Early Analysis on Shipping Break-Up
After a messy end to a successful 19-year partnership with billionaire magnate John Fredriksen in 2014, the Chairman of Golar LNG Ltd (GLNG) has created billions of dollars since then and is now looking to penetrate into the entire supply chain of liquefied natural gas (LNG). GLNG will achieve this by removing its highly volatile shipping assets as well as debt to create a strong long-term RemainCo in this fast growing space.What’s Happening?
As liquefied natural gas (LNG) is among the fastest growing sources of energy (rising at a CAGR of 9.4% over the period of 2015-2020) and with a gross earnings backlog of $10.3bn, Golar LNG Ltd. (GLNG) announced the plan to Spinoff of its Trifuel Diesel Electric (TFDE) LNG carrier business (GLNG Shipping, SpinCo), while shifting its focus to its LNG infrastructure projects, given favorable market conditions for the separation.
GLNG has traditionally been a LNG carrier company operating in a highly volatile space where 70% of its revenues are derived from this business, which has negatively impacted its share price over the last year, -31% compared to the Russell 2000 Index (RUT) return of -7%. We believe the move to separate the LNG carrier business is a positive for GLNG, since it creates an opportunity for the management of GLNG (ex-Spin) to capitalize on higher growth and less volatile business by capturing more of the LNG value chain through its own expertise, as well as through future joint ventures.
Experienced Chairman…
Tor Olav Trøim, who previously was the right-hand man to oil tanker and shipping billionaire magnate John Fredriksen, and is a specialist in this space. Mr. Trøim was well known for helping Mr. Fredriksen set up Seadrill Ltd. in 2005 and Mr. Trøim built Borr Drilling Ltd. from the bottom in 2016 to a $2.3bn offshore drilling company today.
Golar LNG is a midstream liquefied natural gas (LNG) company based in Bermuda. Co. is engaged in the transportation, regasification, liquefaction and trading of LNG. Through its subsidiaries and affiliates, Co. is engaged in the acquisition, ownership, operation and chartering of LNG carriers and floating storage regasification units (FSRUs), and the development of liquefaction projects such as Floating Liquefaction Natural Gas Vessels. Co. owns and operates a fleet of 19 LNG carriers and seven FSRUs, and under management agreements operates Golar LNG Partner LP's fleet of six FSRUs and four LNG carriers.
The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.
The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.
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