Money Morning Article of the Week
by Tony Daltorio, MoneyMorning.com
Golar LNG stock is not the typical way to invest in the coming liquefied natural gas (LNG) export industry – but it will be one of the most profitable.
You see, while the global economy’s struggles have hurt shipping stocks over the past few years, the shipping subsector of LNG carriers is currently flourishing, with about 10% annual growth over the last decade. LNG carriers transport natural gas that’s been cooled to minus 260 degrees Fahrenheit.
And this sector has a bright future, as the United States is set to begin exporting its natural gas in 2015.
Industry-wide, approximately 55% of LNG ships are tied up in long-term contracts, making them unavailable for the coming U.S. export boom.
But Golar has ships ready to sign contracts, and demand will rise faster than supply – which is why Golar LNG stock is headed higher.
Golar LNG Limited: A 13-Vessel Fleet… and Growing
Golar LNG Limited (Nasdaq: GLNG) is part of Norwegian shipping magnate John Fredriksen’s empire. Fredriksen’s World Shipholding owns 45% of the company.
Golar has been in the LNG delivery business for more than 30 years and today is one of the largest independent operators of an LNG fleet.
The company’s current fleet consists of 13 vessels, of which only four are tied up in long-term contracts.
Furthermore, Golar is also expecting delivery of 11 newly built vessels over the next several months.
But Golar’s involvement in the LNG business extends beyond transportation – the company is also a leader in LNG technology.
Golar (Nasdaq: GLNG): More Than Shipping
Golar developed the world’s first floating storage and regasification units (FSRUs) via the conversion of existing LNG carriers.
An FSRU is designed to receive oil or gas from a nearby offshore platform, process it, and then store it until it can be loaded onto a tanker or transported through a pipeline. The very first FSRU is the Golar Spirit.
In addition, the company has moved directly into the upstream LNG business, albeit in a small way…
Golar LNG, together with an as-yet unnamed Asian investor, bought a 25% stake in Canada’s Douglas Channel LNG project in May 2013.
This project is the smallest but most advanced LNG project in British Columbia. This province will be at the core of Canada’s LNG export industry.
The project is unique in that it is controlled by Canada’s native Haisla First Nation. It will produce just 0.09 billion cubic feet per day of natural gas, much of which will be purchased by Golar. Shipments are expected to begin in 2015.
Golar LNG Stock a Good Value for Investors
Despite management making all the seemingly right moves, Golar LNG stock lagged in 2013 and was roughly unchanged for the year.
But this has given long-term investors a good entry point before business grows.
Golar’s stock currently has a 4.9% yield and, with Fredriksen as a key investor, a solid investor base.
The advent of LNG exports from the United States and elsewhere, coupled with the near doubling of its fleet in the coming months, should boost both Golar LNG’s earnings and its already juicy dividend.
The company appears well-positioned for growth, and Golar LNG stock offers good value for investors.
Profit More: While Golar is one of the best LNG shippers to buy, there’s still one leader when it comes to exporters: Cheniere (LNG) stock.
- Financial Times: LNG Carriers Provide Bright Spot to Gloomy Shipping Sector
- Oil and Gas Investments: 4 Key Companies in Canada’s West Coast LNG Projects
[NASDAQ, GLNG, LNG]
Leave a Reply