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Why Liquefied Natural Gas Ltd’s share price surged today

Credit: Matt Biddulph

Shares of Liquefied Natural Gas Ltd (ASX: LNG) (“LNG Ltd”) have skyrocketed today, surging nearly 19% to $1.55 after the company released two market-sensitive announcements this morning. That compares to a 0.7% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

Source: CMC Markets

Source: CMC Markets

Indeed, LNG Ltd has come under enormous selling pressure in recent months, falling from a high of $5 to a low of $1.23 recently. This was largely due to the collapsing oil prices which threatened the economic viability of its various projects.

In a big win for the company today however, it said its wholly owned subsidiary, Magnolia LNG LLC (“Magnolia”), had chosen the KBR-SKE&C joint venture to provide engineering, procurement and construction (EPC contract) work for the Magnolia LNG project.

The EPC contract, costing a little over US$4.35 billion (AU$6.12 billion), is for four LNG production trains with design capacity of 2 million tonnes per annum (mtpa) or greater each; two 160,000 cubic metre full containment storage tanks; LNG marine and ship loading facilities; supporting infrastructure and all required post-FID approvals and licences.

It also includes guaranteed production of 7.6 mtpa, or 0.8 mtpa greater than previous guidance.

LNG Ltd’s Managing Director and CEO, Maurice Brand, said: “The total EPC capital cost in the range of US$495 to US$544 per tonne of LNG plant capacity (for the 8 mtpa or greater plant) establishes a new low for U.S. Gulf Coast projects and is substantially lower compared with recent LNG projects around the world” (emphasis added).

The company also believes the deal can provide a “sustainable long-term business platform that can be replicated in future projects.”

What’s more, the company also announced it had received a final environmental impact statement from the United States Energy Regulatory Commission (FERC), finding limited adverse impacts for the project. When combined, this is great news for the company and its shareholders.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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