Baupost Boosts Stake In LNG

By Mani
Updated on

Seth Klarman’s Baupost Group has enhanced its stake in Perth-based Liquefied Natural Gas Ltd (ASX:LNG) to 10.08% from 8.82%. Until recently, the company’s shares had risen by over 1000%, with most of the gains coming this year.

LNG to gain from American shale boom

Australia’s Liquefied Natural Gas shifted its focus from Australia and joined a list of companies including Cheniere Energy, Inc. (NYSEMKT:LNG) that are planning gas export projects driven by the U.S. shale boom. The company’s LNG development may begin production in 2018. Moreover, Asia’s LNG buyers accounted for about three-quarters of global consumption in 2013. They are now considering North American supplies after a surge in extraction from shale deposits pushed the price of gas to a decade low in the U.S. in 2012.

Liquefied Natural Gas Ltd (ASX:LNG)’s shares gained recently as the market came to terms with the potential value of CEO Maurice Brand’s claim that its Magnolia LNG facility could be among the first five ready to export gas from the U.S. America’s shale deposits are being turned into a natural gas boom. Despite concerns over transport capacity not being able to keep up with still rising production levels, gas reserves are ironically far below their long-term average.

Baupost ups stake

Baupost Group LLC, the hedge fund run by Seth Klarman, also holds a stake in Cheniere Energy, Inc. (NYSEAMEX:LNG). Though both Cheniere Energy and Liquefied Natural Gas Ltd use LNG as their stock tickers, they are both working on liquefied natural gas export facilities on the Gulf of Mexico, with the Liquefied Natural Gas in Louisiana and Cheniere on the Louisiana-Texas border.

Baupost holds a 2.38% stake in Cheniere Energy, Inc. (NYSEAMEX:LNG), which has a $14.7 billion market cap and anticipates exporting its first LNG from the U.S. in 2015. The hedge fund acquired 5.845 million shares of the company at prices between $2.77 and $3.46 each between Aug. 5 and Oct. 10. This brings the hedge fund’s total holding up to more than 46.5 million shares.   The company’s Federal Energy Regulatory Commission (FERC) approval process for the proposed 8 million ton per annum Magnolia LNG export project located in Lake Charles, Louis. is on track.

The Perth-based company has also expanded its presence in the North American LNG sector by agreeing to buy Bear Head LNG Project for $11 million from a subsidiary of Anadarko Petroleum Corporation. This would provide it with a second North American LNG project that expands and diversifies its development pipeline.

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