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Teekay LNG Partners L.P. (NYSE:TGP)
Q4 2019 Earnings Call
Feb 27, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Teekay LNG Partners' Fourth Quarter and Fiscal 2019 Earnings Results Conference Call. [Operator Instructions]

Now for opening remarks and introductions, I would like to turn the call over to management. Please begin.

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Thank you. Before Mr. Kremin begins, I would like to direct all participants to our website at www.teekaylng.com, where you will find a copy of the fourth quarter and fiscal 2019 earnings presentation. We will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the fourth quarter and fiscal 2019 earnings release and earnings presentation available on our website.

I will now turn the call over to Mark to begin.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Thank you, Scott. Good morning, everyone, and thank you for joining us on our fourth quarter and fiscal 2019 earnings call for Teekay LNG partners. I'm joined today by Scott Gayton, Teekay Gas Group's CFO. Turning to slide three of the presentation, we will review some of Teekay LNG's recent and fiscal 2019 highlights. Similar to the past few quarters, we continued to improve on our year-over-year and quarter-on-quarter results. In fact, our 2019 adjusted net income per unit of $1.79 is up over 135% from the $0.76 per unit recorded in 2018. You can see the key result metrics for the fourth quarter and fiscal 2019 and the table at the top of this slide. Importantly, each of these metrics is within the earnings guidance ranges that, as a reminder, were revised higher at our Investor Day event in November of last year. The strength in our earnings and cash flows can primarily be attributed to the recent completion of our $3.5 billion growth program. Our final two Yamal ARC7 LNG carriers delivered in November and December of 2019.

And the Bahrain regasification terminal in which we own 30%, achieved construction completion this past January, and our JV is now receiving revenue. Since the middle of 2019, our LNG fleet has been 100% fixed on fixed rate contracts that importantly have no exposure to floating spot LNG rates. All told, our LNG fleet averaged just under $80,000 per day in the fourth quarter. Our LNG fleet will remain 100% fixed until at least May for one ship and June for the other two ships, at which point these 3, 52% owned or the equivalent of 1.5 ships will roll-off of their fixed rate contracts. We hope to fix these ships away on short to medium-term contracts, thereby maximizing utilization. As we will discuss in a moment, the spot LNG market is currently volatile and thus providing precise details on where we can expect to fix these ships when their contracts end is difficult.

However, since our LNG fleet is over 97% fixed for fiscal sorry, fiscal 2020, the earnings impact from these vessels is limited to about 1.3% for $10,000 per day change in LNG rates on our adjusted net income guidance base of $250 million at the midpoint. Because of this earnings stability, we remain comfortable with the 2020 guidance numbers we released in November, despite this rate volatility. In early January of 2020, Awilco fulfilled their commitment to repurchase the WilForce and WilPride LNG carriers from us and payed the deferred hire in full plus interest. As Scott will detail in a moment, this was significant because it allowed us to delever our balance sheet by over $260 million, and it increased total liquidity balance by over $100 million, which provides us with the flexibility to repay our upcoming NOK bond maturity in May with cash should we so choose.

We do not believe that our strong sorry, we do not believe that our strong project execution and earnings growth is appropriately reflected in our current unit price. As previously announced, we will be increasing distributions this quarter by 32% to $1 per unit per annum, resulting in a pro forma fourth quarter coverage ratio of 3.7 times. Or put in another way, our $1 per unit distribution represents only 35% of our expected 2020 net income, and thus it is well covered and secured, a rarity among our LNG and ML peers these days. And while delevering remains our top priority, we have recently repurchased over 563,700 units at an average price of $13.15 per unit for a total cost of $7.4 million.

On slide four, our 2019 actual results came within the ranges which we raised which were raised in November. Because of the fixed rate nature of our portfolio, we are able to provide 2020 earnings and cash flow guidance which will see earnings per unit increased by 59% and total adjusted EBITDA increased by 12% over 2019. As you can see in the charts, these were already up substantially up over 2018's actual results. After the recent sell-off, Teekay LNG is now trading at an earnings per unit multiple of 4.1 times and an EV to total adjusted EBITDA multiple of 8.1 times, which we don't believe represents the earnings or cash flow power of the portfolio of LNG contracts at Teekay LNG. Looking at slide five. We would like to take a moment to discuss our fixed rate contracts and the composition of our fleet. Slide five includes just the LNG vessels that are consolidated on our balance sheet, and slide six includes our off-balance sheet or equity accounted LNG fleet.

