Shares of Venture Global (VG +2.49%) rallied 16.6% on Monday, as of 12:18 p.m. EDT.
Venture Global reported an earnings beat this morning, but, ironically, that likely only played a minor role in the day's move. Instead, as a U.S.-based liquefied natural gas (LNG) exporter, Venture Global is set to benefit from higher LNG prices, which spiked this morning following the commencement of the war with Iran this past weekend.
NYSE: VG
Key Data Points
Venture Global reports, and Qatar shuts down its LNG facility
This morning, Venture Global reported Q4 earnings, which showed 192.8% revenue growth to $4.45 billion, in line with expectations, while earnings per share were up 24.2% to $0.41, beating expectations. While EPS growth was much lower than revenue growth, the figure was heavily affected by a smaller gain on interest rate swaps than in the previous-year quarter. Profitability as measured by operating income was up 189%, roughly in line with revenue growth.
What's interesting is that Q1 guidance actually came in well below analysts' expectations. But that lowered guidance was mainly due to two reasons: One, winter storm Fern caused shutdowns and reduced output in late January. Two: Q1 margins, reflecting the difference between low domestic gas prices and international LNG prices, had compressed in January and February.
But that outlook may be moot, given this weekend's commencement of war with Iran. As a result of the war, Qatar halted production of its LNG facilities, in response to the threat of Iranian drones. Qatar is one of the top three LNG exporters in the world, so Dutch TTF, which is the main price at which European buyers purchase natural gas, spiked 41% to over 45 Euros this morning.
While Venture Global sells the output from its Calcasieu Pass project at fixed prices under long-term contracts, it can still currently sell volumes from its second facility, Plaquemines, under spot contracts. Management noted in the press release that Plaquemines Phase I will enter commercial production (COD) in the fourth quarter of 2026, while Phase II of Plaquemines will enter COD in mid-2027. At those points, Venture will have to sell a certain amount of volumes under contracted prices, which are likely to be much lower than today's spot prices.
The upshot is that Venture should be able to take advantage of much higher spot LNG prices for a lot of its output this year. On the conference call with analysts, management noted that 59% of its 2026 output will be at contracted prices, including the fourth-quarter Plaquemines I volumes, leaving 41% to benefit from higher spot prices.
Image source: Getty Images.
But there is still litigation risk
It should be noted that several of Venture Global's customers are unhappy with the company and believe VG was required to start shipping volumes at contracted prices earlier, after Venture Global extended the "start-up period" for volume production at its facilities before entering the COD period.
Having been sued by three major customers, Venture Global has won two out of three arbitration cases, which is a good sign. But there is also an appeals process, so there may be an overhang on the stock due to that uncertainty, which could play out for multiple years.
Still, even after today's bounce, Venture Global's stock is down 65% from its January 2025 IPO price. Therefore, value investors bullish on the outlook for natural gas demand may still want to take a look at this newly public company.
