Author: Echo Wang, Curtis Williams and David French
(Reuters) - Venture Global LNG has been forced to cut the valuation it is seeking in a U.S. initial public offering (IPO) by almost half as investors balk at estimates of the company's long-term profits from liquefied natural gas exports, investors told Reuters. Half.
The company is the second-largest exporter of LNG to the United States, which itself is the world's largest exporter of the supercooled fuel.
The listing represents a rare opportunity for investors to gain exposure to U.S. LNG on the stock market and is a sign of confidence in the company's potential in the energy export business and the expected pro-oil and gas policies of President Donald Trump's administration. test.
The Arlington, Virginia-based company on Wednesday cut its guidance price range by more than 40% from $110 billion to the upper end of $65 billion. Reuters first reported on Tuesday the revised IPO plan, which provides additional shares to cover some of the financing gap caused by lower valuations.
Investors question whether Venture Global will make enough money to justify the initial IPO price, several investor sources invited to buy shares in the proposed New York offering told Reuters.
"It's hard for us to hit market cap, and I know some of the other dedicated funds we've talked to are nowhere near it," one investor said before the revision. Like all the sources who spoke to Reuters, he said, speaking on condition of anonymity In cases where this is done to discuss confidential information.
Venture Global did not respond to a request for comment.
The original expected asking price was significantly higher than Cheniere Energy's on a price-to-earnings basis, sources said. Sources said Cheniere is the largest U.S. LNG exporter and the best comparison for Venture Global.
“I would feel better if the valuation was closer to Cheniere,” said a second investor.
Investor sources said future earnings forecasts will require Venture Global to hit all growth targets and market and pricing dynamics to go smoothly.
For example, Venture Global said in its IPO filing that it expects to earn about $4.52 per million British thermal units "over time," based on the fees it charges customers for its services.
According to the document, this is despite traditional liquefaction fees in the United States ranging from $2 to $3 per MMBtu.
Even after revisions to guidance and the number of shares on offer, the upper end of the proposed price range of $23-$27 per share would still raise up to $1.9 billion, valuing Venture Global at as much as $65.3 billion, according to Reuters calculations. That would make it one of the top ten U.S. energy companies by market capitalization.
Pricing at or near the upper end of that range would also mark the largest U.S. oil and gas company IPO since Plains GP Holdings went public in 2013.
The proposed stock listing comes just days into Trump's second term and is intended to benefit from the president's policy pledge to increase U.S. oil and gas production. Measures to further this include reducing regulations and accelerating licensing.
The IPO was for a small stake in the company founded by Michael Sabel and Robert Pender in 2013, and was billed as an opportunity to buy into the company's rapid growth story.
The documents show that Venture Global plans to significantly increase production, from about 10 million tons currently to 143.8 million tons per year by 2031. This would make it one of the largest LNG companies in the world.
litigation
Hanging in the balance over Venture Global and the prospect of its IPO is a lawsuit filed by some of the world's largest energy companies over goods exported from the Calcasieu Pass plant, Venture Global's first project.
The company has long-term sales contracts with companies including BP, Shell and Edison.
Buyers said they have not received those contracted goods since the plant opened in 2022. Venture Global argued that the plant was still in the start-up phase and therefore had not yet had to deliver contracted goods to long-term buyers.
Venture Global makes billions of dollars more by selling goods in the spot market than delivering them to long-term buyers. Losing the dispute could also cost the company billions of dollars, according to IPO documents.
Will it happen?
An IPO is never guaranteed to be priced within the initial range given at the beginning of the formal marketing process, so changes are common. The final price depends on conversations between the company, advisors and potential investors.
If Venture Global decides investors want a valuation it considers too cheap, it could delist and remain private.
Cash from the IPO is earmarked for general corporate purposes, including costs that may be incurred before future LNG projects are approved, according to the filing.
A delay could be advantageous, allowing Venture Global to resolve the lawsuit and make progress on expansion, and also allow the market to absorb the impact of Trump's energy policies.
The company currently has two operating plants near the Gulf of Mexico in Louisiana and has three other LNG projects in various stages of development.
"We're torn on the deal because the valuation looks high, but it's a compelling story," a third investor said before the price adjustment.
(Reporting by Echo Wang and David French in New York and Curtis Williams in Houston; Editing by Simon Webb and Nick Zieminski)