Venture Global Earnings: Geopolitics Take Center Stage with Qatar Shutdown

Key Morningstar Metrics for Venture Global

• Fair Value Estimate

  : $11.00

• Morningstar Rating

  : ★★★

• Morningstar Economic Moat Rating

  : None

• Morningstar Uncertainty Rating

  : Very High

What We Thought of Venture Global’s Earnings

Venture Global’s VG strategy of maximizing spot volumes may pay off once more. This morning Qatar, the largest LNG producer, shut down production after the war with Iran expanded to energy infrastructure, sending EU gas prices higher.

Why it matters: The shutdown’s length will depend on the length of hostilities. It has already sustained one strike, but if it were to be hit more forcefully while in operation the damage could be severe.

• The longer production is stopped, the longer it will take to restart. It recalls the startup of CP1, coinciding with the Ukraine war. However, this event should have a much smaller impact and be relatively short-lived.
• In the near term, EU gas inventory is low, pressuring consumers. The loss of Qatari gas will likely cause marketers to direct more cargoes to Asia, which was the primary destination for Qatar’s volumes, sending prices higher as buyers compete for cargoes.

The bottom line: We are leaving our $11 fair value unchanged. EU gas prices have spiked, but if Qatari volumes return quickly, the premium will fade.

• We see shares as fairly valued, trading in 3-star territory. Our Economic Moat Rating of none, Capital Allocation Rating of Standard, and Uncertainty Rating of Very High remain unchanged.

Big picture: Shares spiked 20% due to Venture’s large exposure to spot prices. However, it sells out near-term volumes, limiting its ability to realize short-term volatility, but it benefits if the war is not resolved quickly.

• The longer-term impact is that major buyers have gotten a reminder of supply diversification and geopolitical risks. This may attract more buyers to US LNG as Qatar has been seeking to place volumes from its major expansions.
• Over the last week, Venture announced 2.0 million metric tons per year of commitments, of which 1.5 million were 20-year, which shows progress in commercializing CP2 Phase 2.