Together, we have roughly $10 billion of forward fixed forward fee based revenues that have an average on average, over 10 years of contract length remaining. The fixed rate contracts for all of our LNG carriers on and off-balance sheet are take-or-pay, which means we get paid by the customer, irrespective of whether or how they're utilizing the vessel. There has been talk in the market about buyers of LNG canceling cargoes by reason of force measure or making cancellation payments. Whether these cargoes are canceled or not does not matter to us. We continue to get paid under our contracts. Similarly, whether the commodity price for natural gas or LNG is low or has no bearing on our contracts, we continue to get paid. And lastly, if there are logistical issues loading or unloading LNG cargo, we continue to get paid under our contracts. On this slide, and as you can see, turning to slide six, we have also detailed the propulsion of our LNG vessels.

Our first vessel to roll off contract is the 50% owned Excalibur which will not roll off contract until December 2021. With an average fleet age of nine years, we feel good about the continued earnings power of our modern fleet. As you can see at the top of this chart on slide six and as we mentioned earlier, we have only three 52% owned LNG carriers or a net 1.5 vessels rolling off their contracts in the middle of this year. Put in another way, over 90% of our LNG fleet is booked for fiscal 2020 and 92% is fixed for 2021. To the left of the chart, we have included a sensitivity analysis that details the impact these vessels could have on our consolidated earnings and cash flow. For each $10,000 per day change and the underlying spot return rate, Teekay LNG's adjusted net income will only be impacted by approximately 1.3% or approximately 0.4% on our total adjusted EBITDA base of $765 million at the midpoint.

Before we discuss a little of what we are seeing in the market, we would also like to point you to slide seven, which provides details of the contract, fleet and debt makeup of our joint venture partners joint ventures. We continue to believe the significant portion of our overall fleet represents hidden value, given the disconnect between U.S. GAAP presentation and the actual size and stability of our fleet, which, as we detailed in November, is more sizable and profitable than many of our publicly traded peers. Our joint venture book represents nearly $340 million to $350 million of adjusted EBITDA, and it has annual dividend capacity to Teekay's LNG of roughly $100 million.

Scott will detail why we believe this fleet represents hidden value in a moment. Looking at slide eight, we have included a graph of spot LNG rates over the past two years. As can be seen, LNG rates have decreased in line with previous seasonal cycles. Of course, this year's spot LNG rates are also being impacted by other factors, such as the coronavirus, which is impacting end-user demand and thus reducing LNG pricing, which reduces arbitrage trading opportunities. With all this uncertainty, it is difficult for us to predict where spot LNG rates will go in the near to medium term. However, as mentioned previously, Teekay LNG's exposure to this market is very limited. On a fiscal and full ownership equivalent basis, Teekay LNG's exposure to the spot LNG market in 2020 amounts to about 3/4 of one LNG carrier. We will earn LNG time charter equivalent or TCE of just under $80,000 per day per ship on average in 2020 if we were to secure the three 52% owned LNG carriers at today's broker headline charter rate of $45,000 per day.

I will now turn the call over to Scott to run through the next two slides before we conclude.

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Thank you, Mark. We presented a version of slide nine at November's Investor Day, and we have recreated a similar slide here. As you can see, calculating a cash flow multiple using just the GAAP or consolidated figures does not tell the whole story. Because our sizable joint venture profit portfolio sits off-balance sheet, the calculation of enterprise value includes over $1 billion relating to our investment in our equity counted JVs. However, the denominator does not include any of the joint venture's EBITDA. Looking at the table, the first column calculates EV to EBITDA based on just our consolidated financial statements and leads to an EV to EBITDA of 9.4 times using the closing unit price on Tuesday. However, if we bring our joint ventures on balance sheet, looking at the column to the far right, the multiple drops to 8.4 times.

