Hoegh LNG (HLNG), the Oslo-based listed gas carrier company controlled by the Leif Hoegh group, has cut its loss in 1Q15 and says it plans to continue to grow its floating storage and regasification unit (FSRU) business.
Group net loss narrowed to USD2.4 million in 1Q15 from USD4.5 million in the same period a year earlier, while revenues increased to USD42.8 million from USD17.2 million, lifted by the delivery of three ships.
The company that operates three LNG carriers (LNGC) said this market is still oversupplied, and approximately 12-14% of the fleet is currently without employment. In a quarterly report, the company stated, “With an orderbook representing 37% of the global fleet, the company expects the LNGC market to remain oversupplied for the next 2-3 years, until all the new LNG liquefaction capacity enters the market. Hoegh LNGCs are all on term charter contracts.”
However, the picture is much brighter in the FSRU sector, and the company currently has five FSRUs in service and two on order. “The drop in oil prices has led to lower energy and LNG prices, which, together with a significant increase in LNG supply over the next three years, has led to higher demand for LNG and consequently FSRUs to import the LNG.”
“Being less capital intensive, quicker to build and more flexible, FSRUs have become the preferred solution for new importers, and with the leading position in the FSRU market and a strong track record of securing new contracts, the company is well-positioned to succeed with its stated growth strategy for the FSRU segment,” the report added.
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Commenting on the figures, Erik Nikolai Stavseth and Kurt Waldeland, shipping analysts at Arctic in Oslo, said the company is highly focused on the FSRU business and is considering increasing its newbuilding investment plan. “We interpret this as a higher pace than what has previously been communicated; being 1-2 FSRUs ordered per year. This corresponds well to HLNG’s view that 2-4 FSRU contracts will be signed each year over the next five years,” they said in a market report emailed to IHS Maritime.
The company is viewing about 30 potential FSRU projects and is bidding on four at present, but the Arctic analysts believe it could stretch closer to 45 projects. “When HLNG states it intends to increase its pace of investments in newbuildings, we think this indicates two FSRUs per year, which would also increase the requirement for capital,” they noted.
Although HLNG has nearly USD199 million of cash and marketable securities, the company only has USD80 million of straight cash with no restrictions. Assuming an investment in two FSRUs, we see a requirement for USD50-65 million as the initial 10% on two USD250-325 million units, the analysts added. “As such, we argue that HLNG could be in a position where a ramp-up in investment pace requires additional capital – be it debt or equity.”