Are we undervaluing Jordan Cove as a development project?

Canadian and U.S. morning comments

December 21, 2016

We attribute no value to the Jordan Cove LNG project in our $13.50 target price for Veresen. However, this could be overly conservative given that there is likely value in the project even in the development phase. We believe that Jordan Cove could potentially represent $4-$5 per share of value for Veresen, if it moves forward. We maintain our Sector Outperform rating and $13.50 target price.

LNG development projects have value. We highlight that TOTAL S.A. is acquiring a 23% interest in Tellurian Investments Inc. for US$207M. Tellurian’s main asset is the proposed 26 million tonne per annum (MTPA) Driftwood LNG terminal in Calcasieu Parish, Louisiana. The project is in the FERC review process with an approval possible in March 2018. This would lead to first LNG being produced in 2022 and full capacity in service for 2025. The project is expected to have a capital cost of US$13B prior to pipeline costs.

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