Yet Another Value Podcast - Jacob Rubin sees value in $GLNG

Episode Date: December 21, 2021

In Part 2 of this two part podcast, Jacob Rubin discusses his thesis for GLNG, including why the company trades at a huge discount to its SOTP and why an upcoming spin can delever the core business and serve as a catalyst for the company.Part 1 of the podcast on FTAI: https://yetanothervaluepodcast.substack.com/p/podcast-87-jacob-rubin-is-flyingMy notes on GLNG: https://twitter.com/AndrewRangeley/status/1471134280906682371?s=20Jacob's research on GLNG: http://philosophycap.com/research.htmlChapters0:00 Intro1:35 GLNG overview5:55 GLNG's different pieces10:30 Discussing GLNG debt and convert maturity13:10 Focusing on the main value driver, FLNG22:00 GLNG's growth asset, Gimi24:45 GLNG SOTP math27:05 Why is the market sleeping on the current environment for GLNG?29:45 Capital allocation and GLNG's lack of share buyback34:55 Historical issues with shipping in general37:30 Closing thoughts

All right. Hello, welcome back to the yet another value podcast. I'm your host, Andrew Walker. With me today, I'm excited to have Jacob Rubin. This is actually part two of our podcast with Jacob Rubin for people who are interested in part one where we talked about FTAI. I've got a weird shout on my face for people on the YouTube. We talked about FTAI and part one. You can go listen to that. This is part two, part two, part one had the intro, the background's Jacob and everything. But Jacob, part two. I'm ready to go. GLNG is part two. So I'll just toss it over to you. What's going on with GLNG? Yeah, and by the way, you get a medal for, we didn't even take a break for everybody listening. We just, he said, you know, should we take a break? Yeah, let's go. So this is why we hit the gym. I know you're a runner. This is why we do it. We have stamina for an hour and a half long podcast.

This is right. So now we're like 10 seconds later and we're forging ahead. I also meant to say I noticed that I should have said on the first pod, but reason to tune into part, part two. No, no mustache. What happened? No, Movember's over. We're December.

It's good to know you're watching the YouTube video. Oh, God. It looks great. It looked great. I think I speak for everybody and saying it was a tremendous mustache. My wife, you are not saying to my wife, which is a major reason the mustache has gone away. Yeah, I can imagine. I can imagine.

My wife says she likes me with a beard better. And I go back and forth based on probably laziness. And I kind of am offended by that because it's like, wait, so if I'm clean shaving, I'm uglier. So you need to cover it up. Anyway, all right, go lar. So let's get into it. Like F-Tide, the reason I wanted to put them together, if I wasn't so, long-winded. And if we didn't have so many good questions to try and rebut or address, I would

have tried to do F-Ti and half the time. The reason I put them together is they're both simplifying some of the parts stories. And I don't know about you, but for me, some of the parts is sort of a graveyard for value. It's been awful because you get stuck. It's like, it's hard enough to get anyone to care about some industrial company. Layer on complexity and different parts that maybe don't fit, it's like, forget about it. So for us, yeah. The word simplifying is the critical component. We want a some of the parts that is going to stop being a sum of the parts and become a pure play where you can pick the right multiple, pick the right comps, make some projections,

boom. And you have a huge audience. You got long onlys, you got hedge funds, you got retail, anybody can get it and get excited about it or not. So these two fit together because this also is a sum of the parts story. We think simplifying. And it's really funny because I told you I was, you know, you announced yesterday that this was one of the names. And just this morning, the first big leg of the simplification was announced.

Yep, very timely. It literally happened 30 minutes before starting recording. So we'll talk about it. I fortunately was able to read the release and we've done so much work. I think we know exactly what it says. Maybe the structure here would be sort of why it's the opportunity, why it exists, what it is. And then we'll go through there three parts to it. And that's it. And let's be tight on this one. Golar was 70 bucks in 2014. Now it's 11. What that means, first of all, is there are people who have been burned, there are

skeletons, and anyone who's been around or in it for a while has been, you know, pretty jaded. And I don't think management would shy away from that reality. And people, you know, met Tor Troim, the magnate who's chairman and behind it at various events over the years. And he's compelling. He's personal. He's, frankly, I think he's fantastic.

And then the stock doesn't work. And so now they would associate some bad experience with that person or this team or this asset or this sector. So we've got baggage. That's one reason. Two, this is related to natural gas. And you might have noticed that with the proliferation of unconventional drilling, horizontal, and fracking in the United States, gas became a great, plentiful byproduct. Gas went to two bucks. Terrible.

