Why Venture Global Fell Back to Its April Lows in November

Shares of LNG exporter Venture Global (NYSE: VG) fell 13% in November, according to data from S&P Global Market Intelligence.

The move lower was notable, as Venture Global had already seen its stock fall significantly on the year, following a bad October stemming from an adverse arbitration court decision. In November, the company learned October's adverse decision might not be the end of its legal troubles, either.

Additionally, Venture Global reported third-quarter earnings, during which the company slightly decreased its profit outlook for the year.

Things go from bad to worse for Venture Global investors

In the third quarter, Venture Global saw its revenue surge 260% to $3.3 billion, surpassing expectations as it ramped its Calcasieu and Plaquemines LNG terminals. However, earnings per share of $0.16 fell slightly short of analysts' estimates.

Perhaps most consequential, the company slightly lowered its full-year outlook for adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), from and range of $6.40 billion to $6.80 billion to a new range of $6.35 billion to $6.50 billion. The lower outlook is due to a lower assumed liquefaction fee in the fourth quarter compared to prior expectations, resulting from lower-than-expected international liquefied natural gas prices, as well as reserves taken into account regarding the company's legal disputes.

Speaking of those legal disputes, the day after Venture Global's earnings, it was reported that Shell (NYSE: SHEL) will challenge its prior defeat against Venture Global in an arbitration case from earlier in the year.

Shell is among several disgruntled Venture Global customers challenging the company in court over the timing of shipments from its Calcasieu Project between 2023 and 2025. At that time, Venture Global claimed Calcasieu had not yet reached "commercial" production, which enabled the company to sell cargoes on the spot market instead of commencing its long-term commercial agreements at lower fixed prices. In 2022, following Russia's invasion of Ukraine, spot prices for LNG surged far above the levels at which Venture Global had contracted with commercial customers.

While Shell lost in arbitration court earlier this year, BP (NYSE: BP) prevailed against Venture Global in October in a different court. In light of BP's win, it appears Shell will now challenge its own arbitration ruling.

With all the legal uncertainty and the prospect of billions in potential damages, it's no wonder Venture Global stock sold off, exceeding even its April "Liberation Day" lows.

Image source: Getty Images.

Is Venture Global worth buying on the dip?

If Venture Global can navigate this period without incurring significant damages, this sell-off could be an opportunity. After all, the company is on track to potentially produce over 100 million tons of LNG per annum when all its planned terminals come online, which could make it a key global energy supplier.

And despite disgruntled current customers, Venture Global continues to sign up new ones. The company was able to sign up two new long-term offtake agreements in November: a 20-year agreement with Greece's SEE LNG Trade S.A., and another 20-year agreement with Spain's Naturgy.

As long as the company can continue to ink supply agreements and dodge the worst-case scenario regarding potential fines, Venture Global may be a turnaround candidate. But risks are high, so interested investors should have a good knowledge of LNG industry dynamics before diving in.

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends BP. The Motley Fool has a disclosure policy.