Selling an Old Favorite, We’re Too Early in the Cycle

By Travis Johnson, Stock Gumshoe, March 6, 2014

Today I’m selling my shares of Golar LNG (GLNG), at the market price at the open (just letting you know this up front to be as transparent as possible, since I’m sending out my note before the market opens — normally I’d use limit orders).

Why? Well, because they announced tremendous weakness in the business when their earnings came out this week … but the stock jumped up tremendously. I can be wrong, for sure, but the market is very much disagreeing with me about GLNG’s prospects for the next few months, at least, so I’m selling.

Golar LNG is a liquefied natural gas company — they own, both directly and through their MLP Golar Partners (GMLP), the tankers that can transport liquefied natural gas. LNG is gas that has been super-cooled so it can be compressed and carried by tanker, and the tankers are specialized to hold these cold cargoes and minimize loss of gas during the voyage. There has been LNG shipping for decades now, but it ha largely been a few routes — like from Trinidad to the US before the shale boom, and from Qatar to Asia. There just haven’t been a huge number of exporting LNG projects or facilities.

That’s changing now with the huge disparities in global gas prices, particularly with the difference in price between the US, where gas is now abundant thanks to our shale gas discoveries, and China, Japan and Korea, the latter of two of which rely heavily on LNG imports for their energy needs. There was a surge of interest in LNG following the nuclear disaster in Japan, since shutting down their reactors meant they needed more natural gas for electricity generation, but the general promise is that huge gas discoveries in the US and Oceania and Africa will be more and more destined for liquefaction and transport to profit from this huge global gas arbitrage play (cheap prices near the wellhead or in pipeline-supplied areas, expensive prices in importing countries without domestic supply).

And the long-term trend remains quite intact, I think — LNG shipping will continue to grow in importance. But the large projects that continue to be anticipated to create substantial LNG export capacity are taking longer and longer to be developed. And the shippers are a lot faster than the energy companies to prepare for new trends, so there’s a substantial ...

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