Entering text into the input field will update the search result below

Teekay LNG Partners: Distribution Boost Caps Record Year


  • TGP has increased the quarterly distribution by 15%.
  • Cashflow and debt reduction targets are being met.
  • Charter extensions provide even further visibility of future growth.
  • We maintain our Bullish opinion, with near-term PT of $17.6/shr, and long-term intrinsic value of at least $22/shr.

Q4 Results

Amid instability and M&A activity in the LNG shipping sector, NYSE:TGP together with its Joint Venture fleet has delivered record results for EBITDA and Net Income as the boost from its large portfolio of fixed term vessels continues to run its course.

Debt amortization remains a top priority with TGP eliminating $100M and $558M from its books (J.V. proportionally consolidated) in Q4 and FY 2020, respectively. The debt reduction in 2020 amounted to 11% of total debt, bring debt to capital down to 64%.

Distribution History

TGP’s quarterly distribution was initiated around $0.70/shr at IPO in 2013, but subsequently cut to $0.14 in late 2015 at the onset of the oil price collapse, coinciding with its large newbuild program. The distribution has since steadily recovered to the present level of $0.25/shr.

With last week’s Q4 2020 earnings call, and as widely anticipated, TGP confirmed plans to increase the quarterly distribution to $0.288/shr, an increase of 15%, bringing the current yield to 8.4%. The new distribution level will become effective with the May 2021 payment.

For U.S. tax purposes, TGP’s common unit distribution typically has a component of return of capital with the remainder treated as ordinary income.

Fleet Status Update

TGP’s fleet maintained nearly 100% utilization during 2020 and with its long-term charter agreements avoided disruption emanating from COVID-induced cargo cancellations. It has made significant strides in diversifying its customer base, which traditionally had been tied to Shell Oil, by adding names, such as Cheniere, Petronas, Yamal LNG, and BP. The JV vessel Marib Spirit received a new charter from Trafigura through early 2023, increasing backlog to $8.8 billion, or $16 per share on a net cashflow basis.

The wholly-owned fleet has an average charter duration of 4 years, while the J.V. fleet is further locked in for an average

This article was written by

Eric Robken covers value and high income stocks in the energy shipping sector with an emphasis on LNG/LPG.  With degrees in Mechanical Engineering and MBA-Energy Finance, his 15-year career has centered around natural gas projects. A Seeking Alpha contributor with several Top Ideas to his credit, Eric stays informed of the latest trends through quantitative analysis, market research, and technological developments. His publications aim to provide a balanced and nuanced view of companies and the ecosystems in which they operate, with an eye toward shareholder value.Eric Robken in an Investment Advisor Representative through Ashland, a Registered Investment Advisor located in Texas.Disclaimer:Communications on Seeking Alpha do not constitute investment advice.Ashland Heights Capital Management, LLC is a registered investment advisor. Please visit our website http://www.ashlandinvest.com/disclaimer-and-privacy-policy for important disclosures.

Analyst’s Disclosure: I am/we are long TGP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This publication is provided for informational purposes only. The opinions expressed herein are those of the individual author, and do not represent the opinions of any other employers or affiliates. The information provided herein is not intended to and does not constitute legal, financial, investment, accounting, tax, or any other type of professional advice, and should not be relied on as such by any recipient. None of the information contained herein should be used as a substitute for consultation with competent advisors. All information contained herein is provided “as is” without any express or implied warranty of any kind. While reasonable efforts have been taken to present accurate factual data from a variety of sources, no representation or assurances as to the accuracy of information or data published or provided by third parties and contained herein is made. The author, and its affiliates, and their respective officers, directors, members and employees shall have no liability in contract, tort or otherwise to any third party. The information set forth in this publication is for the internal use of the subscriber. The information contained herein is proprietary, and any duplication or distribution of such material to any third party is expressly prohibited absent the prior written consent of the author. The copyright for any material created by the authors and all other rights are reserved.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (42)

User46126116 profile picture
Another 4% today on heavier than normal volume.
ggravelle profile picture
@User46126116 I think it's just LNG spirits / energy lifting us. I don't think there's more to it.
FROGBERT profile picture
@Ashland Heights Investments TGP jumped nearly 10% today on no news I find..got me wondering if something going on between them and HMLP which jumped about 6%
@FROGBERT Up 10% on 6X normal volume - something is going on. Your guess seems more reasonable than other commenting about the general energy and shipping markets being up today.

