In the first big IPO of Trump 2.0, liquefied natural gas exporter Venture Global raised $1.75 billion last week by selling a 3% sliver of equity — 70 million shares at $25 a share.
Investor interest in the first big IPO of Trump 2.0 has been lukewarm. The offering was downsized from initial plans, and the stock has already fallen nearly 20% to $20.50.
Even so the deal solidifies Venture Global’s place in the public markets with an impressive $50 billion market cap. And it underscores a real feat of wealth creation on the part of cofounders Robert Pender and Mike Sabel, whose holdings in Venture Global now amount to $20 billion, each.
Pender and Sabel have spent the past decade scouting, engineering, financing and erecting two LNG megaprojects now operational on the Louisiana coast at Calcasieu Pass and in Plaquemines Parish near New Orleans. Together these will enable Venture Global to export 30 million tons per year (about 4 billion cubic feet per day) of super-chilled, minus-260-degree liquefied gas. That puts them second only to Cheniere Energy in U.S. LNG exports.
Pender, 71, and Sabel, 57, still own 84% of the company, and all of its supervoting shares. Their new fortunes would have placed them about 40th on last year’s Forbes 400 list of America’s wealthiest people.
Sabel, an investment banker, and Pender a D.C. attorney who has represented India, China and Guyana in financing energy megaprojects (and is married to JFK’s niece) steered VG to three very profitable years, with net income of $1.9 billion in 2022, $2.7 billion in 2023 and $600 million through the first nine months of 2024. Revenue in 2023 was a stunning $7.9 billion.
How’d they do it? By making some contrarian decisions, and enemies, on the way to investing $25 billion of other people’s money.
First, their engineering and design. Instead of erecting just a handful of enormous gas processing plants (or “trains” as they’re called), Venture Global opted to contract with Baker Hughes to build 18 smaller “modular” trains at its Calcasieu Pass project. Factory-built components are easier and faster to bolt together on site. Yet because Calcasieu had so many more trains than the average LNG plant, Venture Global says it has required a longer commissioning process, since 2022, to work the kinks out.
This has been extremely frustrating to VG’s many contractual counterparties, such as Shell and BP, who had agreed to buy Calcasieu’s output under multi-decade contracts. Naturally Shell thought it would have dibs on Calcasieu’s output when global LNG prices spiked to record highs as Vladimir Putin’s invasion of Ukraine cut off supplies of Russian gas to Europe. But Venture Global refused, citing the indeterminate commissioning process.
This was their second contrarian strategy. Holding back LNG cargoes from contracted “offtakers” enabled VG to sell them into the spot market, and generate what unhappy counterparties claim was $6 billion in profits that should have been theirs.
VG’s customers hollered about the move while it was happening. Shell VP Steve Hill in 2023 said VG had taken “deceitful actions” and that purposefully failing to meet contracts would be “damaging and dangerouls to the industry.” Last year Shell CEO Wael Sawan expressed his disappointment: “Frustratingly, we have got no volumes against our term agreement which underpinned the financing for the project.” Arbitration proceedings are ongoing, with Shell, BP, Repsol, Galp and others presenting $6 billion in claims.
VG in its prospectus states that as of last September it had received $19 billion in revenue from the sale of commissioning cargoes, about $14 billion after deducting for the cost of buying the natural gas. Yet to be seen is whether VG attempts to stretch out the commissioning process at its Plaquemines plant, which will feature 36 Baker Hughes trains by the end of its second phase. Shell, Chevron and ExxonMobil are contracted Plaquemines offtakers.
High-risk financing antics might be a turn off to some investors. Also of concern is Venture Global’s high valuation relative to market leader Cheniere Energy. VG’s stock market capitalization is now $48 billion; add in $27 billion in total debt and the company boasts an enterprise value of $75 billion. That’s about 55 times VG’s average net income over the past couple of years.
To be sure, VG has big growth potential, with three more Gulf Coast megaprojects in the works that it says will cost more than $100 billion. But it’s a tough comparison against LNG pioneer Cheniere Energy, which has its own growth plans and looks considerably cheaper with a $50 billion market cap, $27 billion in debt and net income of $3.6 billion in the past year. Plus, Cheniere hasn’t angered its investors, lately. Though it’s worth recalling that back in 2015 activist investor Carl Icahn took over Cheniere’s board and booted founder Charif Souki when he didn’t like Souki’s plans.
Although no one is going to seize control of the Venture Global boardroom from Sabel and Pender as long as they have all of the company’s supervoting Class B shares, hopefully their commissioning cargo antics don’t scare away the deep pockets needed for their next $100 billion in megaprojects. In its prospectus Venture Global warns it hasn’t figured out how to finance them yet.
This article was originally published on forbes.com and all figures are in USD.
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