Golar is poised to profit from rising LNG production in coming years
Liquefied natural gas (LNG) tanker company Golar LNG Ltd. (Golar) [NASDAQ:GLNG] is poised to make record profits this year as rates to ship LNG drop for the first time in four years, according to a Bloomberg compilation of analyst estimates.
Analysts considered by Bloomberg predict that Golar's net income will jump 47 percent to $201.3 million in 2013 and hit $375.3 million in 2014.
Earnings for LNG tankers have tripled over the past five years even as most other parts of the shipping industry have suffered from a glut of vessels.
Daily rates for the LNG carriers will fall 7.3 percent to an average of $139,000 this year, according to the median of seven analyst predictions, and the market will move from an 11-vessel shortage to a surplus of one ship.
Fotis Giannakoulis, Analyst, Morgan Stanley
Demand will catch up and that will hold the market at very profitable levels
A number of major LNG projects are due to start up in a few years, and Morgan Stanley predicts that production capacity will rise by 77 percent altogether in the next seven years, making the tankers a good investment despite the short-term challenge.
"When the market is growing, even if you have one year of high fleet growth versus demand growth, it's a matter of time before demand will catch up and that will hold the market at very profitable levels," said Morgan Stanley analyst Fotis Giannakoulis
"I don't think there are many industries offering this type of return today."
Golar, founded by billionaire John Fredriksen, announced last week that the BC LNG Export Co-Operative LLC, the company behind the Douglas Channel LNG Project in Canada, has awarded an LNG purchase and off-take contract to Golar and U.S.-bsed LNG Partners LLC.
The project is projected to produce about 700,000 metric tonnes per annum (mtpa) of LNG beginning in the second quarter of 2015.
Golar also began a five-year charter of a modern LNG carrier on November 28, 2012.