I was also speculating they may have won a Qatar contract of some kind.
Gabriel Castro profile picture
Amazing analysis. I share your 12 months share price target. I think it is very reasonable. Just a comment on Exmar joint venture. It is difficult to get more details because Exmar doesn't make earning calls and TGP usually doesn't comment on it, however Exmar LPG fleet is not trading at spot. In fact it is 75% fixed for 2021 and 33% fixed for 2022. Moreover, Exmar joint venture LPG carriers are smaller than VLGC and the rates didn't drop so much. They are more stable. We are in regular contact with Exmar and I spoke with Exmar CEO one week ago. Hope it helps! Good work
Ashland Heights Investments profile picture
@Gabriel Castro, CFA thanks for filling the gaps on Exmar JV. The amount of fixed charter explains why the JV was able to roll the maturing debt recently.
RoseNose profile picture
Thank you for the announcement of the dividend raise, I had read from @The Fortune Teller , TFT, that it was going to be raised by 15%. I am long it because of TFT and his service Wheel of Fortune suggesting it in 2019 and was pleased then with the yield (and then even cheap price). Still very pleased and also own the TGP-B preferred for the very same reason. Maybe I should get some more.... Happy Investing :)) Rose
The Fortune Teller profile picture
Thanks for the shoutout @RoseNose
Hope you took advantage of the 2020 trading alerts for the Teekay group, not only 2019... (-:
RoseNose profile picture
@The Fortune Teller - Thanks and I have multiple buys over the years, and enjoy owning it very much, Thank You!
Are the dividends on the preferred qualified?
gastro4 profile picture
Thanks for update. Long TGP
Nazim Macbeth profile picture
@Ashland Heights Investments

Thanks for the excellent TGP update Eric.

The focus on debt reduction is the best use of their cash at this time. Vessel emissions will be a major factor going forward, so they shouldn't acquire any new carriers until we see a step-change in propulsion technology. The fleet is young; TGP can just keep paying down debt, reducing interest expense, and improving the capital structure. That alone would push us to much higher valuations.
This is from Flex CC:

"The two most important changes are implementation of energy efficiency requirement for all existing ships and not only new ships. This is what we call EEXI and this will take effect from 2023. It's a bit similar to fuel efficiency standards for cars only that it will also include all existing ships as well as the new ships. The measuring stick here will be carbon emissions per ton-mile."

"Keep in mind, LNG ships have historically been extremely inefficient as the thermos keeping the LNG cold have until recently not been very efficient. This means boil-off gas and until about 10 years ago most ships used steam turbines to burn this boil-off to create propulsion. But as I pointed out earlier, steam propulsion is not very efficient."

"Another hot topic is CH4 emissions, which is an LNG specific issue and which have therefore not received much attention. CH4 is a potent greenhouse gas with about 28 times higher effect than CO2. We think it's fair to include this as well. If so the carbon footprint of the four-stroke diesel electric ships will go up a lot as the carbon emission taking this into account is similar to steamships. Hence, we think attrition of older ships due to this new legislation will go up a lot, and this will be more the case in the event of even a carbon taxation, as this will further aggravate the problems for the less efficient ships."

What is the quality of TGP ships? Any threats due to being older?
Ashland Heights Investments profile picture
@Nazim Macbeth Thanks. I agree with your points there. It'll be interesting to see who is the first to order the next set of ships and what do the technical specs look like relative to today's technology. We may have to accept that the pace of engine innovation is slowing down and that the next real step-change is to shift from LNG to ammonia/Hydrogen.
pro8 profile picture
My thinking on ship propulsion fuel is that LNG will be used for at least the next two decades... For IMO 2030 I would think by 2027 there would have to be something in place IOW you cannot wait until 2030 and all of a sudden come up with regs .... 7 years from now they need the regs in place.... I just don't see how LNG is not still one of the main fuels for shipping ... the production of these other fuels like ammonia/ hydrogen I just don't see them produced or advanced enough with infrastructure to be a viable large scale alternative.... we still have diesel ships on the water, lots of them so I think LNG is the main fuel for at least the next 15 years... I just don't see how it is not a allowable part of the fuel regs for IMO 2030.... I'm looking at this from a logical rational perspective... things do not turn on a dime and for LNG tankers I think it will be without question the main fuel for IMO 2030 but also for most shipping another 10 years... IMO 2040 maybe not and ships will need to ordered before then...

