Quarterly Highlights and Appendix 4C
A Message from the Managing Director and Chief Executive Officer
The final quarter of Liquefied Natural Gas Limited's (LNGL or the Company) fiscal year was headlined by three significant announcements:
- Initiation of exploratory efforts into redomiciling the Company to the U.S. accompanied by a listing of the Company's shares on either the New York Stock Exchange or NASDAQ;
- Execution of an Amended and Restated Equity Commitment Agreement with Stonepeak Infrastructure Partners (Stonepeak), a New York headquartered infrastructure fund, relating to equity financing of the Magnolia LNG projects; and
- Exiting the Fisherman's Landing LNG project.
I believe each of these important announcements will positively impact the Company's future. Redomiciling LNGL in the U.S. could allow us to be better positioned in a market where we have peers and competitors, unlike the current situation on the ASX. In addition, it seems important to be listed where our projects are located.
The amended and restated agreement with Stonepeak for the Magnolia LNG project provides the Company with an attractive deal we believe to be very competitive in the LNG industry. Stonepeak is a highly-regarded infrastructure fund that provided a strong message to the industry about the virtues and advantages of the Magnolia project. We think potential offtakers have taken notice of the agreement and our outlook on Magnolia remains bullish.
The inability to secure a long-term gas supply was the main driver of our decision to exit the Fisherman's Landing LNG project. We believe it was a responsible decision and the best choice for our shareholders.
I would like to thank all shareholders who attended our various presentations and meetings during our road show to Australia and Hong Kong in June. We hope your questions were answered, and the update we provided about the Company shows that our top priority remains securing the offtake agreements required to gain a final investment decision (FID) for Magnolia. As such, we are in the process of re-energizing our commercial efforts through some staffing changes.
Lastly, I wish to once again congratulate John Baguley, who was appointed Chief Operating Officer of LNGL in June. John is a trusted advisor and together with the rest of our team, we look forward to delivering shareholder value as we achieve our goals and aspirations for the Company.
In keeping with our promise to shareholders, we have managed our liquidity closely consistent with our stated plans. We closed June 2017 with the Company's total cash position at A$44.5 million, and we remain debt free.
- On 5 May 2017, Magnolia LNG received its Notice to Proceed (NTP) from the Federal Energy Regulatory Commission (FERC) to commence initial site preparation activities.
- On 13 June 2017, Magnolia LNG announced a further extension of the validity period of the current binding EPC contract with KSJV through 31 December 2017.
- LNGL continued to examine technical improvements in the OSMR(R) technology and plant modular design to further reduce costs.
- On 16 June 2017, John Baguley was appointed Chief Operating Officer.
- As disclosed 12 July 2017, 2,532,823 Performance Rights lapsed at or around 30 June 2017. Performance Rights totalling 2,274,137 lapsed as performance conditions were not met during the measurement period and 258,686 Performance Rights lapsed as a participant ceased employment with the Company and was no longer eligible to participate.
- Effective 10 July 2017, 5,205,000 Incentive Rights were issued, consisting of a) 3,123,000 Performance Rights and b) 2,082,000 Retention Rights. These Incentive Rights were issued to employees pursuant to the Incentive Rights Plan summarized in 2016 Notice of Annual General Meeting and released to ASX on 18 October 2016. No Exercise price or other amount is payable on vesting of Incentive Rights.
During the three-months ended 30 June 2017, net operating cash outflow was A$4.5 million, which compared with the net operating cash outflow of A$7.1 million for the three-months ended 31 March 2017. Management believes the liquidity management plan remains on course to deliver its goal of liquidity into 2019 but acknowledges there remain risks to realizing the goal.
LNGL's total cash balance as at 30 June 2017 was A$44.5 million, which compares to A$49.3 million as at 31 March 2017, reflecting a net reduction in reported cash of A$4.8 million. The change in reported cash between periods reflected net cash outflows of A$4.5 million and a noncash reduction of A$0.3 million from currency translation effect relating to movements in exchange rates associated with cash held in denominations other than the Australian dollar (primarily U.S. dollars).
LNGL maintains a material portion of its existing cash and cash equivalents denominated in US dollars. The preponderance of forecasted cash outflows is denominated in US dollars, supporting maintenance of a majority of cash and cash equivalents denominated in US dollars as a foreign exchange risk mitigation strategy. Because LNGL's reporting currency is Australian dollars, the US dollar denominated cash balances are translated to Australian dollars at each balance sheet date, with the net effect reflected as unrealized gain (loss) from translation as a period end-toperiod end reconciling item in reported cash balances. The Company has no debt.
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About Liquefied Natural Gas Ltd
- Magnolia LNG, LLC (Magnolia LNG), a US-based subsidiary, which is developing an eight mtpa or greater LNG export terminal, in the Port of Lake Charles, Louisiana, USA;
- Bear Head LNG Corporation Inc. (Bear Head LNG), a Canadian based subsidiary, which is developing an 8 mtpa or greater LNG export terminal in Richmond County, Nova Scotia, Canada with potential for further expansion;
- Bear Paw Pipeline Corporation Inc. (Bear Paw), proposing to construct and operate a 62.5 km gas pipeline lateral to connect gas supply to Bear Head LNG; and
- LNG Technology Pty Ltd, a subsidiary which owns and develops the Company’s OSMR(R) LNG liquefaction process, a mid-scale LNG business model that plans to deliver lower capital and operating costs, faster construction, and improved efficiency, relative to larger traditional LNG projects.
Liquefied Natural Gas Ltd