The global demand for natural gas is up, a boon for any gas company that has a liquefied natural gas export terminal tied to the end of one of its pipelines. Besides providing much-needed energy in countries such as Japan and China, it turns out that natural gas may also play hero to the damsel in distress that is the shipping industry.
Woe is dry shipping
Shippers such as DryShips (Nasdaq: DRYS ) and Diana Shipping (NYSE: DSX ) have been punished for quite some time, struggling to command breakeven shipping rates because there are so many ships in the sea. DryShips' stock plummeted from $110 to slightly more than $5 in 2009. It now rests at a miserable 2 dollars and change. Diana Shipping suffered a similar fate, dropping from $39 to just under $9, and now sits at around 8 dollars per share.
On the other hand, LNG tankers -- specially designed for transporting liquefied natural gas -- are in very high demand, and rates are going through the roof. Daily rates for LNG shippers have already doubled, and analysts expect that they will continue to climb by as much as 20% in 2012.
Four LNG shippers to know
Golar LNG (Nasdaq: GLNG ) : Headquartered in Hamilton, Bermuda, Golar LNG is on pace to reach its strongest earnings in four years. The company operates 8 LNG carriers but also runs 4 FSRUs, or Floating Regasification Units. These vessels sit offshore and refill the LNG before dispersing to consumers on land.
Here's a snapshot of a few key metrics.
|
Company
|
P/E
|
Dividend Yield
|
TTM Revenue
|
Debt/Equity
|
| Golar LNG |
96.71 |
3.20% |
$276.5M |
163.81% |
Source: Yahoo! Finance.
Teekay LNG Partners (NYSE: TGP ) : Also based in Hamilton, Bermuda and expecting its strongest earnings in four years, Teekay LNG currently operates 15 LNG carriers. Looking to take advantage of current rates, Teekay just bought six LNG carriers from Maersk for $1.4 billion in cash.
|
Company
|
P/E
|
Dividend Yield
|
TTM Revenue
|
Debt/Equity
|
| Teekay LNG |
40.03 |
7.40% |
$375.14M |
222% |
Source: Yahoo! Finance.
Overseas Shipholding Group (NYSE: OSG ) : Headquartered in New York, Overseas Shipholding has a fleet of more than 100 vessels, but only four of them are LNG carriers. Overseas' advantage is that each of its four ships holds 40% more LNG than the standard competitors do.
|
Company
|
P/E
|
Dividend Yield
|
TTM Revenue
|
Debt/Equity
|
| Overseas Shipholding |
N/A |
5.60% |
$1,027M |
123% |
Source: Yahoo! Finance.
Eni's (NYSE: E ) Moss Maritime: A wholly owned subsidiary of the Italian giant Eni, Moss Maritime is headquartered in Oslo, Norway. The company owns and operates 115 LNG carriers.
|
Company
|
P/E
|
Dividend Yield
|
TTM Revenue
|
Debt/Equity
|
| Eni |
9.39 |
4.90% |
$105,201M |
49.54% |
Source: Yahoo! Finance.
I'm concerned
Fifty-five LNG carriers were ordered this year and will come online between 2014 and 2015. All of these orders look like the sign of a healthy business, but keep in mind that increased supply could potentially drive prices down for LNG transporters. No one wants to see a repeat of the rise and fall of dry-bulk shipping.
It's a problem you can see coming a mile away, but in the near future it shouldn't be a concern. At least three LNG export facilities are expected to come online between 2014 and 2016 in North America alone. Noble Energy (NYSE: NBL ) has thrown out the idea of building one in the Mediterranean as well.
Foolish takeaway
If companies begin to over-order ships, falling rates will become a industrywide problem. Right now it looks as if there will be enough product to ship by the time the new tankers hit the seas, but investors should keep an eye on the number of LNG carrier orders placed over the next six months to a year.
Looking for more information on natural gas? Get The Motley Fool's special free report, "One Stock to Own Before Nat Gas Act 2011 Becomes Law".
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