With China wanting cleaner fuels, demand for liquefied natural gas, which can be transported across seas, should grow by 7.1%/year on average through 2020, says Sanford C. Bernstein's Neil Beveridge.
LNG supply will take time to catch up with the demand potential from Asia, which makes infrastructure providers such as Golar LNG (GLNG +0.7%) early movers and potentially big gainers for investors as gas goes global, Heard on the Street's Abheek Bhattacharya writes.
GLNG is one of the first to develop floating liquefaction vessels that can produce, liquefy and store gas; each vessel costs $1.2B, which sounds like a lot until one considers that it is ~10% of what Wells Fargo estimates Shell spends on the closest technology, a relatively immobile though larger LNG platform off Australia's northwestern coast.
The difficulty for investors is that they have to wait, as GLNG's first floating vessel probably won't turn profits until 2017.
GLNG says the conversion, scheduled for completion in early 2017, will be a key step towards full implementation of its floating LNG production strategy; it also has secured firm options for conversion of two additional vessels which can be delivered from Keppel in Q3 2017 and Q1 2018.
GLNG plans to use the proceeds to fully fund initial milestone payments to Singapore's Keppel Shipyard in connection with the conversion of a liquefied natural gas carrier to a floating LNG vessel, and partly fund other future scheduled payments under the conversion agreement.
The four shippers tend to have high fixed-rate contract coverage and limited spot market exposure, which the firm says should insulate them from near-term market weakness and outperform more spot-oriented companies such Golar LNG (GLNG) and Gaslog (GLOG).
Credit Suisse notes that GLNG has the least contract coverage in the group but is hunting bigger game than point-to-point LNG transportation - i.e. floating LNG operations, where securing a contract could be a game changer; Morgan Stanley thinks GLNG's first such commercial agreement will be signed this year.
Under the proposal, the Department of Energy would no longer issue conditional approvals of projects; instead, the DoE would decide whether an LNG export project is in the national interest only after the FERC had issued a final environmental review.
The change to the export process aims to help expedite reviews by focusing only on most commercially viable projects that have finished the FERC process.
P-E firm LNG Partners sought a court-sanctioned reorganization for the Douglas Channel LNG project in October after it effectively ran out of money; the owners now are poised to chop the venture in two as part of efforts to resolve a dispute with other investors in the project.
Under a proposed deal, AltaGas would head up a British Columbia project, while Haisla First Nation, a Douglas Channel joint venture, would develop a separate project with Golar LNG (GLNG, GMLP).
The original export license, awarded in 2012, gives the venture permission to export up to 1.8M metric tons/year of natural gas.
GasLog (GLOG +4.7%) is initiated with an Overweight rating and a $26 price target while gas shipping peer Golar LNG Partners (GMLP -3.6%) is downgraded to Equal Weight with a $33 target at Morgan Stanley.
GLOG offers relatively low downside, having most of its fleet locked in solid long-term charters with strong counterparties and a reputation as a top quality operator, the firm says; GLOG's ability to identify attractive acquisition opportunities, not only by ordering newbuilds but also secondhand vessels, suggests stable growth potential.
The firm sees lower upside for GMLP due to the anticipated difficulty of its parent, Golar LNG (GLNG +1%), to secure long-term contracts for its newbuilds during the next 12 months; however, even with the $33 price target, GMLP still offers 10%-15% total return including a 6.7% yield.
Russia's $27B Yamal liquefied natural gas project, developed jointly by Total (TOT), China National Petroleum (SNP) and Russia's gas producer Novatek, reportedly will name by next month the shipping companies that will move LNG on icebreaking tankers from the Arctic to ports in Europe and Asia.
Two vessels have been commissioned so far; bidders for 14 more vessels include Dynagas (DLNG), Teekay LNG Partners (TGP), Golar LNG (GLNG) and a Chinese consortium.
The giant LNG plant at the remote Yamal Peninsula is one of the world's biggest gas projects and Russia's first foray to extract the vast natural resources that lay below the Arctic ice.
Golar LNG Partners (GMLP -6.2%) is defended at Clarkson Capital, which reiterates its Outperform rating and $38 price target after GMLP reveals plans to offer 5.1M units; parent Golar LNG (GLNG +0.4%) will sell 3.4M GMLP units as part of the offering.
The acquisition of the Golar Igloo from GLNG was expected before the vessel begins service on a five-year contract to Kuwait National Petroleum in March 2014, the firm says; the transaction value is in-line with expectations, and the firm believes GMLP has solid distribution growth potential and strong unit coverage.
Golar LNG's (GLNG +1.6%) ambitions to build several floating liquefied natural gas vessels remains the dominant variable for GLNG shares, Wells Fargo says, with the company providing significantly more color on its move in its Q3 report.
The firm believes the potential for positive FLNG conversion and commercial updates throughout 2014 should continue to help break down the stock's correlation with spot LNG earnings, keeping it as buyers of the stock despite what it sees as a softer LNG carrier rate environment in 2014.
Rates for the biggest crude carriers sank 68% in the past two weeks, more than reversing their advance since the end of June; the rise is seen as a blip, as the U.S. meets the highest share of its own energy needs in three decades.
Rates for VLCCs, each hauling 2M barrels, fell to $7,954/day on Aug. 2 after rising as high as $24,493 on July 12; earnings last exceeded the $25.5K that FRO says it needs to break even in November.
While U.S. oil production is bearish for crude tankers, it’s boosting demand for ships to export refined products, chemicals and liquefied petroleum gas; Scorpio Tankers (STNG) is expected to benefit.
mapodga+ FollowFollowing- Unfollow|Send Message25 Jun
: How to buy secondary? Where?
Jun 25, 5:12 PM
TFCAB+ FollowFollowing- Unfollow|Send Message18 Jun
$GLNG closed long for huge win; will look to re-enter
Jun 18, 3:08 PM
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mapodga+ FollowFollowing- Unfollow|Send Message18 Jun
: it droped like a stone. Have problem to escape. Do you think will drop further?
Jun 18, 4:06 PM
TFCAB+ FollowFollowing- Unfollow|Send Message18 Jun
: i am not good at predicting the future...LT goes higher, but it was running too hot
Jun 18, 5:41 PM
GLNG vs. ETF Alternatives
Golar LNG Ltd is a midstream LNG company engaged primarily in the transportation, regasification and liquefaction and trading of LNG. It is engaged in the acquisition, ownership, operation and chartering of LNG carriers.