Some US energy companies and their investors are preparing for the day when they are allowed to export portions of the country's vast natural gas reserves. Golar LNG Limited (GLNG - Snapshot Report) is a Norwegian ocean tanker company that specializes in the transportation of liquid natural gas, or LNG. One of its key shipping and delivery technologies are known as Floating Storage Re-Gasifiction Units (FSRUs) and would be instrumental in that energy trend.
Unfortunately, that dream may still be quite a way off in the distance. Investors who piled into the phenomenal, triple-digit earnings growth story of GLNG in early 2012 were soon disappointed about the prospects for the continued pace of that growth. Since the stock has recently become a Zacks #5 Rank (Strong Sell) again, it's a good time to look at the business and EPS trends.
Floating the Nat Gas Dream
Golar was originally founded in 1946 as Gotaas-Larsen Shipping Corporation. Gotaas-Larsen entered the LNG shipping business in 1970 when it ordered the LNG Carrier Hilli, which is still part of their fleet today.
In April, 2007, Golar was awarded its first firm FSRU commitments via the award of two long term leases by Petrobras to employ Golar Winter and Golar Spirit as FSRUs. Today, Golar has four FSRU projects and is actively pursuing further growth as a midstream LNG company.
Estimates Still Declining, While Price Recovers
Golar may not be a candidate for shorting just because it fell to a #5 Rank this week. But anybody holding for further gains should take note of the earnings and price trends. The Price & Consensus chart below seems to indicate that estimates could bottom soon, but it is still too soon to tell.
Meanwhile, GLNG shares have rallied impressively in January, and will be facing stiff resistance from previous tops between $42 and $43. The one-year chart below shows that the odds probably favor continuation of the sideways trend until the earnings story is figured out.
What if the US Begins Exporting Nat Gas to China?
This is the big dream of those investing in nat gas exports. Blackstone Group LP has invested billions in partnership with Cheniere Energy (LNG) to construct a large LNG export facility in Louisiana at Sabine Pass.
When that day gets closer, we may see the earnings picture for GLNG reassert itself. Until then, stay away from those waters.
Kevin Cook is a Senior Stock Strategist with Zacks.com