Shares of liquefied natural gas export terminal operator Venture Global (VG 8.17%) rallied 8.3% today, despite the company missing on both revenue and earnings in the first quarter.
Venture Global reported this morning, coming up short of analyst expectations, while lowering its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) outlook for the year.
Nevertheless, the stock rallied as management noted its second liquefied natural gas (LNG) facility would be up and running to full production earlier than expected, which will enable the company to sell LNG at very high spot prices.
Venture Global bouncing back after busted IPO
Venture Global just went public back in January amid much controversy. Venture Global’s valuation at its initial public offering (IPO) was $58 billion, or $25 per share, which was about 45% below the price the company had originally floated. Still, even that lower market capitalization proved optimistic, as the stock sold off hard amid tariff fears to a recent low of $6.75 following “Liberation Day” on April 2.
Venture Global is currently involved in legal arbitration with several customers that had signed up for contracted deliveries at fixed prices many years ago, which would commence once VG began commercial operations. But after spot prices for LNG rocketed higher following Russia’s invasion of Ukraine and the artificial intelligence (AI) data center boom, VG management exploited a loophole in its contracts as to what qualified as “commercial operations,” instead insisting that its early deliveries are occurring in what constitutes a “phased commissioning” stage.
In the first quarter, the company generated $2.9 billion in revenue, up 105%, with adjusted EBITDA up 94%. Despite those big increases, the numbers fell short of expectations, as VG’s first LNG export terminal, Calcasieu Pass, ramped up commercial operations beginning in April. However, management noted it now projects adjusted EBITDA to be in a range of $6.4 billion to $6.8 billion in 2025, down from prior guidance of $6.8 billion to $7.2 billion. The reason given was that project costs for the company’s second LNG export terminal, Plaquemines, are running higher than expected.
However, management also said it plans to ship full pre-commercial volumes from Plaquemines by the end of 2025, which was sooner than investors expected. While Plaquemines has lower-priced commercial contracts kicking in in 2027, the sooner volumes exported during the “formal commissioning” process will be able to be sold on the higher spot price market. Thus, the stock rallied on that bit of information.
Image source: Getty Images.
Venture Global is a tempting stock, but risky
Even after today’s surge, Venture Global’s stock is only back to $10.74, well below its IPO price and far below the initially hoped-for IPO price not too long ago. Therefore, it’s quite a tempting stock to dig into. That’s especially true as management has ambitious growth plans and a third LNG export facility, Calcasieu Pass 2, or CP2, scheduled to begin operations in 2026.
Investors, however, should be aware that not only will the price of VG’s LNG volumes come down once commercial contracts kick in, but the legal overhang from several customer lawsuits also adds to the uncertainty.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.