We believe this calculation method fully encompasses our business portfolio and provides investors with a better metric that is aligned with what they are actually investing in with TGP. I'd also like to point out that should our entire vessel and contract portfolio be valued at 9.4 times, like just our consolidated portfolio is, our unit price would be over $21. On slide 10, we have presented a graph of our net debt to annualized quarterly adjusted EBITDA leverage ratio, as depicted by the blue line, with our liquidity balance graft along the x-axis as gray bars. The shaded blue bar at the end represents our total liquidity balance pro forma for the completion of the Awilco transaction, which closed in early January.

With the final two Yamal vessels delivered in November and December, substantially all of our growth capex was concluded prior to the end of the year, and the small amount of capex that was owned by us at December 31 on the Bahrain terminal was almost entirely offset by a dedicated debt facility. We have already made good progress with our delevering efforts, having reduced leverage from 8.8 times in the middle of 2018 on a quarterly annualized basis down to 6.4 times at the end of 2019 pro forma for the Awilco transaction. Importantly, we expect this trend to continue as we increase cash flow in 2020 and continue to reduce debt through amortization. This delevering profile is important to today's unitholders because not only does debt paydown accrete directly to the equity value, but it also provides us with greater financial flexibility.

I will now turn the call over to Mark to conclude.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Thank you, Scott. We have slightly amended slide seven, which we presented at Investor Day in November, and the light blue to the left. We laid out a few of the key priorities we aim to complete in 2019 through 2020 sorry, 2021, and to the right and dark gray, we have detailed a few of the steps we have taken since the start of last year to achieve these goals. One of our key priorities is to always maintain a high utilization of our fleet. And we're happy that we locked away 100% of our LNG fleet mid last year in the high 70s to low $80,000 per day. With only net 1.5 vessels or less than 5% of our fleet rolling off contract in the middle of this year, we feel comfortable we will be able to meet the earnings guidance presented on slide four. We continue to believe reducing leverage is good for all stakeholders, and we have made good progress on that over the past year, reducing our net debt to total adjusted EBITDA on a quarterly annualized basis by 1.4 times over the past four quarters.

We have continued to de-risk Teekay LNG through the successful delivery of our $3.5 billion order book. And in part because we expect new LNG shipping tenders will likely be delayed, we don't see Teekay LNG ordering new growth vessels for some time to come. However, when tenders are issued, we will look at them opportunistically and ensure they meet our conservative hurdle rates and are complementary to our current strong business mix. And we have continued to return capital to unitholders since late 2018, with a combined 79% increase in our distributions from $0.56 per unit paid in 2018 to $1 per unit per year, starting with the first quarter of 2020 distribution to be paid in May. And since late 2018, we have purchased repurchased 3.5% of our outstanding LP units and intend to continue repurchasing units on an opportunistic basis. Lastly, we continue to believe that eliminating the IDR structure and possibly converting to a C-Corp makes sense for us and for our investors, and we will evaluate the best way for us to achieve this goal.

Thank you for your time today. And operator, we are now available to take questions.

Questions and Answers:

Operator

Yes, sir. [Operator Instructions] Our first question will come from Randy Giveans with Jefferies.

Randy Giveans -- Jefferies -- Analyst

Howdy gentlemen, how's it going?

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Good morning. Ready?

Randy Giveans -- Jefferies -- Analyst

Good morning. So in your 3Q 2019 financials, you showed about $26 million in unit repurchases, same number shown in the 4Q 2019 full year cash flow. And then you said you repurchased about 560,000 units at 7.4%. So were all those purchases in the last, I guess, 7, eight weeks. And then with that, kind of looking ahead, obviously substantial cash balance, conclusion of the Awilco sale, no basically remaining capex, so how do you balance that debt repayment with additional unit purchases in the coming quarters? For example, real quick, repaying that NOK bond with cash or maybe rolling that NOK bond in purchasing units that are currently yielding 7.7% with that cash.

