LNG exporter Venture Global cuts target valuation for US IPO to $65.3 billion

By Manya Saini and David French

(Reuters) -Venture Global LNG on Wednesday slashed the valuation it sought from a U.S. initial public offering to $65.33 billion, significantly lower than the initial target of $110 billion.

The revision by the second-largest exporter of liquefied natural gas in the United States follows days of marketing to potential investors, who baulked at the firm's lofty preliminary valuation.

Investor concerns that the company's future sales would not justify the valuation outweighed a rare opportunity to buy equity in a pure-play U.S. LNG exporter.

The flotation is the first big IPO under the second term of President Donald Trump, and was expected to benefit from the incoming administration's agenda to boost energy production.

Trump signed an executive order on his first day to end a moratorium on new LNG export permits, which clears an obstacle to Venture Global's expansion plan. He has also said he wants to see European companies buy more U.S. LNG.

The revised IPO plan - first reported by Reuters on Tuesday - offers additional shares to help bridge some of the gap in fundraising from the lower valuation.

Venture aims to sell 70 million shares at a price range of $23 to $27 per share to raise $1.89 billion, compared with its prior target of selling 50 million shares for $40 to $46 each to raise as much as $2.3 billion.

"Offering more shares at a lower price would imply it needs to raise a specific amount of money at the IPO," said Dan Coatsworth, investment analyst at AJ Bell, adding it was unusual for a company to boost the number of shares it planned to issue.

The pricing of an IPO is not guaranteed to fall within the range provided at the start of the formal marketing process and making adjustments is common. The final price is often dictated by investor demand, underwriters and the company.

Despite the price revision, Venture Global's potential market capitalization would likely surpass rival Cheniere Energy, currently the largest U.S. LNG exporter with a market value of around $56 billion.

A $65-billion valuation would make it a top-10 U.S. energy name by market value, exceeding North American energy companies including Occidental Petroleum, Marathon Petroleum, and Schlumberger.

TAILWINDS

Venture Global exports LNG through a process in which gas is cooled into liquid form for transportation to several international markets, including Europe and Asia.

Global LNG demand has been rising as the world transitions from coal to cleaner energy sources. The U.S. is producing record gas volumes due to the shale boom, which has transformed the country's energy sector.

Developers such as Venture Global have built terminals along the U.S. Gulf Coast to liquefy and ship the gas, turning the United States into the world's top LNG exporter.

U.S. supply helped fill the void in European gas supplies after the European Union sanctioned most Russian gas imports in the wake of Russia's invasion of Ukraine.

The U.S. is on course to more than double LNG capacity to 200 million tonnes per annum even without additional projects that are likely to move forward if they receive new export permits.

Venture Global has five LNG projects in various stages of development near the Gulf of Mexico in Louisiana and expects to have total peak production of 143.8 million tonnes a year.

The company, founded in 2013 by former investment banker Michael Sabel and financial lawyer Robert Pender, is aiming to trade on the New York Stock Exchange under the ticker symbol "VG."

Its IPO is being underwritten by a syndicate of Wall Street banks led by Goldman Sachs, JPMorgan and BofA Securities.

(Reporting by Manya Saini in Bengaluru and David French in New York; Editing by Arun Koyyur and Rod Nickel)