LNG Ltd. (LNGL), which is developing natural gas export terminals on the Gulf Coast and in Canada, is facing a cash crunch and warned Tuesday that it might not be in business much longer after a Singapore-based company backed out of a deal to acquire it.
First Wall Street Capital Corp. ended LNGL’s funding last month. As a result, privately held LNG9 Pte Ltd. has withdrawn its takeover bid of the liquefied natural gas (LNG) project, indicating a lack of funding is “likely to have a material adverse effect” on LNGL and that certain conditions of the proposal “have been triggered or are incapable of being satisfied.”
LNGL, which is listed on the Australian Securities Exchange (ASX), noted that LNG9 remains interested in acquiring all or part of its assets, but the exclusivity period has lapsed with the bid retraction.
The company said it has enough cash in reserve to meet its obligations until the end of this month and “must secure additional meaningful funding urgently to continue operating beyond then.” In the meantime, LNGL is working on strategic alternatives with “other parties” to strengthen its cash position. The company also said a U.S. subsidiary has received a Paycheck Protection Program loan of $388,552 under the $2 trillion stimulus package that Congress passed last month to aid the economy amid the coronavirus outbreak.
Citing “intense” competition in the race to export LNC and a need to secure liquidity, LNGL said in February it was considering LNG9’s takeover offer. The Singapore-based company owns and operates offshore regasification facilities in Asia and Europe.
Under LNG9’s bid agreement, shareholders would have received 13 cents/share (or the Australian dollar equivalent) in cash, valuing it at around $75 million. The offer represented a 72% premium to the closing price on the ASX on Feb. 27, the trading day before the announcement.
LNGL is working to get LNG projects off the ground while the global market is awash in supply and buyers are unwilling to sign long-term supply deals. Despite having all permits in hand, securing binding offtake agreements has been a struggle for the proposed Magnolia LNG terminal near Lake Charles, LA, and the Bear Head LNG facility in Nova Scotia. The Gulf Coast facility would have the capacity to produce 8 million metric tons/year (mmty), while the Canadian project would produce up to 12 mmty.
The macro environment has been made worse by the pandemic, which has brought down demand for natural gas across the world. The oil price rout has also hurt projects with crude exposure. Final investment decisions on ExxonMobil’s Rovuma LNG and for an expansion at Woodside Petroleum’s Pluto LNG facility have been postponed, to name a few projects already impacted by delays and other issues.
Poten & Partners said during a webinar last week export projects across the world are likely to face delays from the Covid-19 pandemic. Facilities potentially impacted represent 227.75 mmty of supply.
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