Gas has sucked for a long time. And this is LNG. It's in the title. So it's a commodity that's been on its ass and everybody knows it, not to mention ESG and all of that, which is very real. And then three, the third reason is the other half of the business is shipping. And shipping has been a complete, you know, horrible place. People are orphaned. You know, I could tell you personally, I was an investment banker.

And I remember in 2006, there was a whole shipping team. And they were just cranking on equity deals. And there's this one and that one, MLP these. and it was so active, and it was the heyday. It was a glorious time to be in shipping, and what happened? Very predictable in a supply demand market. They built up supply, flooded the market, and then, sadly, as happens, you hit a demand shock, GFC, and now it's overbuilt, and now returns suck, and everybody dies, and companies

go away, they go bankrupt. They had debt, too much debt. Then you have bad apples, like dry ships, you know, splitting a thousand times in 99.99% losses. You have foreign jurisdictions, it's Greek domiciled, or it's this one domicile. And what happens is banking teams go away, buy side shops go away, redemptions galore, and now nobody looks at it. And then guess what? Ten years of working through supply, ships get scrapped, demand and global GDP rises,

and eventually it's go time. And that just happened. And sort of the COVID, we've all seen it. And DeNouse went from $375 to $70 and Zim broke an IPO for. from 11 to 50, you know, and then you can go through GSL, you can go through all of them, whether it's container, I mean, bulk, product, not so much, but basically shipping is having a renaissance. Okay. Shipping death, gas death, stock death, this thing, Golar has been ignored. Now, how do we find it? We're value guys. We were looking in gas. We were looking in shipping.

We found some names in each. And then we learned about Golar. And so that's sort of how we it. So now I'll just tell you, so what are you getting for $11? So GolarLNG is a company with 108 million diluted shares trading at 11. And then on that, there's north of a couple billion of debt and a minority interest and then some cash. And so, you know, you add it up, if I want to give specifics, and you come out with an EV consolidated of, like three and a half billion dollars. It's a little more complex than that, which is the opportunity. So let's just get maybe, if it's cool, let's just get right into it.

So I'll start maybe nibble around the edges of this thing because the non-core parts, we can just sort of agree, hive it off, put it over there, and then get to the crux, which is floating LNG, FLNG, that's the crux, the core of this business that we really need to talk about. And it's a great business, and that's why we love it. So the announcement today was shipping. They have 10 ships, and we predicted that they would spin or sell them. And they kind of did a combo of that.

They're spinning it, but with an anchor, putting up 150 million, that's a private shipping company, and it's going to list in Oslo in the first quarter. This was all announced this morning. And our prediction was that ships present a problem. The big guys that like a midstream, long-term contracted, just producing entity, which is what like cheneer the guys that like cheneer which has a nice fat multiple on if you exclude its marketing business its producing business is generally traded at 12 and a half 13 times um in most some of the parts on cheneer so that is a big multiple high quality just steady eddy

type asset and there are investors who love that they don't love ships because everything i just said is not true about ships that's boom and bust levered tons of debt so the opportunity was twofold get ships out of the picture and maybe people will look at FLNG more seriously because we have heard it is a gating item. And second of all, when ships go, there's a billion dollars of debt stapled to ships. This is a massive de-leveraging event. And so what they announced today is eight of the 10 ships are being spun. The average value is $145 million per ship. So you get to almost $1.2 billion of value with $850 million a debt associated with those eight ships. So rough math is $2.80 of equity value per share of Golar. And you de-lever by

$850 relative to the two-odd billion that we have today. Massive de-leveraging and value creation and we are getting closer to pure play. I think, and this is where our, you know, the fact that this, I'm recording this right after the announcement, I got to go figure this out. They announced that they were tri-diesel ships and eight of them. And I was looking at, the announcement, I think they have an FSRU, which is a different type of ship, and then a small steamer that they did not sell. That's my best guess, two ships. That FSRU is called the Tundra. It's worth like 250 million bucks with 150 a debt on it. So you get another dollar a share for Tundra. And it's their best asset. And so yes, it's shipping that stays there, but it's a very

good asset. Yeah, it does look like there's something addressing it in the press release, but I'm with you. The press release was out 15 minutes before we recorded. So we have to figure out the two left. But there's a small steamer and it would make sense that that didn't go with it. And we'll see what they do with it. Could they milk it in a strong market for cash flows? Yeah. Could they just go find a one-off buyer? Probably. And then I want to hear what they want to do with Tundra. Tundra, because it's actually a different type of ship, it might make sense to keep it. And I know they love that asset. All right. Shipping. So we've got that. There's some, there's some, there's some, there's some stock, NFE, which is publicly traded, they own that, which, you know, people can go do their own work on that. You can value that at market price. I know a lot of people think it's under value, but we probably don't need to talk about a ton about that. Let me give you two minutes on NFE. Yeah. Because it's interesting. They went down, when the midstream and upstream went to shit for gas, they went, they did some smart moves and went downstream. Assets that actually ingest gas and benefit from low gas. One of those is sort of power producing in Brazil. They had

