New Fortress Energy (NFE) -- LNG Entrepreneurs Making Hay...

[ajootian]

...while the sun shines.

I've bought quite a bit of this stock, mostly over the last week. The stock has gone idiotic ever since they made that blockbuster announcement on 3/31, in which they said they had filed to build an offshore LNG liquefaction facility 16 miles off the coast of Louisiana, and made the shocking statement that they hoped to get it going by 1Q '23. This type of development speed is totally unheard of in the LNG world. They are calling this initiative their "Fast LNG" initiative, and this facility in LA is actually the 2nd one they have started working on. The first one, which is being constructed as we speak, is going to go offshore The Democratic Republic of the Congo and will be liquefying gas that is, for the most part, stranded gas, in a field discovered by ENI. This Congo facility is a tolling arrangement with ENI, but with one very important additional provision -- NFE has retained the option to acquire up to half of the gas they process into LNG for their own account -- an option that NFE is certain to exercise fully for the foreseeable future, given how valuable LNG is these days..

After the LA facility announcement Stifel jacked up their PT on this from $45 to $68, saying:


"While finding capital needed for the project is TBD, even with more equity capital, we believe it should be extremely accretive" for New Fortress, Stifel analyst Ben Nolan writes, seeing the Louisiana project along with another in Congo and possibly other projects to come as unlocking the "growth engine."

New Fortress management's Q1 2023 start-up target for the project seems optimistic, Nolan says, but "even if delayed six months, with the forward curve above $22/MMBtu in 2023, getting any incremental liquefaction capacity that soon could result in an investment payback period of less than 12 months."

This is a facility that will probably run full tilt for as long as it is technically feasible, yet it will pay out in less than a year. This is some pretty crazy economics boys & girls.

But just like the old Gin-su Knives commercial -- "but wait -- there's more!"

As shown in slide 10 of their latest slide deck:

For Europe to reduce natural gas from Russia by 30-50%+, world needs additional 35-50 MTPA of LNG

Fast LNG is part of the solution

LNG demand expected to exceed supply by up to 164 MTPA by 2030(iii) unless additional liquefaction capacity is constructed and expeditiously comes online However, LNG supply is constrained: • current LNG volumes are largely already committed • little additional LNG supply coming online in next 2 yrs(ii) • new traditional liquefaction projects take 4-5 years to develop.

I see these first 2 offshore LNG facilities as being just the beginning of a huge new business for NFE, which should be easily repeatable. For example, why not set up one of these babies offshore Vancouver? The price of your feedstock would be a helluva lot less than offshore LA.

One trick they are using to keep costs down, as you mention in your post, is that they are just taking old jack-up rigs and floaters that are ready to be scrapped, buying them for scrap value, and then retrofitting them for their use in any of their LNG businesses.

NFE already has very successful businesses going in the midstream and downstream (i.e. regasification) parts of the LNG business. See their website for more background and a very good SA article on them is at https://seekingalpha.com/article/448112 ... -cash-flow

Although the Stifel guy says their financing for the LA project is "TBD" I'm not too worried about that issue at this time. They have said that they are going to try to sell one or more of their more mature projects, to raise in excess of $1B cash, plus they have a lot of unused borrowing capacity on their bank line, so I don't think they will need to raise any equity to get this project financed.

The stock price took a pretty good hit over the last week, most likely due to the fact that a large shareholder blew out about $14M worth of his position on 4/19. I looked at this event as a great buying opportunity -- the guy sold less than 1% of his position and with the stock having appreciated so much leading up to that I'm not surprised at all that he took some chips off the table. Fear of future sales could provide an overhang on the stock price I suppose, but I believe the news of future developments by these guys ought to overcome said overhang pretty easily.

[dan_s]

Very interesting. Thanks for posting.

The global LNG market s/b expanding rapidly as I believe that generating more electricity with natural gas and displacing coal fueled power plants is the only way to significantly reduce carbon emissions. Wind and solar projects will continue to be disappointing, and they cannot be a significant percentage of any countries power baseload.

[ajootian]

NFE Application for Fast LNG Solution in the U.S. Gulf of Mexico Advances

April 26, 2022 at 6:00 AM EDT NEW YORK – New Fortress Energy Inc. (NASDAQ: NFE) (together with its affiliates, “NFE”) today announced that the U.S. Coast Guard, in coordination with the Maritime Administration, has affirmed the completeness of NFE’s deepwater port license application and will proceed with the preparation of an environmental impact statement as part of the environmental review within the 356-day application process. NFE’s application proposes the ownership, construction, operation, and eventual decommissioning of an offshore natural gas export deepwater port, known as New Fortress Energy Louisiana FLNG, that would be located in Federal waters approximately 16 nautical miles off the southeast coast of Grand Isle, Louisiana in a water depth of approximately 30 meters. The deepwater port would allow for the export of approximately 145 billion cubic feet of natural gas per year, equivalent to approximately 2.8 million tons per annum (MTPA) of LNG. “This is a significant step forward for our effort to build the first Fast LNG facility in the United States,” said Wes Edens, Chairman and CEO of NFE. “With rapid deployment, this project can help address the energy crisis in Europe and support our efforts to reduce energy poverty by providing more affordable, reliable and cleaner fuel to our growing portfolio of customers.” Accessing abundant U.S. gas supply by leveraging existing infrastructure, NFE’s Fast LNG liquefaction design pairs the latest advancements in modular, midsize liquefaction technology with jack up rigs or similar offshore infrastructure to enable a much lower cost and faster deployment schedule than today’s floating liquefaction vessels and onshore liquefaction terminals. Subject to the receipt of all required permits and approvals, NFE targets beginning operations in the first quarter of 2023. About New Fortress Energy Inc. New Fortress Energy Inc. (NASDAQ: NFE) is a global energy infrastructure company founded to help address energy poverty and accelerate the world’s transition to reliable, affordable, and clean energy. The company owns and operates natural gas and liquefied natural gas (LNG) infrastructure, ships and logistics assets to rapidly deliver turnkey energy solutions to global markets. Collectively, the company’s assets and operations seek to support global energy security, enable economic growth, enhance environmental stewardship and transform local industries and communities around the world.

******************************************************

Great to see the progress here. The US has committed to helping NFE's project move along expeditiously, viz.:
"This Task Force will focus on the following urgent issues: The United States will strive to ensure, including working with international partners, additional liquified natural gas (LNG) volumes for the EU market of at least 15 bcm in 2022 with expected increases going forward. The United States commits to maintaining an enabling regulatory environment with procedures to review and expeditiously act upon applications to permit any additional export LNG capacities that would be needed to meet this emergency energy security objective and support the RePowerEU goals, affirming the joint resolve to terminate EU dependence on Russian fossil fuels by 2027."

See complete text of joint statement made by US & Europe at https://useu.usmission.gov/joint-statem ... text=Joint Statement between the United States and the,committed to reducing Europeâ??s dependency on Russian energy.

[Fraser921]

I'm familiar with this company as they bought out a company I was invested in GLNG. I believe GLNG owns 12.2 m shares after selling down the position by a third

Fast LNG: They bought used jack up at record low 5 cents on the dollar, strip it and put the liquidation equipment on deck, they locate over a gas field then liquify the NG and then ship it. Very interesting. I have NFE on watch list

Good pick

https://seekingalpha.com/news/3821174-g ... g-projects