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Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

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LNG Market Recovery Makes GasLog Attractive

LNG

The LNG market was one of the hottest sectors in the energy space a decade ago. The surplus of U.S. gas and its high price overseas led many to talk about a robust market for liquefying and exporting that gas. The Fukushima disaster in Japan only added fuel to a growing demand for LNG.

Thanks to the boom in LNG pricing, LNG companies went on a building spree in plant construction, and the resulting vast increase in supply led prices to collapse. The scenario playing out over the last few years has been a textbook case of how commodities markets often work, and a preview of both the oil industry as a whole and the deep water drilling market more specifically.

Building giant LNG plants to refrigerate gas, turning it to liquid is massively expensive, and too many plants opened up precisely as prices for LNG plummeted. Against this backdrop, the industry has become brutal. Investment has ground to a halt and just one significant project is still moving ahead; BP’s expansion of a plant in Indonesia.

When everyone else hates a market, it’s often time for smart investors to start looking through the rubble and such is the case here. One good option for investors is GasLog Partners LP. Gaslog is a dull business in a bloody and beaten industry – but it still has some valuable assets and it is well positioned for an industry upturn.

GasLog is a shipper operating a fleet that ferries cargoes of liquefied natural gas to customers around the world.…

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