Venture Global

Since we starter MORAM Capital more than five years ago, LNG has been one of the industries where we have been most active, periodically publishing sector updates and covering the vast majority of companies in the space such as Golar LNG, Cheniere, Excelerate Energy, NextDecade, and New Fortress Energy.

Today, after several weeks of analysis and months of monitoring, we are sharing with you our Initial Research on Venture Global, which – if we consider both operating and under-construction capacity – is the largest LNG exporter in the United States, even ahead of the pioneer, Cheniere. The company currently has one operating facility (Calcasieu Pass, 10 MTPA), one facility in commissioning (Plaquemines, 20 > 27,2 MTPA), and another under construction (CP2, 28 MTPA).

What differentiates Venture Global from the rest of the industry is the modular design it employs in its plants, which allows it to significantly shorten construction timelines and bring parts of the facility online (exporting LNG into the spot market) well before COD. This point is critical, as long-term contracts (20 years) with offtakers (BP, Shell, etc.) only become effective once COD is reached. Venture Global’s plants have commissioning periods that can last for years, during which the profits from spot cargo sales accrue to VG itself. This has led to several arbitrations (up to seven related to Calcasieu Pass), as offtakers believe Venture Global intentionally delayed COD in order to capture the extraordinary economics of the TTF–HH spread during 2022–2024.

In fact, the loss of the arbitration with BP (which, together with Shell, had 40% of Calcasieu Pass contracted capacity) and the potential damages award of more than $1bn – raising the prospect of cascading claims from other offtakers – has been a key driver of the stock’s collapse in recent months (alongside the narrowing spread and concerns about a potential LNG glut in the coming years). The company’s market cap has fallen from over $60bn at IPO to roughly $16bn as of this Friday’s close, despite EBITDA expected to exceed $6.4bn this year and net debt of around $30bn.

Today, we provide an in-depth analysis of Venture Global with the objective of:

• Explaining its operating model and assets in detail
• Analyzing the various arbitrations and forming an informed estimate of the ultimate damages payable
• Forecasting EBITDA (including both commissioning and post-commissioning economics) and cash flow for the coming years
• Understanding the capital structure and what ultimately accrues to equity holders
• Independent valuation
• Our thoughts on Venture Global