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Yes. Thanks, Randy, good morning. So yes, you're correct that all of our repurchases were, as you have said, took place in the 2020 time period. And I guess, what I would say on a go-forward basis and how we really look at repurchases and then maybe touching on the NOK bond for a minute. As you said, we have been active on the buybacks. We've also been paying out dividends. Those are going to be increasing this quarter, and we do think that actually represents a fairly compelling yield right now for investors. But with all that said, we've been very clear for the last year or more, the delevering really remains our key priority. And I think this will remain our key priority over the next couple of years. But with that said, we have been buying at levels above where we were trading around now in these last couple of days. And so I think you can assume that we will be continuing with our repurchases on a modest basis.

And then maybe looking at the NOK bond for a moment, our creditworthiness is increasing really day-by-day here as we have shown, and we expect that to continue. And so I think what that will do is continue to lower our borrowing costs, and obviously the base rates are coming down as well. So we do evaluate what we're going to do with that maturity in May. And I think what we said at our investor event was that we may look to renew it. We could pay it off with cash. But if we do renew it, then I think that it would be at a smaller size than the current growth of around $135 million today. So we're still evaluating that market. We were over there earlier this year, and we think we had quite a supportive investor group. I don't think that there would be any problem if we decided to roll it. But right now, I think that remains to be seen.

Randy Giveans -- Jefferies -- Analyst

Sure. All right. Good answers there. Obviously, not an unlimited amount of cash to go around. So balancing the debt repayment and unit repurchases will be tricky, but obviously both accretive. Now in terms of growth, you mentioned that briefly there, Mark, at the end. How do you kind of look at growth opportunities, again, with delevering being the main priority? And then would any growth come via new buildings on long-term charters with Arctic two or Shell, Exxon, Mozambique whomever or are you open to uncontracted second hands?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

No, Randy, it would come, as you say, probably through newbuilds hopefully against well, certainly against long-term contracts, but the longer the better. The contracts, the FIDs, we do believe have been pushed back just slightly at least this year. Even Qatar seems to be a little slower than some had anticipated. I think it's still coming. So that's the kind of contract that we would like to see. And again, hopefully, the longer the better. Other projects that might come out are Train seven for Nigeria. There's a few that will hopefully be build-to-suit. Picking up secondhand might be a possibility for us. If this market continues to bear out like it is, and we are as we've been preaching on this call today, pretty fixed out and hopefully in a relatively good shape. There may be an opportunistic possibilities for us over the next couple of years or so, but I don't think that's our priority.

And this leads to the other question you asked about the delevering being our number one priority. When we look at ordering new builds, for instance, as early as possibly this year, so those wouldn't deliver until maybe 2024 or so if we did that, by which time, as Scott has showed you in this slides, I've shown you, we will have delevered beyond our target range if that's what we want to do. So ordering newbuilds against long-term contracts wouldn't effectively the yard is warehousing those big final installments plays much better into a delevering story than for us to go out and order more spot ships today from secondhand even if it's an opportunistic play.

Randy Giveans -- Jefferies -- Analyst

Got it. Okay. That makes sense. Yes, I know there are a few uncontracted second hands out there, maybe looking for a buyer. But I will turn it over. I'm sure there's other questions. So I'll hop back in the queue. Thanks.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Thanks, Randy.

Operator

Thank you. Our next question comes from Ben Nolan with Stifel.

Frank Galanti -- Stifel -- Analyst

Yeah. Hi, This is actually Frank Galanti on for Ben. How's it going?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Alright.

Frank Galanti -- Stifel -- Analyst

So just kind of follow-up on Randy's last question. You'd mentioned you want to focus on doing newbuilds with long-term contracts. However, the last I guess, year or two years, I don't think we've seen many substantially long-term contracts. So can you kind of talk about the availability. I know you said maybe Nigeria Train seven and a couple of other projects reaching FID in the near term, but it doesn't seem like projects are willing to sign up seven-plus year deals anymore. Would you still go ahead with a new build on a seven-year deal? Or am I misinformed and there are actually 10, 15-plus year long deals that you'd be able to participate in?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

So we agree with you. We haven't seen a lot of these. There's been one or two, I think, Jay [Phonetic] did a long-term contract, but there haven't been a lot. So then the question is, is that going to change? I don't know if a lot of our peers are going to be able to continue to do what was done before, which is to order speculatively and then ultimately put them against seven-year charters or five-year charters or whatever might be available. I think we're coming to the point perhaps, where if you're a charter and you if you need a significant amount of ships, you might actually have to bank on providing longer term charters. So you should have that tonnage. You've seen where the MLP markets are today, I don't think it's a riskier bet. Now to go ahead and order a bunch of ships and even against a seven-year charter.

