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Why the Liquefied Natural Gas Ltd share price collapsed today

The share price of Liquefied Natural Gas Ltd (ASX: LNG) has been smashed again today, shedding another 11.3% to trade at just 78.5 cents. It hit a fresh 18-month low of 77.5 cents earlier in the session.

As just a little bit of background on Liquefied Natural Gas Ltd, or LNGL, the company was the story share of 2014. Investors held high hopes for the company’s proposed liquefaction and export facilities, namely Magnolia LNG and Bear Head LNG, which were to turn gas into LNG. However, the company was still short of binding tolling agreements with gas suppliers in order to approach lenders to get the projects off and running.

The market though was so excited about the company’s prospects that the share price rose from just 29.5 cents at the beginning of 2014, to a peak of exactly $5. Investors who held on for that entire duration were sitting on a remarkable gain of nearly 1,600% by April this year.

Unfortunately, it’s been all downhill since then. Oil prices around the world have collapsed, dragging liquefied natural gas prices down as well. That has raised serious questions regarding the economic viability of LNGL’s two major projects and there is a possibility that energy prices could fall even lower from here.

Source: ASX website; two-year share price chart for LNGL

Source: ASX website; two-year share price chart for LNGL

To put it another way, the market is now focused on the enormous risks facing LNGL, and the industry as a whole, as companies around the world shelve their liquefied natural gas projects, or else scrap them entirely.

Even at its current share price of 78.5 cents, Liquefied Natural Gas is one for more risk-averse investors 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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