Two weeks ago I wrote about 8 companies/industries that stand to benefit from a continued uptick in domestic oil and natural gas production. Among those industries was liquefied natural gas (LNG) marine shipping which profits from moving LNG around the globe in search of arbitrage opportunities within the distorted LNG market. The following eight companies are marine shipping companies which will profit from increased volumes of and demand for LNG throughout the global market. This list was compiled by screening publicly traded marine transportation companies for ones operating LNG carriers.
GasLog Limited (GLOG) - GasLog focuses solely on the management and operation of LNG carriers. The company owns 2 carriers, manages another 12 ships, and has 8 more wholly owned vessels under construction with 6 of those slated for delivery in 2013. GasLog's 2 wholly owned vessels are under multi-year contracts and has contracts in place for the ships scheduled for delivery in the first quarter of 2013. A relative newcomer to the LNG shipping space, GasLog IPO'd in April 2012, and offers investors a strong growth opportunity as new vessels come online and are placed under contract. The company's 3.8% dividend yield is also a welcome addition to GasLog's growth prospects.
Golar LNG Ltd. (GLNG) - Golar LNG is similar to GasLog in its focus on the LNG market, however, the company operates floating storage and re-gasification units (FSRU) in addition to its LNG carriers. Normal LNG carriers are restricted to off-loading their cargoes in ports with specialized re-gasification facilities designed to render LNG back into usable natural gas. FSRU vessels allow a shipper to transport LNG to ports lacking re-gasification facilities and thus open additional markets up to LNG shippers. Golar is also developing floating LNG production facilities that would operate like reverse FSRU vessels and allow LNG to be produced onboard instead of at dedicated facilities. Similar to the competitive advantage gained by operating FSRU vessels, a floating LNG production facility would open numerous new markets to Golar. The company is trading at a P/E ratio of 26, but with a 4.6% dividend yield and strong growth prospects (the company has 13 additional ships on order) it is still an attractive option in the LNG shipping space.
Golar LNG Partners LP (GMLP) - Golar LNG Partners LP operates as a master limited partnership (MLP) with Golar Limited as its parent. The MLP plans to acquire ships chartered for contracts longer than 5 years. It currently owns interests in 4 vessels and with Golar Limited's chartering of Golar Maria in late November of this year for a 5 year contract, it will likely acquire an interest in a fifth vessel in the near future. The company's second quarter dividend of $.44 per unit equates to an annualized dividend yield of 6.7% at current unit prices. Golar LNG Partners offers investors the benefits (and added hassles) of pass-thru taxation treatment while also providing opportunities for growth as its parent expands.
Teekay LNG Partners LP (TGP) - Like Golar LNG Partners LP, Teekay LNG offers investors the benefits of a high dividend yield (7.1%) due to its organization as a MLP. Teekay LNG is the third largest independent owner of LNG carriers, but, unlike GasLog or Golar, is not merely a one trick LNG pony. In addition to its 27 LNG carriers, the company also owns and operates 5 LPG carriers (liquefied petroleum gas) and 11 crude oil tankers. This diversification can be attractive to customers who also have LPG and/or crude oil for transport and to shareholders not wanting to invest in a pure-play LNG transport company. Additionally, Teekay LNG's majority shareholder, Teekay Corporation (TK) operates more than 150 vessels in the oil and gas space and lends its expertise to the operation of the MLP. Teekay LNG has increased its dividend payout every single year since its initial IPO in 2005 and recently ordered two more LNG carriers.
Mitsui OSK Lines Ltd. (MSLOY.PK) - Headquartered in Tokyo, Mitsui operates ~950 cargo vessels throughout the globe. Mitsui currently owns and/or operates 36 LNG carriers and has another 6 on order. While diversification in the case of Teekay LNG is a positive, Mitsui's diversification has left the company open to the hardships experienced by other shippers during the Great Recession. Over the past 4 years, Mitsui's operating margins have ranged from 10% in 2008 to -2% in 2011. Despite the company's profitable LNG exposure, the weakness of the general shipping industry rules out the company as a good investment.
Chevron (CVX) - Chevron is a unique play in the LNG shipping industry because it offers investors exposure to LNG shipping, oil and gas exploration and production and refining operations. Through its subsidiary, Chevron Shipping Company, Chevron operates 35 ships, among them 4 LNG vessels. Three of the four LNG vessels were acquired in 2012 and the company has 4 more vessels on order from Korea's Samsung shipyards. With a 3.3% dividend, Chevron is an attractive option for investors looking for diversity within the oil and gas industry.
Höegh LNG (HOLHF.OB) - Höegh LNG is a 40-year old Norwegian LNG shipping company that conducted its initial public offering on the Oslo Børs in 2011. The company operates 6 LNG carriers and 2 FSRU vessels, all under long-term contracts. Höegh has contracted for 4 more FSRU vessels from Korean shipyards with 3 of the 4 already under long-term contract. Additionally, like Golar LNG above, the company is experimenting with the design of a floating LNG production facility which would open numerous new markets up to the company. Höegh's real potential is in its prospects for significant growth in the LNG shipment and re-gas space as the company is currently operating at a loss of $.23 for the last twelve months. Höegh presents investors with an opportunity to profit from a pure-play in the LNG shipping industry on a foreign exchange.
Kirby Corporation (KEX) - Kirby Corporation is not a direct play on the LNG shipping industry, but rather an indirect investment in the continued boom of oil and natural gas drilling and production. The company operates tugs and barges that transport commodities and equipment on the inland waters of the United States. As I documented last week, Kirby has been on an acquisition spree of late, and the company is benefiting from bulk shipments of equipment and material to and from shale plays such as the Eagle Ford. Kirby is trading approximately 13% off its 52-week high, but with the accretive earnings from its recent acquisitions it is attractively priced assuming the recovery of the Mississippi's current low-water levels.
For a more in-depth look into the nuts and bolts of the LNG shipping industry, I would highly recommend reading Ship Tracking Natural Gas Opportunities by Seeking Alpha contributor Herr Hansa. Overall, while there may be a glut of capacity in the LNG vessel market in the next 12 - 18 months, the industry will continue to benefit long-term from increased LNG demand worldwide.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.