Energy collapse sends LNG Ltd into administration as coronavirus crisis hits oil and gas
The biggest energy crash in a generation has claimed its first Australian gas scalp.
The biggest energy crash in a generation has claimed its first Australian gas scalp after LNG Limited slipped into administration just two weeks after saying it was running out of cash.
The ASX-listed junior said it had appointed PwC as voluntary administrators with the company’s directors and management quitting the company over the past few days.
The gas developer had been toiling to kickstart a hugely ambitious $US5bn ($7.8bn) Magnolia LNG project in Louisiana but ran into a series of difficulties including a slump in the LNG price and fallout from the US-China trade war, complicating moves to sign up customers in Asia for its project.
The market has no interest in backing prospective LNG projects in the current market downturn, Credit Suisse analyst Saul Kavonic said.
“There is no appetite to progress LNG projects to a final investment decision amidst the oil price rout,” Mr Kavonic said. “Appetite for US LNG is waning in particular as current spot prices aren’t covering cash costs.”
US gas prices have sunk to their lowest level since 1995 with domestic stockpiles due to hit a record in 2020 as demand falls due to the coronavirus which roils demand. The outlook is also downbeat for high cost US LNG exporters with a surplus of supply in international markets and prices in Asia also hovering near record lows.
US shale operator Freedom Oil and Gas, backed by former BHP petroleum boss Mike Yeager, plunged into administration on March 23.
Board members including chief executive Gregory Vesey resigned in the past few days. PwC are reviewing the company’s business and assets ahead of contacting creditors.
A takeover deal for LNG Ltd by Singapore’s LNG9 was terminated in April after a financing deal collapsed prompting the junior to scour financiers for an urgent but ultimately fruitless search for funding.
LNG Limited outlined a plan last May to make a final investment decision on its 8 million tonne a year Magnolia export project in the second half of 2019 after initially targeting a call earlier in 2019.
The company was started by Perth entrepreneur Maurice Brand and was originally focused on the Fisherman’s Landing project at Gladstone in Queensland before changing to the US LNG market. In addition to the Magnolia project, it also hoped to develop the Bear Head LNG plant in Canada’s Nova Scotia.