a big process at one point they were going to IPO it. They ended up doing a transaction with NFE, publicly traded New Fortress Energy. It's run by West Eden's from Fortress. Okay. So as a result of that, they have 18.6 million shares of NFE. When you first found Golar months ago or whatever, you would have been faced with 18.6 million shares of a $50 NFE, not to be confused with like 23 today. And then you would be hearing Golar talking about the convertible maturity in February of 2022 and how they're going to take that out using NFE proceeds. So two things. One, if you wanted to isolate the SOTP value, you could put on a pair trade and short NFE just to get pure play Golar X NFE. Risky. And I'll just pause right here to remind people,

we said in part one, nothing on this podcast investing vice. Everybody should do their own due diligence. I just want to remember that because we didn't put it in part two yet. Yes. Oh, God. Disclaimers, please. This is all my best effort. I'm talking my book. We can change her mind with new info, all the disclaimers, very much, this is part two. So go see part one. And it's in our decks. And I'm not advocating what I just said. I'm saying that that is what some people could have done if they wanted to do a pair trade. I mean, hedge funds do that. And it wouldn't have been, well, certainly in hindsight, the dumbest thing. And there was this technical where you monitor, you know it's a seller. And people are all the time. If they know you're selling

and they know when the convert comes due, February, so they know a timetable, it makes all the sense in the world. And so the thing gets cut in half. Well, what happens? First of all, I think a lot of that technical stuff ran its course and now you should just own GOLAR. Second, they did a straight bond offering and took out the convert. They're going to take out the convert with those proceeds and told the world, forget it. We're not monetizing NFE at these levels. We see what you're doing. We're going to just do a straight debt deal and take it out. So that trade is over. So if you want to go, you know, do something with NFE, that's a free country. what I will say is we ended up as it drew down doing a lot more work on NFE and we actually

really like it. And we do have a small long position in NFE. And we think it's been overly penalized and it's kind of an opportunity. All of that said, for Golar for this conversation, four bucks to share an NFE value at market. If you want to do a hold co discount, be my guest because honestly the margin of safety on this investment, it doesn't move the needle. Who cares? Take 50 cents off. It doesn't matter to me. Based on how much it's been hammered, to me, that sort of, there's your hold code discount. The thing just got cut in half.

It was $8 a share before and now it's four. So, you know, that's up to you, the listener or the reader or whatever. But I just say four bucks there. And the net value from the two ships remaining and the spin value of shipping is $350. So you got $3.50 and $4. You got $7.50. It's $11 stock. We haven't even gotten to the real business, in my opinion.

So that's $750 a value, and we just de-levered the hell out of it with the spin. FLNG, what is it? So here's the big thing. If we all see that Europe wants to go renewable, right? They want to go wind solar. They're not even sure they want nukes. And EDF is dealing with that in France. But meanwhile, they've had some stumbles.

Cold winters happen. There's a reason base load power exists. Nord2, this pipeline to Russia has geopolitical concerns as they're going to invade Ukraine. Europe is finding out the hard way with $30 spiking gas that it's good to have some non-renewable just produces day in, day out, at least for a transition period of a 10 or 20 years, right? So what FLNG is exploiting globally in which I think it now has come into sharp relief is this idea that you need a transition period. and LNG is a great option. And here's why. It's cleaner than burning diesel.

Yep. Or coal. It's not as good as just wind energy, fine. And it's incredibly economical, particularly when you find stranded gas and you can liquefy it. That's the holy grail here is there are these gas fields off Africa that are freaking huge. So there's one they're working on six trillion TCF. And then their next project is going to be in one where phase one, which is, it's a BP Cosmos sort of a joint venture and BP big.

That is 15 trillion TCFE for phase one. And the field could have as much as 100 TCF. So to give perspective, we ran the conversion math on TCFE to, you know, MBMBLE to barrels of LNG. and we looked at their production rates, it would take hundreds of years to pull this out. These are huge. The cost to pull it out, liquefy it, and transport it is very, very low.