So to some extent, we are hoping that the market will return to normalcy. Then we can may not be the 25 or in the case of Arctic two for us even longer charters that we in 25 years that we've had, but hopefully we can return to a longer charter. And for that, the whole industry, and when I say the industry, it's really ship owners have to sort of work together and there's always going to be pockets where they're going to do shorter charters. But we are hopeful that as an industry, the industry is going to want longer charters again. So as a result, we may be more selective, we may be more conservative, we will not have the same probably the same growth CAGR as we've had in the past, but I still think we're going to get some good long-term charters. That's our hope.

Frank Galanti -- Stifel -- Analyst

Okay. That makes a lot of sense and helpful. So kind of looking into the future a little bit. You've got two, three years, the focus is on deleveraging, maybe buying back some shares. But it almost seems like the inevitability for the partnership is to turn into some type of C-Corp. And I know in one of the last slides, that's a consideration. But with kind of the MLP shipping market being pretty weak generally for the last several years now, is that something that's in serious consideration where the partnership is expected to kind of stand on its own from a capital perspective from replacing assets? Can you just kind of talk a little bit about what that world might look like in a couple of years from now with potentially moving to a C-Corp?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Well, to your point, the partnership has been standing on its own from a capital perspective for some time. We haven't I can't recall actually the last time that we took a drop-down and we're funded at the GP level. So all orders have been made at the LP in all acquisitions and investments for some time without guarantee from Teekay. So in a sense, we already have been moving toward that model for years. Do we continue on and go into the C-Corp models because not only have we've been funding from the daughter's level, but also, it looks like yields are blown out. Yes, it's a real possibility for us to go to. We are seriously considering C-Corp or other type of moves in the out of the MLP space. It obviously involves interaction and appropriate cooperation with the parent. And so it's something both the parents and the daughter are looking at.

Frank Galanti -- Stifel -- Analyst

Okay, that's helpful. That's all I had. Thanks very much.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

All right, thank you.

Operator

Our next question comes from Greg Wasikowski with Weber Research and Advisory.

Greg Wasikowski -- Weber Research and Advisory -- Analyst

Yeah, Hey, good afternoon, guys. How are you?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Good morning, Greg.

Greg Wasikowski -- Weber Research and Advisory -- Analyst

So I just wanted to start with the commercial start-up at Bahrain, just to clarify, in your release, you said the commercial start-up is upcoming. When is that expected to begin and from TGP standpoint since the JV is already collecting terminal fees in January. Does it matter?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

It doesn't matter. No. So to kind of reiterate, and we've made there's been a lot of news in media, but let's just simplify it all. Again, TGP has been receiving full hire for its FSU since 2018. And now it's also, as part of its joint venture receiving full revenue on the terminal. In terms of commercial start, it's available at the customer's discretion. That customer will start commercial operations whenever it makes sense. Now obviously, it's set up a floating regas terminal for a reason. The Middle East, as we know, is seasonal, and to some extent, it's cyclical like everywhere else in the world. And so we have a floating unit out there, which is probably more as efficient for trading as any other ship on the water.

So they might actually end up using that ship for trading during this period of time, but it is commercially available to them to run the terminal when it makes sense. Typically, that's in the summers in the Middle East when you need air conditioning, but I'm not even suggesting that it might happen this summer. That's entirely up to the downstream customer. But to reiterate, yes, the terminal is ready for commercial use, if that's what the downstream customer wants.

Greg Wasikowski -- Weber Research and Advisory -- Analyst

Okay. And then do you see TGP, like in terms of growth, do you see you're looking more toward this area, more of a downstream or a small-scale LNG focus. Just thinking outside the box, did you see that happening in the next couple of years?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

It's it remains to be seen. What we do perhaps end up looking at is niche projects of various types. So if you look at a couple of niche projects where we have, we have the Arctic seven, the ice breakers, the ships in Yamal. And because they're not the cookie-cutter seven years type of two-stroke project, you do earn an outsized return. Similar with Bahrain, which is a has the regas terminal element in it in addition to the ordinary FSU carrier. So we will continue, I think, to look at niche projects if as we just discussed, if we if the market can't move back to if it's going to get stuck on seven-year contracts for new builds, we're going to continue to look at other types of affiliated sectors.

