Wednesday, June 21

Today we acquired a new position in Golar LNG (GLNG), an LNG transportation, regasification, and liquefaction company. GLNG charters, and is developing a floating LNG platform ship (FLNGs) of the type used to ship dense LNG across the ocean, then convert it back to a gas at the destination. Shipping gaseous NG is economically impossible – it’s value to volume ratio is far too low to justify shipment.

This is an industry with extreme barriers to entry –  there is only one ship of this type in the world (the Prelude, operated by Shell). GLNG’s attempt to convert an existing LNG ship into an FLNG is the first of its kind, and if successful it would cut literal years off of the production cycle of the other FLNGs proposed or in production (none are in production yet to our knowledge, though four others have been proposed).

Successful completion of their project ship (named the Hilli) would make them the second player in a hugely underserved field. Production is still on schedule (barely), and is scheduled to enter service as soon as September of 2017.

The Hilli – shown here at Sinapore’s Keppel Shipyard

The remaining risk factor is GLNG’s recent moves to buy out most of the partners in this venture for upwards of $470mm, causing them to post a $0.70/share loss last quarter. That move cut their share prices from around $28 to the current $22, though logically the prices should recover. They did not lose the money, it was simply a reacquisition. We, alongside most other analysts, anticipate a recovery to at least $28 by they end of the year. Analyst sentiment projects values as high as $40 by the end of this year, with EPS growth through at least 2020.

Also – Seeking Alpha is holding a series of conferences today on Maritime Industrials:


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