Liquefied Natural Gas Ltd [ASX:LNG] jumped 33% this morning to 77 cents per share. While the stock is far from its 2017 high of 96 cents, the latest price rise gives shareholders a 14% return for the year.
What happened to the LNG share price?
This morning, LNG announced its investment firm, Stonepeak Partners, has committed $1.5 billion to LNG’s Magnolia LNG project.
Magnolia LNG and Stonepeak have entered into an amended and restated equity commitment agreement. LNG’s Managing Director Greg Vesey said:
‘This announcement signals a strong message to the LNG industry about our shared confidence in the virtues and advantages of the Magnolia LNG project as we continue to focus on finalising offtake agreements and moving toward a final investment decision (FID).’
Stonepeak is bullish on the long-term outlook of US sources for LNG. And it believes Magnolia is among the best positioned projects to profit from this situation.
What next for Liquefied Natural Gas?
LNG has a strong balance sheet, with around 6.1 cents in net cash per share. It has reserves of $43.6 million and little to no debt.
Yet it currently earns nothing from projects. In its half yearly results, the group generated a majority of its revenues from foreign exchange gains. The company reported a net loss of $13.6 million for the half. And it also lost $33.5 million in cash for the period.
Essentially, LNG is like an ice cube on a hot day — until it starts producing gas. I suggest you hold out and put the stock on your watchlist. By buying the stock at its current level, you’re taking on unnecessary uncertainty.
Junior Analyst, Money Morning
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