Houston — A privately held energy infrastructure firm has agreed to buy Magnolia LNG from its parent, Australia's LNG Limited, for $2.25 million, according to the voluntary administrators that were appointed to review the parent company's assets.
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The transaction, announced Tuesday and scheduled to close by Friday, covers the Louisiana export project, its 16 employees and the optimized single mixed refrigerant liquefaction technology that would be used at the proposed terminal.
The development follows the April 13 withdrawal of a takeover offer for LNG Limited that the parent company had previously said was the best chance to save the up to 8.8 million mt/year export project. With LNG Limited on the verge of insolvency, CEO Greg Vesey left the company and administrators from PricewaterhouseCoopers were appointed May 1 to review its assets on behalf of creditors. It was a sign that the developer might be preparing to enter bankruptcy or liquidation.
Assuming the new transaction is completed, liabilities associated with Magnolia LNG will pass to the acquirer, Global Energy Megatrend Limited, which has offices in London and Lafayette, Louisiana. The company is interested in becoming an integrated natural gas firm by acquiring and participating in US gas fields and pipelines and operating liquefaction facilities.
The transaction does not include LNG Limited's interest in the business and assets of the proposed Bear Head LNG project in eastern Canada. For now, that project, which has been said to be marketing capacity to major Western Canadian Sedimentary Basin gas producers, will remain owned by entities controlled by LNG Limited.
The administrators are continuing to evaluate remaining assets for possible disposal. Bear Head LNG will retain a perpetual license to use the liquefaction technology that is being sold with Magnolia LNG, a statement on LNG Limited's website said.
In Australia, voluntary administrators are usually appointed by a company's directors after they decide that the company is insolvent or likely to become insolvent.
Administration is akin to bankruptcy in Australia. In some cases, administrators may be appointed for the purpose of liquidation. LNG Limited had most recently said it only had enough cash to fulfill its obligations until May.
LNG Limited's decline has come amid weak global LNG market conditions that have been exacerbated by the coronavirus pandemic. Widespread stay-at-home orders have caused overall demand to drop and led to a further decline in international prices, a trend that started before the virus was first observed in China in December.
Magnolia LNG received its certificate authorization from US regulators to build Magnolia in 2016. It also secured a fully wrapped engineering, procurement and construction contract. What it was unable to do in the four years since was reach any firm offtake deals with buyers of the LNG it planned to produce. Most North American developers need such contracts to be able to secure financing for the billions of dollars for construction.