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Liquefied Natural Gas Ltd Draws U.S. Fund Baupost As Major Shareholder

Liquefied Natural Gas Limited's (ASX:LNG) rapid progress with its Magnolia LNG export project in Louisiana has clearly drawn the big guns with world's 11th largest hedge fund Baupost becoming a substantial shareholder with a 6.69% stake.

Notably, Seth Klarman's Baupost also holds a 2.38% stake in Cheniere Energy (NYSEMKT:LNG), a US$15.6 billion market cap that expects to export its first LNG from the U.S. in 2015.

This investment should come as no surprise to investors who have been watching LNG Limited given its potential to mirror Cheniere's stellar growth.

Cheniere had built its share price up from US$12 per share to the current US$65.68 after securing U.S. FERC approval for its Sabine Pass LNG export plants, which are expected to ship their first cargo of LNG in 2015.

Given that LNG Limited is among the top five liquefied natural gas export projects being progressed in the U.S. with first LNG expected in 2018, it appears likely that Baupost believes that it will follow in Cheniere's shoes.

What is just as interesting is that Baupost, which is also Boston's largest hedge fund with US$27 billion under its management, has been acquiring LNG Limited's shares in on market purchases since acquiring an initial 5.75 million LNG Limited shares at a starting price of A$0.55.

Since then it has bought parcels of shares at prices ranging from A$0.80 to A$1.62 to bring its total shareholding up to 25.9 million shares.

Magnolia LNG

Magnolia LNG, located along the Calcasieu River near Lake Charles, is planned as a 8 million tonne per annum (Mtpa) liquefied natural gas export project comprising of four liquefaction trains, each capable of producing up to 2Mtpa of LNG (1.7Mtpa firm).

This will use LNG Limited's OSMR® LNG process technology with the company adopting a tolling business model whereby Magnolia LNG will provide liquefaction, storage and ship loading facilities to LNG buyers who pay a monthly fixed capacity fee, plus all LNG plant operating and maintenance costs.

The LNG buyers are also responsible for the supply and transportation of gas to the project site.

LNG Limited has tolling agreements covering 7Mtpa of the project's planned 8Mtpa capacity and is currently focused on converting the first 4Mtpa to binding status in the first half of 2014.

The U.S. Federal Energy Regulatory Commission has formally accepted its filling application for Magnolia LNG with all approvals expected during 2015 in time for financial close in the middle of the same year.

A final investment decision will be made in late 2014.


LNG Limited's strong progress in progressing its Magnolia LNG project towards development is clearly being noticed by big hedge funds.

This is highlighted by Seth Klarman's Baupost, the world's 11th largest hedge fund, gradually building up its interest in the company to a 6.69% in on market purchases.

Baupost clearly likes what it sees in LNG Limited and U.S. export LNG projects given that it also holds a 2.38% shareholding in Cheniere Energy that represents 7.57% of its total portfolio.

Other luminaries that hold shares in LNG Limited include Daniel Loeb's Third Point LLC.

Shares in the company have been on the upward swing, having risen 260% in the three months since 13 March 2014 ($0.48) to its high of $1.73 yesterday, and there's still room to grow.

Proactive Investors continues to maintain a Speculative Buy recommendation with a 18 month price target of $2.25.

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