Liquefied Natural Gas Ltd PK (OTC:LNGLY) has already announced two encouraging updates in 2017. On 30 January, the EPC contract with KSJV was extended to the end of June 2017, giving greater construction price certainty as and when the final investment decision (FID) is taken. On 23 January, it announced a Heads of Agreement (HOA) with KG LNG terminal in India for 4mtpa for 20 years. While non-binding, this suggests the company is making progress towards financial close for Magnolia’s 8mtpa export project. As it works to retain as much cash as possible until the FID is reached, LNG is making good progress towards monetizing the OSMR technology and Magnolia project. We leave our valuation unchanged, but note that if a binding contract is agreed with KG LNG it would be a major step towards realizing the significant potential of the Magnolia project. Bear Head (with all environmental approvals obtained) remains a further option on the growing LNG trade in years to come.
Non-binding HOA with KG LNG terminal
The non-binding nature of the HOA means further work has to be executed before a binding agreement can be signed; this would likely have a material de-risking effect on Magnolia as it would mean half of the 8mtpa capacity would be accounted for. However, we are encouraged that progress has been made and long-term customers are interested in taking Magnolia-sourced LNG.
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