Greg Wasikowski -- Weber Research and Advisory -- Analyst

Okay, helpful. And then shifting gears, just where do you think period returns are right now for new business. On a cash-on-cash basis, somewhere around 8%, would you say?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

So term business, you're talking if we were ordered to order a newbuild today and put it on a seven-year charter, I don't think it's 8%.

Greg Wasikowski -- Weber Research and Advisory -- Analyst

Okay. Where do you think it is, just if you could provide a range?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Well, that's enough range probably for now. But it's less I think it's less than 8%.

Greg Wasikowski -- Weber Research and Advisory -- Analyst

Okay, fair enough. Alright, thanks for the time, guys. I'll turn it over.

Operator

Thank you. Our next question comes from Mike Weber with Weber Research and Advisory.

Mike Weber -- Weber Research and Advisory. -- Analyst

Hey, good morning, guys. How are you?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Good morning, Mike.

Mike Weber -- Weber Research and Advisory. -- Analyst

Getting tagged in today by our group. I just wanted to follow-up on a clarify the ranges, not 8%. But the in terms of the C-Corp conversion, and just it seems like there's you mentioned, it seems like there's a lot of inertia kind of in that direction and there's a kind of a menu of things you guys could do to kind of simplify the structure and kind of make it a bit more friendly, in addition to the work you've already done. But the notion of actually converting it to a C-Corp, I'm just curious around what comps or what the benefit would be in that regard? In terms of removing the IDRs will be one thing. But in terms of where would you comp yourself on a marine C-Corp basis where there's a in terms of looking at some sort of valuation uplift beyond the LP space? And then kind of in a secondary basis, with so many large C-Corp conversions at the in the large-scale space for MLPs, and you think about index rebalancing, is it worth reconfiguring the IDRs that maybe staying in LP to get a bit of an uplift in terms of a presence in the Ilerian [Phonetic] and/or kind of a bigger relative presence within the universe.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Sure, Mike. What we'll do, this is Mark, obviously, but let me try a stab at this, and then I'm also going to hand it over to Scott, and he'll have his views as well. Just to kind of the universe of things that we've done that we could do, let's just note that we've already done some things already. So we've moved to a 1099 filer from the K-1, we've obviously have a very defensible coverage ratio going forward. So we're already making very positive steps to be in that neighborhood already at the C-Corp. In terms of the reasoning to go further, we have seen, and it's a little bit difficult to find the exact metrics, it does seem to be a much wider universe of investors for C-Corps. Exactly what the metric will be or how the multiples will be is a little bit more difficult to say. Do we get into a transportation mode or a utility mode or something else, which is definitely rating better than energy MLPs right now, I'm not sure. But Scott, do you have any what are your thoughts on this?

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Yes. Thanks, Mark. I think, Mike, another couple of things I'd point to is that we also can see what's been happening in the midstream space, where you've seen a number of large MLPs have moved from an MLP into a C-Corp structure, and on average a lot of them have noticed a valuation uplift, sometimes as much as a couple of terms on cash flow. And then I think the other thing that we look at is really the valuation metrics that get used by people like yourselves and the analyst community, and you can look at other LNG peers that we have, and you can look at the way that analysts would look at the valuation of, for example, Golar or GasLog at the corporate level versus their MLP level. And oftentimes it's on more of an earnings or a cash flow on the C-Corp and more of a dividend yield on the downstairs MLP. And I think given the makeup of our fleet, the way that our earnings are growing, I think that we wish that we would have more people valuing us in line with those C-Corp metrics.

And then lastly, you talked about having the various indexes and I think you're right that in some places, we're becoming a bigger fish and probably a shrinking pond in the MLP space. And I guess, I would look at it, as Mark said, that the non-MLP type investor is just growing by leaps and bounds. And so I think that we would look over the fence and say, well, is there a possibility of us getting included in whether it'd be transportation indexes or shipping indexes or you name it, that we probably don't have access to today and probably the best we can hope for is to be included on an MLP type index. And overall, that seems to be just a shrinking pond, as I said.