I know Maersk has said they will try to go another direction and have no plans to buy LNG pwrd ships , I say good luck with that but they are not the only shipping company out there... we'll see how that works for them and how many try and join them... but we have been through this before with solar panels , lithium batts, etc.. it takes time for these things to be viable and it also takes time to replace them and they were all touted as the next big thing but it took many years for that to happen... if you're old enough I think you can understand that . Solar was talked about a lot in the late 70's early 80's and used, cost and efficiency being an issue... lithium batts were first commercialized in 1991... they were not a viable vehicle batt until ~2010 with the Dept of energy , do to the oil crisis of 2008, that TESLA got a $465M loan from and they decided on lithium batts, among other mfg's, for electric propulsion which gave them a big jump but here 10 years later the combined hybrid/pure electric fleet in use world wide is just 3% of the total vehicle fleet...
Can you compare this with the other LNG carriers? I think FLNG is more risky since they are more on spot and they still have new shipbuilding. TGP is more risk averse and diversified. So perhaps a full position in TGP and a quarter in FLNG would be the right way to think about it?
Brilliant article, Eric. Thanks.

Shares o/s about 87mil. Let's say FCF ~$4.10/sh, or about $3.00/sh greater than dividend. Is it practical, in your opinion, that they could pay down another $261mil in debt in 2021? (87mil shares x $3.00/sh) I am eager to see debt paid down. Am I looking at it the right way?

Thanks. Steve
Ashland Heights Investments profile picture
@SteveL, cpa Thanks. Yeah that's basically how I see it. This $260M debt reduction is at the TGP level and as well the 26 JV entities are amortizing at a proportional rate of c. $140M. So I am projecting consolidated Financing CF of ($400M) in 2021. With very little Capex requirements this is an overall net cash breakeven.
awisecpa profile picture
@Ashland Heights Investments Great article, thank you! Would like your opinion regarding the preferred-A, which is redeemable Oct-21. With only 5MM shares outstanding and a 9% yield, would you say it is highly likely that they will enact a full redemption at that time? I'm asking since my position is sizable and I have a hefty gain. I'm strongly considering selling once my gain becomes LT (reduced tax rate ) and I want to exit before the price declines down to par as we approach the date. Also, what is interesting to me is that just today, the price of the B (I own, but much less than the A) rose slightly past the A. TIA!
Ashland Heights Investments profile picture
@awisecpa Thanks for reading. I do not give out investment advice, but as I mention in the article, the call risk on the A's is substantial. Especially as it trades above par. I recently exited GLOP-B and am considering GMLPP at or near par, given the security of the new parent co. NFE.
edinvest123 profile picture
very good article, i am invested since 2017
TGP's interest expense in '20 was reduced by $32 million. This year that savings can drop to the bottom line with less interest expense in '21 from debt retirement. If you have the patience, and are willing to earn 8% while you wait, TGP is for you. With DCF 3.85X the distribution, there is no chance of a distribution cut, and lots of room for another increase and/or buyback!!
good solid article but stock is like watching grass grow. I'm an income guy so this fits my overall plan but it is painful to see other securities make in a week or so what it takes us a year to achieve with the divy. I too am waiting for the 20's to cash out.
CincinnatiRick profile picture
@Geosands C'mon, man. You've been at this long enough that you should understand you need workhorses as the backbone of your portfolio. With a solid basis of dividend payers, you may then find yourself free to enjoy a little spice in your life chasing any frisky fillies that might catch your fancy.

If and when this plow horse ever reaches the twenties, it will most likely be because the dividend has forced it up there. I'm not even going to push that stupid canard of YOC but what's the problem with a reliable current 8% anyway?
@CincinnatiRick exactly what I have done....about 50% in this solid performer and the rest in more diversified funds and undervalued situations. wish I had the courage to write calls in the mean time...
CincinnatiRick profile picture
@Geosands Calls are a pretty tame exercise...it's the puts that will test you. The worst that can happen with calls is the shares get called away...leaving you the consolation of the call premium plus whatever the spread between what you paid for the shares and the strike price you selected. If it lets you sleep better at night, think of the premiums you get for the calls you sell as augmenting your dividend income. Since the bulk of your investments are in sober dividend payers, you really don't have the kind of action that you get with high flyers likely to be called away so you may get to rinse and repeat with your plow horses over and over.
Excellent article, thanks. Have owned since the distribution was .14 per Q, so investment in the common has been an adventure. Patience is now paying off and expect continued small distribution increases in the coming years. Long common and preferred.

ggravelle profile picture
Long and feeling strong. Can be frustrating investment but when you factor in the juicy dividends this thing works.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.