Applying Druckenmiller's advice: GLNG?

If I had access to the 2021 board, I could point to a pair of threads on Golar LNG (GLNG). Unfortunately, I don’t. A quick summary
Although Golar LNG (GLNG) still had a shipping fleet of 10 LNG tankers in 2021, I had stopped counting them as a shipping entity. The reason being,

  1. The majority of GLNG’s revenue was from its Floating Liquefaction of Natural Gas (FLNG) vessel, Hilli
  2. The revenue from the shipping fleet was fairly streaky, and sometimes lumpy during an annual cycle

In 2022, there was even more reason to not consider them a shipping entity - GLNG sold 8 of its 10 vessels (8 TFDE LNG tankers) to a third party, and kept a minority stake in the entity (Cool Co). In mid 2022, GLNG sold its two remaining LNG tankers for FSRU (Floating Storage & Regasification Units) roles.

So how does GLNG fit Druckenmiller’s advice?
Well, right now GLNG have the one FLNG asset. In Q4 2023, Golar activates operations on a second FLNG vessel, Gimi. The vessel has a 20-year contract with BP, and GLNG has a 70% stake in the asset. Let’s call it 2024, since that’s the first full year of Gimi operations. So, that’s Golar about 14 months out.

Any other surprises? Well, GLNG mgmt seem cautiously optimistic on the possibility of another FLNG project award in 2022. A FID (Final Investment Decision) in 2022 means vessel delivery 3-5 years later. Instead of lumpy revenue, the model changes to “step function”-like [ Hohum uses his engineering knowledge :slight_smile: ]. Not a bad situation if the leverage picture has changed

Previously, GLNG struggled with financing some of its projects. Now, the company has a lot more liquidity and investments to boot

A very good article on Golar LNG (GLNG) current state:

Tiny GLNG stake


Small correction to put a comment in perspective:

The basic FLNG vessel has a step function type characteristic. However, if one adds a tolling bonus feature e.g. Golar has with FLNG Hilli, the revenue outcome becomes more of a differential equation (that’s the engineering reference). As mentioned in the article, T1 and T2 produce steady revenue. But when either of the bonus features, or both bonus features, kick in, revenue is not as easy to gauge.

I held some Teekay a long time ago. As far as I can tell, shipping as an industry is a poor investment, regardless of cargo/class of fleet.

Shipping is a capital intensive sector. Sectors within shipping tend to go on streaky runs (sometimes up, sometimes down). Teekay is an interesting case. The Teekay parent, Teekay Corp (TK) grew steadily in its early years. But then, couldn’t keep up with developments in all its sub-sectors, so it carved them up into daughter entities. The plan worked for a couple of years, then it didn’t. One of the daughter entities was Teekay Offshore (ticker TOO). A good core business of shuttle tankers and FPSOs (Floating Production & Storage Offshore units) eventually couldn’t keep up with its growth plans and its grand plans (specialized offshore docking, a towing unit)… A few years ago, that daughter entity ended up with Brookfield, and they too have run into problems managing the entity, that got renamed Altera Infrastructure.

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@ajm101 - BTW, ever hear of Oaktree Capital?
Oaktree Capital have been involved with shipping companies for many years, and their existing investments include dry bulker Star Bulk (SBLK) and a majority stake in product tanker company Torm (TRMD)


Of course I’ve heard of Oaktree. They seem to understand corporate credit better and special situations than I do, and I’d be interested if they have shipping bonds, and in what proportion to equity. I don’t see their investment as a long term positive for a sector, necessarily. But in general, outside of Maersk it seems shipping companies have complicated and kind of nasty corporate structures that sometimes overlap in a way that resembles nepotism. Critical industry! And you seem to follow them closely and I applaud you for it.

Yes, probably “above average” grouping of unsavory characters involved with shipping. So yes, it does require some effort to vet some of the shipping companies. But some e.g. Economou (former DRYS backer), Pistiolis (TOPS CEO) are so frequent in the misbehavior, it becomes easier to ferret them out.

Lots of things occurred to get Torm to a healthy place. I do recall that Torm had several classes of single shares e.g. Oaktree had/has a single Class C share with a lop-sided extra voting power

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BTW, the primary niche sector of shipping that GLNG used to be involved in, i.e. LNG tankers, is experiencing its seasonal uplift … with a vengeance. Spot rates and/or market rates are typically higher. And this year, the situation is more drastic given the Ukraine-Russia conflict. A few weeks back, there were suggestions that rates could hit $500K daily.
Okay. But, how many LNG tanker companies have available vessels to benefit from market conditions? Given the LNG tanker cost (now $230M - $270M), owners tend to fix the vessels prior to delivery. To tie things nicely, even CoolCo is a variant of the spot trading LNG tanker pool (Cool Pool) that Golar helped establish several years back. Cool Pool’s members included GasLog (now private), GasLog Partners (GLOP - still active) and Golar LNG (GLNG).

Per my comment upstream on shipping streakiness - check GLOP’s trajectory the last six weeks

11/3 New developments

Golar is trimming its stake in Cool Co

Does this mean an imminent FLNG project announcement? or two projects? Seems like there was enough existing cash to start a new FLNG project, without resorting to monetization of an investment

11/16 Q3 2022 results announced
While there area number of points, many of them have already been announced prior e.g. Golar LNG (GLNG) selling a chunk of its Cool Co shares. However, there were a few new updates

  1. The order of long-lead items for a new FLNG project
  2. Strong customer development for FLNG growth development projects. I know, I know, that is very scant on details. I mean, for all we know, Golar mgmt could have just met to discuss a project that might be in exploratory stages, and not happen until 5 - 10 years down the road…
  3. GLNG is in a much better position financially than in prior years
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As 2022 ends, a few comments on this idea.

  1. Having disposed of its LNG tanker fleet and trimmed investment stakes, GLNG is in a more stable position financially.
  2. GLNG’s one operating FLNG asset, FLNG Hilli is a “cash cow” (more precisely, Train 3 (T3) with its associated bonuses going 88% to GLNG)
  3. GLNG’s second FLNG asset, FLNG Gimi is still on track to start operating in Q4 2023
  4. Slight disappointment that there was no formal announcement for a third FLNG asset.
  5. Still, GLNG did order long-lead items for another FLNG asset (my guess, $100M - $200M worth)
  6. GLNG still gets small cash flows from other sources e.g. an operating LNG tanker that will be converted to an FSRU, special div from NFE

Someone asked a shipping question on the new Shrewdom boards. It can be found here:

[Shrewdom: A Merry and Shrewd Investing Research and Education Community]

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I am quite familiar with ZIM - the reddest idea in my shipping basket!
Waiting for the Shrewdom verification email so I can respond

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Email was down on 1 January (during a change to a faster server), so if you sign up again to all should be okay.

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@Manlobbi - Thank you. I registered the same handle on Shrewdom and have also responded to the thread. Thank you again for the all the work you have put into making Shrewdom a working site to share and exchange ideas

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