Key Takeaways:

1) Mozambique LNG (MZLNG): After A Sluggish Start…The Next 6 Months Are Critical…

Q320 & Q420 satellite images indications… (pgs. 15-18)

17-months after FID, meaningful piling, concrete, &/or structural steel erection [redacted]…

Recent security issues (increasingly localized terrorism) could further hamper staffing levels & complicate the path forward (while also potentially creating the pretense for Force Majeure relief)

2) Schedule Analysis & Estimates: 

Our proprietary risk model implies a probability of the project meeting its cost/schedule metrics is [redacted] (page 5)

EPC Contract Exposure: ~$8B LSTK contract, via a consortium comprised of Saipem (74.95%, SAPMF), McDermott (24.98), MDR) & Chiyoda (0.07%,)

A successful project would boost Saipem’s reputation, while also certainly meaningful for a restructured MDR ($560MM Raise on Jan 5, 2021).

3) Mozambique vs. LNG Canada 

MZLNG & LNG Canada share similarities, including: a remote area, greenfield, man-camp, etc. (page 4)

Key differences: MZLNG’s has lower-cost construction wages, shorter project schedule, but 300% more peak labor (~11k craft workers).

Should MZLNG require even more labor given the circumstances described in pages that follow, it would likely require an even more significant pull from local labor (on-site housing can support ~9.5k workers).

MZLNG is located in one of the least developed areas of Mozambique, which creates unique risks around that heavy lean on local labor, even before considering the uptick in localized terrorism. (page 12)

4) Mozambique LNG: Baseline Report Q121

Key Takeaways:

1) Union Craft Avg. Wage Rate Escalators & Impact On JGC/Fluor, and broader project cost…

What’s Happened/Changed: Part of our current focus is on LNG Canada’s wage rate escalation and union labor agreements post-2023.
Why Does That Matter: EPC lump sum proposals generally include labor escalation between 1-3% per annum (rates vary based on geography/availability). Labor agreements supporting LNG Canada and other B.C. projects expire in 2023 and have a relatively advantageous average labor escalation rate of…..continued.
For context, union labor strikes, renegotiated agreements, and significant wage rate escalation supported Gorgon LNG coming in $20B+ over budget. 
What’s The Impact:…..continued (Page 3)

2) Taking A Look At JFJV’s Longer-Term Labor Inflation Risk (Page 5)

3) JFJV’s Construction Activity – What does it tell us about the project timeline? (Page 8)

4) Satellite Image Analysis Baseline –  Benchmarks for Remainder of the Project…. (Pages 9-17)

Key Takeaways:

1) Chiyoda’s Engineering Delays Continue. We believe engineering delays have eroded a significant portion of the EPC risk, contingency, and profit, with the likelihood of ramping balance sheet exposure. (Pages 4 & 11)

2) Timeline & Cost Overrun Estimates. Our updated project timeline (delay) and contingency fund estimates are now material, sitting at….(continued)

3) Our estimates point to Golden Pass project progress sitting closer to ~10% vs Chyioda’s report figure of 16% (Q2) based on both our satellite image review and….(continued)

4) Sabine Pass Comparison. 18-Months after FID Sabine Pass LNG Trains 1 & 2 were 57.1% complete, vs our estimated range for Golden Pass LNG (~10-16%). (Page 8)

Golden Pass LNG Satellite Image Overview (page 13)

Key Takeaways:

1) Union Craft Avg. Wage Rate Escalators & Impact On JGC/Fluor, and broader project cost…

What’s Happened/Changed: Part of our current focus is on LNG Canada’s wage rate escalation and union labor agreements post-2023.
Why Does That Matter: EPC lump sum proposals generally include labor escalation between 1-3% per annum (rates vary based on geography/availability). Labor agreements supporting LNG Canada and other B.C. projects expire in 2023 and have a relatively advantageous average labor escalation rate of…..continued.
For context, union labor strikes, renegotiated agreements, and significant wage rate escalation supported Gorgon LNG coming in $20B+ over budget. 
What’s The Impact:…..continued (Page 3)

2) Taking A Look At JFJV’s Longer-Term Labor Inflation Risk (Page 5)

3) JFJV’s Construction Activity – What does it tell us about the project timeline? (Page 8)

4) Satellite Image Analysis Baseline –  Benchmarks for Remainder of the Project…. (Pages 9-17)