Venture Global LNG, a liquefied natural gas exporter, recently completed its initial public offering (IPO), marking the first major IPO of the second Trump administration. The company raised $1.75 billion by selling 70 million shares at $25 per share, representing a 3% stake in the company. Despite being touted as a significant event, investor interest proved tepid, resulting in the offering being downsized from initial projections. The stock price further declined post-IPO, falling nearly 20% to $20.50 per share. Nevertheless, the IPO solidifies Venture Global’s presence in the public markets, establishing a substantial market capitalization of $50 billion. The deal also signifies a remarkable wealth creation for co-founders Robert Pender and Mike Sabel, whose combined holdings in Venture Global are now valued at $20 billion each.
Pender and Sabel have dedicated the past decade to developing two major LNG projects on the Louisiana coast, Calcasieu Pass and Plaquemines Parish. These facilities are projected to have a combined export capacity of 30 million tons per year (approximately 4 billion cubic feet per day) of liquefied natural gas, placing Venture Global second only to Cheniere Energy in U.S. LNG export capacity. Pender, a 71-year-old attorney with experience representing countries like India, China, and Guyana in energy megaprojects, and Sabel, a 57-year-old investment banker, retain 84% ownership of Venture Global, including all supervoting shares. Their newfound wealth would have ranked them around 40th on the Forbes 400 list of wealthiest Americans in the previous year. Their strategy has yielded impressive financial results, with Venture Global reporting net incomes of $1.9 billion in 2022, $2.7 billion in 2023, and $600 million in the first nine months of 2024. The company’s revenue in 2023 reached an astounding $7.9 billion.
Venture Global’s success can be attributed to a series of contrarian decisions and a willingness to take risks, often generating friction with industry counterparts. One key differentiator was their approach to engineering and design. Instead of constructing a few large gas processing trains, Venture Global opted for 18 smaller, modular trains at Calcasieu Pass, utilizing factory-built components for faster on-site assembly. However, this unconventional design with a higher number of trains led to a prolonged commissioning process to address technical issues, causing frustration among contracted buyers like Shell and BP who had anticipated receiving LNG shipments sooner.
Another controversial strategy involved withholding LNG cargoes from contracted offtakers during periods of high global LNG prices. Venture Global capitalized on the supply disruptions caused by the Russia-Ukraine conflict by selling its LNG on the spot market, generating substantial profits, estimated at $6 billion, that their counterparties argued rightfully belonged to them. This move sparked significant criticism, with accusations of deceitful actions and warnings about the potential harm to industry trust. Shell and other major buyers like BP, Repsol, and Galp initiated arbitration proceedings, seeking compensation for the lost revenue.
Venture Global disclosed in its prospectus that it had generated $19 billion in revenue from the sale of commissioning cargoes, with a net profit of $14 billion after deducting the cost of natural gas. This raises concerns about the potential for similar delays at their Plaquemines plant, which is planned to feature 36 Baker Hughes trains. Major energy companies like Shell, Chevron, and ExxonMobil are among the contracted buyers for Plaquemines, leaving them vulnerable to potential disruptions.
The company’s high valuation compared to industry leader Cheniere Energy, coupled with their high-risk financing practices and controversial business tactics, presents potential challenges for future investment. Venture Global’s current market capitalization of $48 billion, combined with $27 billion in debt, results in an enterprise value of $75 billion. This represents a multiple of approximately 55 times their average net income over the past two years. While Venture Global has ambitious growth plans, including three additional Gulf Coast megaprojects estimated to cost over $100 billion, securing financing for these ventures could prove challenging given their current financial position and market perception.
Cheniere Energy, the established market leader, offers a stark contrast. With a comparable market capitalization and debt level, Cheniere generated a net income of $3.6 billion in the past year, making it a seemingly more attractive investment. While Cheniere has faced internal conflicts in the past, such as the ousting of its founder by activist investor Carl Icahn, its current stability and financial performance make it a less risky proposition compared to Venture Global.
Despite retaining complete control through their supervoting shares, Pender and Sabel face the crucial challenge of securing the substantial financial resources required for their ambitious expansion plans. Venture Global’s prospectus acknowledges the uncertainty surrounding the financing of these projects, raising questions about the feasibility of their long-term growth strategy. The company’s controversial operational tactics, particularly their handling of commissioning cargoes, could deter potential investors and hinder their ability to secure the necessary capital. Whether Venture Global can navigate these challenges and deliver on its ambitious growth plans remains to be seen.
