The Drewry LNG Shipping Equity Index increased 1.8% YTD (as of 28 September 2023), underperforming the S&P 500, which surged 12% during the same period. The share price of Golar LNG and Nakilat rose by 4.6% and 1.4%, respectively, while that of Flex LNG declined by 6.5%. In August, LNG shipping stocks under our coverage declined significantly. Nakilat declined 12.2%, Golar LNG by 8.4% and Flex LNG 4.8%. LNG shipping stocks were affected by weak 2Q23 results, low spot prices and lacklustre spot demand. These stocks recouped some of their losses in September mainly due to a steady increase in spot freight rates.

In 2Q23, Nakilat’s total revenues grew 8.5% YoY to USD 316.1 mn (QAR 1,170.6 mn) and net income rose 8.8% YoY to USD 102.2mn (QAR 378.4 mn). While the results benefited from higher joint venture income, increased operating costs and financial expenses dragged the company’s net income. Flex LNG’s 2Q23 revenues improved 3.1% to USD 86.7mn, while net income contracted 11.8% to USD 39mn. Increased vessel operating expenses (up 12.5% YoY) and higher interest expenses (up 1.7x) weighed on the company’s 2Q23 results. Dividend per share reduced 40% YoY to USD 0.75 per share. Golar LNG’s adjusted EBITDA declined 17.9% YoY to USD 82.8mn due to lower liquefaction services revenues and higher vessel operating expenses.

Newbuild momentum continues to be firm, with QatarEnergy placing orders for 17 LNG vessels worth USD 3.9bn with Hyundai Heavy Industries. Saudi Amaco’s investment in MidOcean Energy (with interests in four Australian LNG projects) points towards the long-term attractiveness of the LNG sector.
LPG stocks under our coverage increased in 2023 YTD (as of 28 September 2023) due to high freight rates, increased second-hand prices and robust 2Q23 results. Stock prices of Stealth Gas, BW LPG and Navigator Holdings surged 89.2%, 78.6% and 24.3%, respectively.

BW LPG reported robust 2Q23 results, with shipping revenues up by 67.5% YoY to USD 290.8mn and net profit up by 102.4% YoY to USD 78.2mn. The revenue of Navigator Holdings grew by 9.2% YoY to USD 135.3mn and adjusted EBITDA jumped by 26% YoY to USD 69.3mn. Meanwhile, StealthGas revenues declined by 6.6% YoY to USD 36.7mn and adjusted EBITDA slid by 14% YoY to USD 18.1mn, mainly due to the reduced fleet size.

BW LPG stock price has benefited from strengthening spot freight rates for VLGC vessels. The surge in StealthGas share price is due to its plan to enter bigger LPG vessels, ongoing deleverage and share buyback. The company is divesting its smaller-sized vessels and looking to diversify into bigger vessels.

LPG shipping rates have been robust YTD 2023, bolstered by growing US LPG exports to Asia, increased Panama Canal waiting time, widening arbitrage influenced by large inventory build-up in the US and improving petrochemical demand in Asia. LPG shipping rates increased in September due to continued Panama Canal draught restrictions, curbing the vessel supply.

Source: Drewry Maritime Financial Research