Mike Weber -- Weber Research and Advisory. -- Analyst

Yes. I don't want to venture into commentary versus a question, but I don't like I covered the C-Corps you're referencing, and they're not included in transportation or utility indices, right? And we do look at those on the sum of the parts basis. And if you think about where cash-based metrics really exists within the marine space are actually in the LP space. So all I mean, not certainly to repeat the steps you guys have taken in the last year or two because they are all very valid. And stock certainly in a much stronger position, but it's that last mile of actually transitioning away from MLP. I just wonder whether it's kind of a grass is greener scenario or I don't know what kind of success stories where you've seen the there's still going to be marine comps on the C-Corp side that are Golar from a valuation perspective, should not be the comp you would be angling for, right? Or FLEX or anything else that's going to be trading below now.

Anyway, just more of a the full conversion, just kind of caught my ear, but I'm certainly kind of trending in the right direction. Just to follow-up on Greg's question on the unlevered returns and whether they're sitting at or around 8%. There's new business kind of coming out of the Arctic slowly. You mentioned Nigeria, Mozambique. Are you noticing any geographical differences in terms of where you can make the math work and where you can't? And then I think you touched on this a bit earlier. But when you are kind of beginning to running the math on new business, even though it would be delivering couple of years from now when you would be at a lower leverage level, are you running that with 50% or less gearing? Or are you actually running that hurdle math on an ROE basis with 70%, 80%?

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Just kind of turning first to the I guess, we'll touch first on the first question, which is the geographicals. Do we see a premium in some places, and the answer is sometimes, yes, and sometimes no. So we certainly saw it in Yamal. Yamal has a risk-return premium because of where it's located, and that's been great for us. But obviously with all these projects, we're not going to do we're not doing Arctic two because we already have enough concentration in Yamal. When we look to other areas, for instance, in Africa, where you would might have you might expect a risk-reward premium, we haven't seen it. So sometimes, we see it and sometimes frankly we don't, is the simple answer to this, Mike. You had another question?

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Yes. No, Mark, I was actually going to follow-up on a previous point that Mike was making, and we're having our conversation. I think Mark pointed to slide number four, where we look at where we're trading on a multiple of earnings, and we're sitting here at 4.1 times, and that type of valuation metric is probably unfathomable if you look at it in the broader C-Corp space. But even just on an MLP space, you would never see any type of MLP investor or MLP analyst, even look at earnings as a potential valuation metric. And so I think that's when we talk about moving to a C-Corp, you're right, it is very tough to see in today's market that everybody is trading with some level of dislocation.

But if we try and put our normalized sunglasses on, I think the C-Corp investors who are used to some of these fundamental valuation metrics would look at that and say, wait a minute, you've got 10-year contracts and over a $10 billion revenue book in your trading at a 4 times earnings multiple, like what am I missing. And so I think that's really what we're trying to highlight and also maybe try and go after some of those new type of investors who would look us that way.

Mike Weber -- Weber Research and Advisory. -- Analyst

Okay, fair enough. And just and finally, just the last part of that question in terms of when you're running your math on new business from a return perspective. Are you underlevering that new business? Are you still running that math at 70%, 80%?

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Yes, we're still in that same 70% to 80% range on a project basis.

Mike Weber -- Weber Research and Advisory. -- Analyst

Okay. Alright. Alright guys, thanks.

Operator

Alright, that was our last question. And now I would like to turn the call back over to Mr. Kremin for closing remarks.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Well, just a quick thanks to everyone for their support, and have a great day. Thanks. Bye.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Scott Gayton -- Chief Financial Officer, Teekay Gas Group Ltd.

Mark Kremin -- President and Chief Executive Officer, Teekay Gas Group Ltd.

Randy Giveans -- Jefferies -- Analyst

Frank Galanti -- Stifel -- Analyst

Greg Wasikowski -- Weber Research and Advisory -- Analyst

Mike Weber -- Weber Research and Advisory. -- Analyst

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