Golar LNG Limited (“GLNG”) builds, owns, and operates marine infrastructure for the liquefaction and regasification of LNG. It currently owns 2 out of 5 existing FLNG ships in the world, which posits it perfectly for the projected LNG deficit in Europe.
Floating liquefied natural gas vessels (FLNG) have been designed to facilitate the production, liquefaction, and storage of natural gas at sea. If you have a producing well at sea, you can add an FLNG vessel and liquefy the gas for transportation on the sea.
Golar LNG is both a short-term and long-term investment opportunity:
- In the short term, the company should re-rate with the delivery of the second FLNG vessel, which is scheduled to deliver in this quarter ( in September), and in 1Q24, it should start its 20-year contract with BP.
- The market pricing indicates that this may not be fully reflected in the share price. The 2024 revenues and profits should double by the delivery of the vessel. Historically, GLNG was trading around 8-10 times EV/EBITDA. It trades around 8 now on 2023 projections and around 5 on 2024 projections. It indicates that 2024 is not fully reflected in the share price.
- The short-term trading opportunity is supported by the 150 million USD buyback and by the fact the company just announced its first dividends in 5 years. The yield is 5% now, and the dividend size may increase with the increased profits next year due with the operation of the second FLNG.
- GLNG is a long-term attractive play as well. Due to the Russian war, Europe is now dependent on LNG. That dependence will drive demand for FLNG. Golar is planning to add more ships. It already bought one vessel for conversion, and two other projects are assumed by the brokers.
- The second ship delivered this year is not in the price, and the additional vessels are not priced at all. Golar is the global leader in FLNG and should be the beneficiary of the LNG demand.
We are long GLNG, and our entry price is around the current share price.
Disclosure:
The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.
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