Shares in Liquefied Natural Gas Ltd (ASX: LNG) have traded as much as 12% lower today, as global oil prices continue to freefall.
Down a whopping 48% in three months, shares of LNGL have been a regular feature in the media's 'worst performing stocks', despite a miraculous run earlier in the year which saw its share price pop over 1,000%.
However the sharp share price drop comes despite encouraging news from LNGL's two subsidiaries, Bear Head LNG and Magnolia LNG. The subsidiaries own LNG liquefaction and export tolling facilities in Nova Scotia, Canada and Louisiana, USA, respectively.
Yesterday, Bear Head made an announcement to the ASX saying it had filed an application with the US Department of Energy to export LNG to Free Trade Agreement (FTA) and non-FTA countries. This is an important regulatory hurdle which will be required if the facility intends to be in commercial operation by late 2018, as forecast.
Magnolia LNG, LNGL's flagship project in Lake Charles Louisiana, is also moving closer to first LNG production in 2018. Today it released a statement to the market saying it has received the anticipated Engineering Data information from the Federal Energy Regulatory Commission (FERC). This is a key milestone in the FERC filing process and is usually the final request sought by FERC before the issue of a Notice of Schedule and final decision. It enables the agreed outcomes to be detailed and relevant contracts to be completed by 31 March 2015. Financial close is still expected around mid-2015.
Should you buy, hold, or sell LNGL?
Since I first recommended investors buy LNGL shares earlier this year, it's up around 600%. However, when coupled with the backdrop of falling oil prices, the risk-reward trade-off does not appear as good as it once was. However, if the company can get one of either the Magnolia or Bear Head export facilities constructed and into operation as expected, I believe today's share price will look seriously cheap in hindsight. However, that's a big 'if'.