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| Those Wild, Crazy LNG Project Developers | ||||||
| Zeus Liquefied Natural Gas Report May 7, 2009 |
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| Gasol and Energy World Corp see triple digit year-to-date growth on the promise of their LNG export projects. |
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Energy World Wows Investors with Grand Plans The largest of the independent LNG project developers, Energy World Corporation, has nearly tripled its market capitalization in two months to nearly $700 million as of May 7. The company was valued at just $240 million (A$312 million) two months earlier, down from a high of nearly $2 billion in May 2008. Last month, though, management began to promote a growth strategy to fit the company’s ambitious name. Six LNG projects in the Pacific Basin to serve Asian markets, some with adjoining power projects, were identified. Four are export plants: the Sengkang LNG Terminal on Sulawesi Island, Parama Island LNG Export Terminal and Deepwater Port in Papua New Guinea, and the Abbot Point and Hay Point Terminals in Queensland, Australia. Two are receiving terminals with associated power plants: the Pagbilao LNG Terminal in the Philippines and the other, Hambantota LNG, on the northern coast of Sri Lanka. Progress at Sengkang According to Energy World, the major equipment for the Sengkang export project has been purchased from Chart Industries and Siemens. The majority of it has been manufactured and is ready for shipping. Management estimate the Keera Wajo plant will cost $588 million for a 2.0 million metric ton per year plant. That is equivalent to $294/ton-year of capacity, a very competitive capital cost when compared to some larger plants. Site acquisition is underway. Gasol Back from the Ashes Gasol plc announced April 6 that it is now in a joint venture with Sociedad Nacional de Gas, GE (SONAGAS), the national gas company of Equatorial Guinea, after African Gas Development Corporation Limited (AFGAS) assigned its rights to Gasol. This news helped to double the value of Gasol’s market value to $71 million. At the beginning of the year, the company’s market capitalization had fallen to just $12 million. Fuel with Optimism Such is the life of project developers. None of the companies listed in Figure 1 is profitable. According to financial data, Energy World achieved a negative operating margin of 70% in the fourth quarter of 2008. Gasol achieved a negative 96% return on assets in its latest quarter. But this paled in comparison to Liquefied Natural Gas Limited, which achieved a negative 107% return on its assets in 4Q 2008. Project developers’ values are only as good as their latest press release and the perception investors have of the prospects for their projects. A constant progression of optimistic releases is necessary to keep demand high for their stock. Likewise, a rising stock adds credence to the project. Neither Flex LNG nor Liquefied Natural Gas Limited has issued an announcement lately. Perhaps some investors are learning to buy when news is quiet and sell on the announcement. |
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