Summary
The LNG shipping sector faces a mixed outlook amid seasonal and market dynamics. While the slow onset of winter has impacted the industry, increasing demand for natural gas in Asia is boosting prices, particularly for electricity generation. Companies with long-term contracts continue to show resilience, achieving solid Time Charter Equivalents despite challenges from weak spot rates.
Several companies experienced notable stock movements. New Fortress Energy led with a 13.8% increase, halting its decline, while Excelerate Energy rose 11%. Flex LNG regained key price support, and Dynagas LNG Partners resumed investor distributions. In contrast, Cool Company saw a significant 16.5% drop due to a dividend cut and increased spot market exposure.
UPI & SPX
Last week, UPI, which tracks listed LNG shipping companies, gained 2.75 points, equivalent to 1.67%, closing at 167.58 points. The S&P 500 index gained 1.68%. The chart below illustrates the performance of both indices with weekly data.
Broader view
The sector is still experiencing the impact of a slow start to winter, which is typically its peak season. This was highlighted during the conference call, which discussed Norwegian Cool Company’s third-quarter results. Despite achieving a strong Time Charter Equivalent (TCE) of $81,600, spot rates for ships that lack long-term contracts pose a significant threat. Additionally, the recent dividend cut further underscores the sector’s pessimistic outlook.
On the other hand, cooling in Asia is increasing the demand for natural gas and its price. This growth is stronger than the commodity price increase for producers. US gas prices (Henry Hub) reached $3,276 on Friday, an almost 5% week-on-week increase.
Let’s examine the future more closely. Is it possible for us to shift from one main peak season to two smaller ones? Current summer trends suggest this could be the case. Global warming has led to increased natural gas consumption in Asia, primarily for generating electricity for air conditioning. This winter season is starting off well, although it may be slightly delayed. Regardless, electricity consumption is unlikely to decrease.
Constituents
UPI was pulled up mainly by upstream and downstream companies. New Fortress Energy (NASDAQ: NFE) was the biggest gainer, which confirmed our earlier expectation of halting its decline. Its growth was 13.8%.
Conversely, Excelerate Energy (NASDAQ: EE) completely ignored the threat of the candlestick chart pattern we wrote about last time and gained 11%. Golar LNG (NASDAQ: GLNG) was another driver, rising 8.6%.
Dynagas LNG Partners (NYSE: DLNG) notched a gain of 6.9%. This partnership also released its quarterly results, and perhaps most interesting was the release of its first distribution to investors, $0.049. The partnership thus ended the moratorium on distributions enforced by funding institutions in 2019.
Shares of Flex LNG (NYSE/OSE: FLNG) were up 4.1%, confirming the stock’s return above the $25 support broken in early October due to the decline in spot rates.
We’ll mention two more companies whose stock price rose in the past week. They are BP (NYSE: BP) and SM Korea Line Corporation (KRX: 005880). Both look like they are trying to reverse the downtrend. BP added 2.6%, while KLC rose 2%.
Let’s now look closer at Cool Company’s (NYSE/OSE: CLCO) quarterly results, which we mentioned in the introduction. The stock reacted to the results with further weakness, losing 16.5%. The dividend was cut to $0.15. On the negative side, the company’s number of ships on the spot market – so far – may rise to four out of thirteen in Q4-25. On the other hand, the long-term contracts are slightly less than three years with a TCE of around $85,000, the company said.
Awilco LNG (OSE: ALNG) has seen the second-largest decline as it continues to fall due to spot rates. The company lost 7.2%. Capital Clean Energy Carriers (NASDAQ: CCEC) suffered the last significant decline, losing 2.8%.
However, the decline only led to a return to the support line. Tsakos Energy Navigation (NYSE: TEN) lost just 0.9%, but it is at risk of further decline as the rising attempt was unsuccessful.
About UPI
Established in 2020, the UP World LNG Shipping Index is a rules-based stock index family designed to measure the performance of worldwide publicly traded companies involved in the maritime transport of liquefied natural gas (LNG). This unique index covers 19 companies and partnerships worldwide, representing over 65% of the world’s LNG carrier fleet in 2020. The UP Index offers premium services with freemium and trial access to charts. With Freemium, users can access the basic UPI vs S&P 500 chart after email registration. The trial includes full access for fourteen days.
Source: UP-Indices.com