LNG, Oil & Gas, M&A Market Intelligence Specialist

Massimo Bellino

Thematic (Sector/Industry)

After a prolonged downturn that lasted more than three years, the LNG shipping industry is at an inflexion point as the recent surge in the spot LNG charter rates could underpin a new period of growth.
While the spike in the spot charter rates to record levels was driven by a sudden and to some degree unexpected shortage of available LNG carriers for the spot market, the underlying industry fundamentals had been improving for over a year.
The growth in LNG demand that started in 2017 is continuing in 2018. Imports by China have grown 43% this year compared to the same period in 2017 while global LNG demand is up 8% (YoY). Long-term LNG demand forecasts have been upgraded to the upside.
Global LNG capacity additions, expected to reach a record level in 2018 of 47 mtpa, will continue throughout 2019 and 2020 totalling an aggregate capacity of around 55 mtpa.
As the majority of new LNG additions are coming from the US, the average voyage distance required to reach the Asian buyers is increasing. The LNG market is evolving into a more liquid market thanks to a growing number of trades exchanged on the spot market or under short-term periods (i.e. less than five years).
As a result, the number of carriers required for the spot market is increasing. This, together with cross-basin shipments and more frequent destination changes to exploit arbitrage opportunities, are all pushing up LNG spot shipping rates.
The limited number of non-committed LNG carriers in the order book before mid-2020 is also expected to negatively impact the number of carriers available in the spot markets for the next two to three years.
The peer group of companies involved in LNG shipping and the related FLNG and FSRU markets announced, in general, a set of positive third-quarter results, but are their market values fully reflecting the improved outlook in the industry? Our comparative analysis of historical EV to forward EBITDA valuation multiples will seek to answer that question.
<h2>Exhibit 1: LNG Shipping Peer Group Share Price Performance (LTM)</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/011/original/ex1.png?1543816495" class="editor-image img-responsive" data-smartkarma-image-id="72011"></figure>
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Source: Capital IQ and interpretation of data from Flex LNG 3Q18 presentation. As of 29 November 2018
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After a prolonged downturn that lasted more than three years, the LNG shipping industry is at an inflexion point as the recent surge in the spot LNG charter rates could underpin a new period of growth.
While the spike in the spot charter rates to record levels was driven by a sudden and to some degree unexpected shortage of available LNG carriers for the spot market, the underlying industry fundamentals had been improving for over a year.
The growth in LNG demand that started in 2017 is continuing in 2018. Imports by China have grown 43% this year compared to the same period in 2017 while global LNG demand is up 8% (YoY). Long-term LNG demand forecasts have been upgraded to the upside.
Global LNG capacity additions, expected to reach a record level in 2018 of 47 mtpa, will continue throughout 2019 and 2020 totalling an aggregate capacity of around 55 mtpa.
As the majority of new LNG additions are coming from the US, the average voyage distance required to reach the Asian buyers is increasing. The LNG market is evolving into a more liquid market thanks to a growing number of trades exchanged on the spot market or under short-term periods (i.e. less than five years).
As a result, the number of carriers required for the spot market is increasing. This, together with cross-basin shipments and more frequent destination changes to exploit arbitrage opportunities, are all pushing up LNG spot shipping rates.
The limited number of non-committed LNG carriers in the order book before mid-2020 is also expected to negatively impact the number of carriers available in the spot markets for the next two to three years.
The peer group of companies involved in LNG shipping and the related FLNG and FSRU markets announced, in general, a set of positive third-quarter results, but are their market values fully reflecting the improved outlook in the industry? Our comparative analysis of historical EV to forward EBITDA valuation multiples will seek to answer that question.
Exhibit 1: LNG Shipping Peer Group Share Price Performance (LTM)


Source: Capital IQ and interpretation of data from Flex LNG 3Q18 presentation. As of 29 November 2018


Soaring Spot Charter Rates Could Herald a New Upcycle for the LNG Shipping Industry

Energy Expert

Thierry Bros, PhD

Thierrybros.com

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Belgium

Exmar NV transports gases.  The Company primarily transports liquefied natural gas (LNG), and liquefied petroleum gases (LPG) including propane, butane, and anhydrous ammonia.  Exmar produces LNG in Asia, the Middle East, and the Caribbean.  The Company also offers offshore services.

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Exmar Nv (EXM BB)

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