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Teekay LNG authorises $100m in stock buybacks

The board of Teekay LNG Partners has announced a $100m stock repurchase authorisation, citing low share prices and strong LNG carrier market fundamentals. The company has increased distributions and will amend its tax structure to seek wider investment amid an upturn in the market that has brought increased cash flow

A well-timed newbuild schedule is allowing Teekay to make the most of a market upturn

TEEKAY LNG Partners has announced the authorisation of $100m in stock repurchases as the company sees increased cash flows amid improving LNG carrier market fundamentals.

The timing and number of repurchases will be dependent on market conditions, according to a company press release, and will be made either privately or in the open market.

Teekay LNG’s stock price, which rose more than 7% following the news, is down more than 30% this year. That valuation makes the repurchase the best use of Teekay’s increased cash flows, said Mark Kremin, president and chief executive of Teekay Gas Group.

“We believe that Teekay LNG’s common units represent compelling value and repurchasing them is currently the best investment we can make as the unit price does not fully reflect the underlying value of our business, our large and diversified contract portfolio totalling $10.6bn of forward revenues, and the strong LNG carrier market fundamentals, which is resulting in higher cash flows for the partnership,” he said.

Teekay has benefitted from a well-timed newbuild schedule that saw the delivery of three LNG carriers in the third quarter and another seven through 2019 as the spot market reaches multi-year highs.

In a statement last month, Teekay president and chief executive Kenneth Hvid said a more balanced capital allocation strategy, focused on deleveraging its balance sheet and returning capital to investors, was prudent.

A shareholder vote also approved a proposal to see the company treated as a corporation, rather than a partnership, for US federal income tax purposes effective January 1, a move intended to open the company to a wider investment base.

“We continue to believe that this will make Teekay LNG a more attractive investment, particularly for larger institutional investors,” said Mr Kremin.

A corporation, unlike a partnership, is legally distinct from its owners. Corporations’ shareholders are not personally liable for a failing corporation’s debts and unlike the owners of a partnership, do not pay taxes on the profits a corporation earns, but pay taxes on dividends and capital gains.

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