Liquefied Natural Gas Limited (ASX:LNG, OTC ADR:LNGLY) has raised A$174 million through the placement of 40 million shares at $4.35 each to progress its North American LNG projects.
It has also started front-end engineering and design on its Bear Head LNG project in Nova Scotia, Canada, after receiving the last of the initial approvals.
Proceeds from the placement, which was made to institutional and sophisticated investors at a 5% discount to the volume weighted average price for the five trading day period up to and including 15 May 2015, will be used for:
- Commencement of an Early Works program at the proposed 8 million tonne per annum Magnolia LNG (MLNG) project following receipt of the timeline established in the Federal Energy Regulatory Commission (FERC) Schedule of Environmental Review (SER) announced on 30 April 2015. Expenditures on the full Early Works program will commence upon the execution of binding offtake agreements for at least two LNG trains with a current design capacity of 4Mtpa and the finalisation of pricing for the EPC Contract with the KBR/SKEC JV, with a view to ensuring first LNG is delivered to customers in late 2018;
- Bear Head LNG’s (BHLNG) pipeline infrastructure development work and FEED for a full 8Mtpa export facility, targeting a 2016 final investment decision (FID);
- Potentially, the acquisition and development of a third LNG project in North America; and
- General corporate purposes.
“The capital raised will materially help us to progress the Magnolia LNG and Bear Head LNG projects under development in North America,” managing director Maurice Brand said.
“Commencement in the second half of 2015 of an Early Works expenditure program at the Magnolia LNG project will comprise detailed engineering and ordering of critical long-lead equipment items to accelerate the site works schedule following receipt of the SER from FERC.
“Timing of the full Early Works expenditures is intended to align with Magnolia LNG’s execution of binding offtake agreements for at least two LNG trains with a current design capacity of 4Mtpa, and the finalisation of pricing for the EPC contract with the KBR/SKEC JV, and is consistent with our current plan to achieve first LNG in December 2018.
“We are also very pleased with the progress of the Bear Head LNG project in Richmond County, Nova Scotia.
“Expenditures on the Bear Head LNG project, also commencing in the second half of 2015, will focus on access to feed gas supplies and FEED for a full 8Mtpa export facility, maximising use of the completed FEED for the Magnolia LNG project, targeting FID in 2016.”
Bear Head LNG
Bear Head LNG Corporation, a wholly-owned subsidiary of LNG Ltd, has received approval from the Nova Scotia Department of Environment for its updated provincial Environmental Assessment for the development of an 8Mtpa LNG export facility in Point Tupper, Nova Scotia.
The NSE approval is the last of the 10 initial federal, provincial and local regulatory approvals needed to construct a LNG export facility on the Strait of Canso in Nova Scotia.
Bear Head LNG is now the only LNG project in Eastern Canada with all of the 10 project approvals and permits in place necessary for construction.
Some of these approvals would take a minimum of 18 months to secure if they had not been previously obtained and appropriately maintained as active.
"Receiving Nova Scotia Environment’s approval is a significant step in the development of Bear Head LNG,” Bear Head LNG project director John Godbold said.
"With this achievement, Bear Head LNG is now advancing from the initial permitting phase to start actual execution of the project.”
Bear Head LNG has also kicked off the FEED work with KBR Inc., a global leader in the LNG engineering, procurement, and construction (EPC) business that has been involved in the delivery of about one third of the world’s current LNG production capacity.
KBR has knowledge of the local site, since they executed the FEED work for Bear Head LNG, when it was proposed as an LNG import facility. It is also the leader of the KBR/SKEC joint venture for the FEED and EPC contract for Magnolia LNG.
“We are excited to embark on the FEED phase of the project with KBR, a well-credentialed partner in the continued development of the Bear Head LNG export facility,” Godbold added.
“Integration of KBR’s prior FEED work for Bear Head LNG and the Magnolia LNG FEED will enable the Bear Head LNG project to be fast-tracked toward a potential 2016 Final Investment Decision and initiation of construction,” said John Godbold.
Bear Head LNG will use the company’s g OSMR® liquefaction technology, which is patented in 16 countries/jurisdictions including the U.S. and Canada.
Godbold noted the use of OSMR provided a significant advantage over other LNG projects as it required lower CAPEX and significantly enhances energy efficiency and plant performance.
“These attributes of the OSMR® technology enable the project to be economically viable at 2Mtpa,” he added.
Managing director Maurice Brand added:
“While Bear Head LNG is currently permitted as an 8Mtpa facility with a pending application with the Canadian National Energy Board to export 12Mtpa, the Bear Head economics with OSMR® provides an opportunity to engage in a step-wise approach to capacity which enables Bear Head LNG greater flexibility relative to other developing LNG projects to align itself with differing timelines for gas supply and infrastructure availability in Eastern Canada, and provide for the future expansion to at least 8Mtpa through incremental phases.
“As part of the transition from the initial permitting phase, expenditures will focus on access to the feed gas supplies and FEED for a full 8Mtpa export facility, maximizing the use of the completed FEED for the Magnolia LNG export project.
“LNGL’s capital raise of A$174 million, which closed today, will be used in part to support Bear Head’s initiatives.”
Analysis
The $174 million capital raising positions Liquefied Natural Gas Limited to continue progressing its Magnolia and Bear Head LNG projects.
Certainly, the strong response speaks volumes about investor interest in the company and its assets.
Already, LNG Ltd is moving to front-end engineering and design work for Bear Head LNG, which is targeted for a final investment decision in 2016.
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