Venture Global Wins $1.6 Billion Arbitration Case Against Shell -- Shares Jump

Aug 13 - Venture Global (NYSE:VG) scored a big legal win that sent its stock higher by 14% on Wednesday morning, after an arbitration tribunal sided with the LNG exporter in a contract dispute with Shell (NYSE:SHEL). Traders pushed VG up about 14% as the panel rejected claims that the Calcasieu Pass plant failed to honor long-term cargo commitments. Several buyers, including Shell, BP (NYSE:BP) and Repsol (REPYF), accused Venture Global of selling contracted cargo into the spot market instead.

Warning! GuruFocus has detected 4 Warning Signs with VG.

Venture Global welcomed the ruling, saying the contracts' plain language supports its position. Shell called the tribunal's decision disappointing and warned that trust in long-term LNG deals remains critical for industry investment. The stakes were high: Venture Global previously estimated potential penalties as high as $1.6 billion if it lost the arbitration.

The outcome eliminates a significant overhang on VG and allows management to take a breath in order to concentrate on operations, sales, and commercial activities at Calcasieu Pass. Nevertheless, the ruling does not get rid of the greater market tensions in relation to LNG supply and enforceability of contracts. Buyers and sellers will monitor whether this ruling will alter how the firms will weigh long term contracts against attractive spot opportunities.

This article first appeared on GuruFocus.

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