The Lizard King has been stalking the US Liquid Natural Gas export angle for some time. See utilities with upside 1 & 2. Today, I took a nibble out of a transport company that is primarily engaged in shipping gases over the ocean. That company is Teekay LNG Partners LP. (TGP). I’m pretty close to full up so I am only going with 100 shares.
Teekay has 48 LNG carriers and is building more. They should have a major slice of market share once the US LNG export trains become operational (Sabine Pass will begin exporting before year end.) The company also operates a fleet of industrial gas tankers shipping vast volumes of propane, butane, and ethane, as well as other gases. The United States has a surplus of said gases and Europe and Asia have a shortage. Clearly, a lot of those gases will be shipped. TGP also has 8 conventional crude tankers but the export of crude from the US is still prohibited. That might change but the time frame is difficult to judge. On the whole, this company has a strong tailwind behind it.
To boost returns, I have written a strangle. This strategy plays both ends against the middle by writing both a put and call at the same expiry. Only one can be exercise and it is likely neither will. I got into the strangle with a net debit of 34.65. That is composed of 35.72 for the shares, a credit of .38 for the call and a credit of .69 for the put. Both are on the June expiry meaning the trade will be open for 31 days. That puts 7,072 of capital at risk for 107 dollars in return. Over 31 days, the annualized return is thus 17.81%. I also expect to collect annual dividends of at least 2.80 for another 7.5% in bonus yield. Capital appreciation should come with improving economics as US based exports start as well. I expect this to be a big winner and a long term position.
Risk: There is something to watch out for. Companies in the ocean shipping business are notorious for diluting shareholders with secondary offerings to finance construction of new vessels. TGP is no different. That has been dilution in the past. There is a positive sign in that 130 million dollars equivalent in Norwegian bonds were recently raised. This debt financing is vastly preferred to further dilution.
Devour your prey raptors!