The shale boom in the U.S. is changing the flow of oil and gas throughout the world. It is also lowering energy prices, which is fueling incremental demand for energy around the world. Because of this boom it has changed the dynamics in the energy market so that liquefied natural gas will soon be shipped out of the U.S. into Asian and European markets. Further, oil tankers are no longer waiting in line to ship oil into the U.S. and instead oil soon could be flowing out of the country. It's a trend that could lead to a rise in the profits of tanker stocks with the following five being the best positioned to capture these profits.
Best LNG tanker stocks
Worldwide LNG demand is expected to double by 2025. This is expected to drive a significant amount of growth for LNG tanker companies. In fact, the industry could require over 180 additional LNG vessels by 2020, which represents $37 billion in investments for the LNG shipping industry.
One company with an actionable plan to capture a growing share of this growing market is GasLog (NYSE:GLOG) and its affiliate GasLog Partners (NYSE:GLOP). The duo has what it calls the GasLog 40:17 Vision, which is a plan to grow its combined fleet from 25 to at least 40 vessels by 2017. The company sees this as low-risk growth because its ships are backed by long-term contracts; in fact, the company already has a revenue backlog totaling $2.7 billion. (NYSE:GLOG)
Another growth-oriented natural gas tanker company is Teekay LNG Partners (NYSE:TGP). Like GasLog, Teekay owns several LNG vessels. In addition to that, the company also owns liquefied petroleum gas, or LPG, vessels that transport natural gas liquids like propane or ethane, which is seeing surging exports from the U.S. thanks to the shale boom. Overall, the company currently has a $3.4 billion growth pipeline of vessels that it plans to build through the end of the decade to capture this growth.
Best oil tanker stocks
Turning to oil, there are two tanker stocks investors should consider to potentially profit from the flood of oil that continues to hit the global market, with more on the way if the U.S. starts to export oil.
The first tanker stock is actually part of the Teekay family: Teekay Tankers (NYSE:TNK). The company currently owns a diversified fleet consisting of 32 double-hull tankers, with another 20 tankers owed through joint ventures or other investments. Teekay sees its growing fleet well positioned thanks to the three fundamentals driving strong spot rates for oil tankers: low expected industry fleet growth, high crude oil supply, and rising oil demand. These trends, along with its own fleet growth, are expected to drive cash flow growth for the company over the next few years.
The other tanker stock well positioned for these trends is Nordic American Tankers (NYSE:NAT). The company currently owns 24 vessels; however, it has a slightly different business model as it only owns one type of vessel, Suezmax, in order to drive operational efficiency. This is a low-cost business model so Nordic can really cash in when spot rates rise, which is what has been happening over the past year. Those rates could continue to head higher in the years ahead as more oil flows into a market that's constrained by projected low fleet growth.
The shale revolution is spilling over into the global energy marketplace. That's leading to a need for tankers to ship oil and natural gas around the world. That future could lead to rising rates for tankers and strong gains for tanker stocks.
Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.