high-reward investment at today's prices. However the company is quickly moving towards financial close in mid-2015 and chipping away at a number of uncertainties. Whilst the company is no longer a one-trick pony (it has the potential to develop another two LNG tolling sites), it is awaiting DOE approval for shipments to non-FTA countries, FERC approval and binding tolling agreements. As a result risk averse investors would be advised to keep the stock on their watchlists, for now.
