A year after the Russian invasion of Ukraine, and resultant changes in seaborne flows of LNG, the market remains ebullient- with modern dual fueled X-DF vessels capable of TCE’s exceeding $100,000 per day. However, a hefty vessel orderbook, fueled partly by 2022’s improved prospects, lurks in the background.
The equity analysts are paying more attention to the sector, and participants who have moved beyond only the ownership of vessels, as evidenced by the team at Deutsche Bank covering Golar LNG, trading on Nasdaq with symbol GNLG. They have now begun coverage of New Fortress Energy (Nasdaq: NFE), making a niche with FLNG’s and land-based terminals, and the FSRU specialist Excelerate Energy (NYSE: EE)- also involved with terminals, which listed nearly a year ago during the booming Q2 2022.
The analysts at Deutsche Bank, Chris Robertson and Amit Mehrotra, tell their clients that their focus on the sector comes: “as geopolitical developments make energy security and diversification key investment considerations.”
These thoughts comport with those of Poten & Partners’ Chairman Emeritus Michael Tusiani, who- speaking at the recent Capital Link “Invest in Shipping” forum, held in New York, said: “Today we are in an unprecedented time for LNG shipping.” In his remarks, Tusiani said that, “Two Black Swan events, the pandemic and the Russian invasion- particularly the latter, have put LNG on the front pages,” with media coverage putting the sector in to the mainstream.
Pointing to the flexible destinations attached to US gas sales, he said that US exports would soon be exceeding those of Qatar. Nevertheless, he said that 75% of overall LNG moves are conducted under longer term contracts. This dynamic makes the sector very attractive for infrastructure investors - some with a decades-long focus.
In its analysis of New Fortress Energy, which represents a tie-up between private equity funds tied to the Apollo Group and those of Fortress, a long-time infrastructure investor, the Deutsche Bank team say that: “In short, NFE operates within the realm of the more structural energy transition that is happening globally.”
They highlight that NFE, “owns and operates assets within the broader LNG sector, including liquefaction and regasification assets and LNG-to-power generation assets. It also has a pipeline of four new under-construction FLNG assets in the Gulf of Mexico which will be completed through 2023 to 2024, and has started construction on a 120 MW onshore green hydrogen plant in Beaumont, Texas.” In its coverage of EE, the analysts highlight the growing importance of FSRU’s in providing energy security in Europe, with imported molecules replacing those previously delivered by pipeline from Russia.
All of the positive news comes as one remaining limited partnership with a strong niche in vessel ownership, GasLog Partners (NYSE: GLOP) would be absorbed into its parent company, and General Partner, GasLog Ltd- the Livanos controlled entity which had privatized in mid 2021. At that time, an infrastructure fund controlled by BlackRock, with a distinct long-term focus, had bought out shares held by outside holders. Now, limited partner units, which had continued their public listing, will be purchased by the now-private parent.
Analyst Ben Nolan at Stifel suggests that GLOP unit holders, who must approve the deal, vote against the deal in the hopes of getting a better price, citing unrealized gains on vessels. The buyout offer, at $8.65 per limited partner unit, is well below Stifel’s estimated $13 per unit Net Asset Value.
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