Why the Liquefied Natural Gas Ltd share price has been hammered today

Credit: Pieter van Marion

Liquefied Natural Gas Ltd (ASX: LNG) (“LNG Ltd”) has been one of the worst-performing shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today, falling 9.1% compared to the market’s 1.4% decline.

LNG Ltd’s share price is currently sitting at 90 cents but hit a low of 87.5 cents earlier in the session. It’s the lowest price LNG Ltd’s shares have traded at in more than 18 months. At one point the shares were soaring towards an eventual high of $5 each.

Today’s sharp decline has almost certainly come as a result of the plummeting oil prices on Friday, which are acting as a drag on most companies in the energy sector today. The Brent oil price, which is considered the global benchmark, fell 5.3% to US$37.61 a barrel while US crude is hovering around the US$35 a barrel mark. It’s the resource’s lowest price since the Global Financial Crisis.

It’s very possible that falling oil prices will continue to impact gas prices in a negative way. While this won’t directly impact LNG Ltd, it could certainly make its two core projects, being the Magnolia LNG export processing plant and the Canadian Bear Head LNG project, economically unviable.

Indeed, as oil and gas prices continue to decline, it’s becoming riskier for its shareholders. Even at 90 cents, LNG Ltd seems like one to avoid.

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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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