By Avi Salzman

Venture Global, a company that processes and ships liquefied natural gas around the world, launched the largest initial public offering for a U.S. energy firm in history on Friday.

The IPO values Venture Global at $60 billion, instantly making it one of the largest U.S. energy companies. That number gives the company substantial credit for its potential future earnings, making it stand out in a sector of the economy that isn't usually valued that way. That adds some risk to the shares, but could attract an audience that doesn't usually invest in energy.

Shares were set to start trading on Friday, though the exact timing wasn't clear.

The IPO is a big splash for an industry that hasn't had many in recent years. Traditional oil-and-gas companies are associated with older products that will eventually become defunct as the world shifts away from fossil fuels. Energy companies make up less than 4% of the S&P 500's market capitalization today, down from more than 10% in 2010.

But Venture Global thinks it is tapping into an area of energy that can attract new investors. Venture Global CEO Michael Sabel said in an interview that he thinks the investor base for energy has "broadened out substantially," pointing to the interest he has seen both in Venture Global and in other companies.

One example he cited was Constellation Energy, which owns nuclear power plants and whose stock has more than doubled over the past year because of excitement about the use of nuclear power for artificial-intelligence data centers. "You've seen some really interesting pivots for growth investors into traditional energy stories," Sabel said.

Venture Global is focused on liquefied natural gas, an industry that also has a promising growth trajectory ahead of it -- LNG volumes are expected to double in the U.S. in the next four years. American companies are hustling to add more capacity for LNG to supply Europe, which is weaning itself off Russian gas in the wake of Russia's invasion of Ukraine. President Donald Trump has promised to "unleash" LNG exports, reversing his predecessor's more cautious policy.

Sabel also thinks that his company can provide LNG that can generate electricity for data centers overseas, tapping into a similar source of growth as Constellation. "A lot of investors were focused on international investment in AI data centers that's increasing electricity demand globally," Sabel said of his conversations with market participants before the offering.

But a lot of growth appears to be reflected in the stock price already. That means investors who are considering jumping in after the IPO will have to weigh whether things can get substantially better.

Investors are valuing Venture Global at a premium to its closest competitor, Cheniere Energy, even though Cheniere's export capacity and financial results exceed Venture's. Cheniere's market cap is $52 billion, compared with Venture Global's $60 billion valuation.

Cheniere's LNG export facilities have capacity to ship more than 45 million tons of LNG a year, versus the 30 million expected capacity for Venture Global's two operating facilities. Venture Global says it is on track to increase capacity to more than 100 million tons a year.

And Cheniere's net income through the first three quarters of 2024 far exceeded Venture Global's net income, $2.3 billion to $756 million.

That may be one reason that Venture Global reduced its expected offering price during the IPO process. It initially announced a range that could have valued it as high as $110 billion.

Growth is back in the energy sector. Investors will have to decide if they are willing to pay up for it.

Write to Avi Salzman at avi.salzman@barrons.com

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January 24, 2025 12:19 ET (17:19 GMT)

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