Liquefied Natural Gas Ltd (ASX: LNG) (LNGL) has seen its share price sink 23% so far this year, compared to the S&P/ASX 300 (Index: ^AXKO) (ASX: XKO), to trade at around 66 cents.
That's a far cry from the $5.00 the LNG share price reached in early May 2015, and not far off its 52-week low of 63.5 cents.
Much of the fall has to do with the falling oil price, with Brent Crude falling 6% overnight to US$31.55 a barrel according to Bloomberg, and looking increasing likely to head into the US$20-US$30 range.
Massive global oversupply and weakening demand mean millions of barrels of oil and other petroleum products like gas are being produced around the world with no buyers.
LNGL is attempting to become one of the first companies to export liquefied natural gas (LNG) from the US, developing a multi-billion dollar processing plant – Magnolia in Louisiana, USA, as well as Bear Head in Canada and Fisherman's Landing in Australia.
But LNGL now faces the prospect of having no buyers for its gas – leaving it in a precarious situation.
One option the company could consider is trying to commercialise its proprietary optimised single mixed refrigerant (OSMR) technology, licence it to other larger gas and oil companies and give up its ambitions of becoming a gas exporter.
LNGL says its OSMR technology means its LNG processing plants will cost a fraction of those already built and those currently under construction.
Foolish takeaway
LNGL has the backing of some well-known value investors, including Seth Klarman's Baupost Group, which made a huge bet on energy shares in June 2015, revealing that nearly 40% of his 27-share portfolio was allocated to energy.
But even the best investors make mistakes, and LNGL could be one of them.
Look out below.
