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A Look At TGP’s Contracts to Gauge its Future Outlook

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Dec. 4 2020, Updated 10:52 a.m. ET

TGP’s fleet

Teekay LNG Partners (TGP) has a total fleet of 87 vessels, out of which 27 vessels are newbuilds under construction. The active fleet of 60 vessels consists of 29 LNG carriers, 21 LPG carriers, and eight conventional tankers.

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Backlog

Through its contract portfolio of forward fee-based revenues, Teekay LNG Partners has a backlog of $12.1 billion. Out of this, $5.2 billion is from active vessels and $6.9 billion is from its growth projects. These new projects will commence between now and the first quarter of 2020.

In 4Q15, Teekay LNG Partners secured a new contract that increased its backlog by $1.1 billion over the last quarter. The company expects its backlog to continue to increase as it seeks to secure new contracts for its two uncharted newbuilds.

Backlog comparison with peers

As all LNG carrier companies vary in size, it is not a good idea to compare their backlogs. Instead, we compare them as a ratio of backlog to their revenue. Teekay LNG Partners’ ratio of its backlog to TTM (trailing 12-month) revenue stands at 1306% (based on the backlog of its current vessel fleet). Dynagas LNG Partners (DLNG) has a backlog-to-TTM-revenue-ratio of 419%, and Gaslog (GLOG) has a ratio of 935%.

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Contract characteristics

Teekay LNG Partners (TGP) does not have any significant contract rollovers until 2018, with the exception of two small contracts that will roll off in 2016. The average contract length for its LNG contracts is 13 years. Hoegh LNG Partners (HMLP) has an average contract length of 14 years. Dynagas Partners (DLNG) has an average contract length of 3.8 years.

Contract updates

  • Teekay LNG Partners has received notice from the Total-led Yemen LNG project that due to political unrest in the country, the plant will be temporarily shut down. There will be a temporary deferral of charter payments that would have been received by TGP. The company expects this deferral to negatively impact its cash flow from vessel operations by $18 million in 2016. It is expected that YLNG will pay the deferred amount in full on the resumption of the LNG plant in Yemen.
  • TGP secured a new 20-year contract to develop an LNG regasification project in Bahrain. This has increased the backlog by $1.1 billion.
  • One contract on a newbuild is expected to commence in 1Q16 for which sea trials are completed in the fourth quarter. For another newbuild, sea trials are going on and the contract is expected to commence in 3Q16.

Investors who are interested in broad exposure to industrials can invest in the SPDR Dow Jones Industrial Average ETF (DIA).

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