Kimmeridge Eyes More US LNG Investments, Despite $60M Hurdles

Key Takeaway

• Kimmeridge Energy plans further investments in US LNG, notably in Louisiana's Commonwealth project, despite Biden's permitting pause.
• The firm remains open to other US LNG deals, anticipating industry consolidation.
• Permitting delays cost developers $30-$60 million to maintain project viability.

Kimmeridge Bets on US LNG Amid Permitting Freeze

Kimmeridge Energy Management Co., a prominent player in the US shale industry, is doubling down on its investment in the liquefied natural gas (LNG) export sector despite a current halt in new permitting by the Biden administration. The firm is particularly focused on the Commonwealth LNG project in Louisiana, with plans for additional investments. Ben Dell, co-founder and managing partner of Kimmeridge, highlighted the firm's commitment to the sector and openness to consolidation opportunities among US LNG export projects. This move comes as the White House's decision to pause new export permits has forced developers to incur significant carrying costs, estimated by Dell to be between $30 million to $60 million, to maintain project momentum.

Adani's Strategic $600M Offshore Loan

In a parallel development, the Adani conglomerate, led by billionaire Gautam Adani, is in the process of securing a $600 million offshore loan for its Dhamra LNG Terminal Pvt. subsidiary. This initiative aims to refinance existing debt with a tenor of three to five years, linked to the Secured Overnight Financing Rate (SOFR). The move involves discussions with major banks, including Credit Agricole and DBS Bank Ltd., reflecting Adani's strategy to optimize its financial structure amid global economic shifts. This financial maneuver is part of India's broader ambition to increase LNG imports and reduce reliance on coal and oil, supporting the country's environmental sustainability goals.

Renewed Investor Confidence in Adani Group

Following a period of intense scrutiny, notably after being targeted by US short seller Hindenburg Research, the Adani Group has witnessed a resurgence in investor confidence. This was particularly evident in March, when the conglomerate saw strong demand for its first public bond sale since the short seller crisis. The group's efforts to secure an offshore loan underscore its commitment to stabilizing and expanding its financial base, even as it navigates the complexities of the global economic landscape.

Strategic Energy Shifts and Environmental Goals

Both the Kimmeridge and Adani initiatives underscore a significant shift towards LNG as a critical component of the global energy mix. Kimmeridge's investment in the US LNG export sector, despite regulatory challenges, and Adani's financial strategies to bolster its LNG terminal operations, reflect a broader industry trend towards cleaner energy sources. These moves align with global efforts to transition away from coal and oil, aiming to reduce carbon emissions and combat climate change. The strategic focus on LNG not only supports environmental sustainability but also represents a pivotal adaptation to the evolving energy demands of the 21st century.

Management Quotes

• Ben Dell, Kimmeridge’s co-founder and managing partner:

  "There is a carrying cost to just staying warm."