Sunday, July 3, 2011

Awilco LNG listing with promising business plan

The AWILCO LNG start-up is attracting investor interest from blue-chip investors. The Awilco Group of the Wilhelmsen family in Norway is well known for Wilhemsen Marine Services, a major ship management company as well as their investment in Royal Caribbean Cruises. The business plan to enter the LNG market was conceived last fall. They made a debut in March and April this year purchasing three elderly LNG units from NYK LNG. In June, they closed an order at Daewoo for two new LNG units.

AWILCO has strong technical expertise in offshore, heavy lift transport and drilling. In each of these areas, they have created value for investors with imaginative business plans sometime involving major conversions of sophisticated marine assets like heavy lift vessels for drilling rig transport and upgrading/ reactivation of drilling rigs. They have been innovative in arranging the finance and successful in securing profitable employment. AWILCO Offshore was sold off to China Oilfield Services in 2008 for US$ 2,5 bn.

AWILCO LNG's purchase of the NYK LNG units provcd propitious timing, just prior the Japan Tsunami disaster. In March, the Wilgas (ex Dewa Maru) built 1984/ Wilpower (Bishu Maru) built 1983 were purchased for US$ 25/ 23 mio respectively. In April, the Wilenergy (Banshu Maru) built 1983 was purchased for US$ 23 mio. The Daewoo newbuilding deal was reported in early June, where they closed firm on two vessels with delivery August and November 2013 plus two options for 2014.

AWILCO plans to trade the older units on short term time charter and then replace them with the new building deliveries. They have already fixed the Wilpower for six months with three addition 6-month options. Ultimately, they plan to convert these older units into FRSU's or possibly G2W units. The Norwegians have considerable expertise for a FRSU conversion. These Moss tankers are well suited for conversions due to their self-supporting aluminum tanks, which do not deteriorate and do not structurally weaken the hull.

A major capital markets group is forecasting for the LNG sector a startling 17.7% advance in fleet utilization this year. This sector has been a very thin 'boom and bust' market, where last year due oversupply, earnings were so marginal that a number of units went into layup. Nakilat, a Qatar LNG export project, ordered a series of mammoth Q-max (266.000 m3) vessels for US export, which has collapsed due shale gas technology. The units remain laid up white elephants for the time being.

Natural gas should see increased market share in the global energy market due to its attractive price compared with oil, as well as more environmental friendly features. Combined with a low orderbook, this will likely lead to strong growth for LNG carriers. Already spot rates have surged to levels over US$ 100.000 per day from the marginal 2010 levels of US$ 20.000.

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