It's basically a dollar per barrel to get it out of the ground and liquefied, and then you can add a couple dollars, two, three bucks, whatever to get it somewhere. So you could be creating for a few dollars per barrel, LNG on a market that right now has spiked to 30 and everyone's worried that it's backwardated and it's almost always backwardated and I would point out the geopolitical issues that I mentioned and there's always a possibility

of a backwardated structure that could shift up you know if Russia becomes a big problem as it kind of feels like it's going. I just saw headlines before we recorded of Russia, Putin, she and what they're talking about. It's not good. That said, this price from 30 could go to 15 and we're still hugely in the money. So, you know, the economic rationale, the ESG rationale, the global energy infrastructure rationale for LNG, I think is very strong. And what these guys do is floating LNG. They take a ship, they convert it so that it can store and liquefy from a field into LNG, and then get it on ships and move it on its way. That's what they do. So here's what's super fascinating, which I had no idea. There are only about five of these things globally, and most of them are subscale or don't

work. Shell on this thing called Prelude has sunk something like, these are news sources. We don't know exactly. North of $10 billion, maybe even $15 billion to build one of these, and it still doesn't quite work. You can look at the Wikipedia page for this and some of the links I posted in the show notes. It's really, it's interesting stuff looking at what's going on here. Yeah. So very hard to build. And here's what's. great. So you'd hear very hard to build and say, oh, that sounds risky. These guys built one. It's off the coast of Cameroon. It has been producing for years. It produces at 100% uptime. It's, it works. Their second project, which is 75% constructed and has already signed a 20-year

deal with BP. It's virtually the same design. It's a little different, but the same design. And it already works, the first one. So in terms of derisking, we feel pretty good. One is producing perfectly, and the other is the same design. So these guys know what they're doing, and nobody else can do it. So that's, you know, that's really exciting. So the way we analyze FLNG is they have three things. Hilly, that's the producing one. Yep.

Gimmy, that's 75% constructed, but 20-year contract with BP. And then growth projects. So we can just go through the three and add up the value. That's how we do it. We value Hilly, we value Gimmie, we value the, well, actually, We give zero value to growth, but it's sort of our back pocket of that should be valuable. And it's sort of just the overall picture of Golar. Hilly is going to grow by leaps and bounds for two reasons.

And it's just effing awesome because it's like a multiplicative effect. Yep. It's 50% utilized right now. And they technically only own 45% economics on the 50. So they have these four trains. They run all four trains all the time. but only one and two technically are working or producing. And that is tied to the customer, which is the country and then also Parenko, just how much

they want to produce. And so they're producing a certain amount and it's utilizing half the asset. And these guys, when we first found this thing, they wanted Parenko to do more and utilize the asset. Obviously, just more utilization of an unutilized asset, great leverage there, operating leverage, but also they have 87% interest on incremental production. So they have twice the interest almost on incrementals. So if they turn on more, it's not just one for one. It's they turn on more and they get twice as much of it. So they have been pushing these guys. We want to do more. And eventually,

and I wasn't privy to the conversations, you could imagine that this deal that runs to 2026, they would say something like, hey, good thing for us, it's a boat. We'll move it. And if you don't do more between now in 26, we're going to go contract with someone else. And it's going to be gone the day our contracts over. I don't know that they did that, but you could imagine they did that. And here's the good news. A few months ago, there was an announcement. Guess what?

Perenko is taking up from $1.2 million out of 24, 50% utilization. They are taking it up on Jan 1 to $1.4, an extra $200,000 per year. They have an option that expires June 30 to do another $200. And we think they could do even more than that. We think, and they're drilling four production wells right now. These are not spec wells, production wells, to boost it. And so what you could see is 1.2 goes to 1-4 or 1-6 or 1-8. And of course, beyond that, it could go even more.

But that is just Perrenko taking these options and doing some more. And so what we model is we model 400,000 at the 87% incrementals. And then there are two caveats on Hilly. The first half is tied to Brent. Every dollar over 60, they get 2.7 million at EBITDA. It's just upside. They have a baseload, volume-based, that's crystal clear, but they get upside. So if it's $70, they'll make 27 more of EBITDA.

Then on incrementals for Trans3 and 4, they have a TTF that's European gnat gas based upside at the current curve, including backwardation, where they could hedge it in the market, if they wanted to, and for all I know they're doing it, I don't know if they are, they could make 70 million bucks of EBITDA just on that upside, not on the base, you know. So you add it all up, and what we see is 150 to 200 of EBITDA on what was less than 100 to them next year. So EBITDA can just about double on Hilly based on production ramps and commodity upside. So that's Hilly.

What do you want to value it at? I mean, this is a producing contracted with upside asset that's very unique on a huge field that goes forever. To me, that's like look at Schneer, exclude Scheneer's marketing business. It feels like 11, 12 times business. No, I think there's only like five FL&Gs in the world. And some of them, as you mentioned, there are some onshore. There are some onshore. Yes.

Have any of them transacted? Have we seen any multiples or kind of comps? I don't have good transaction comps. Okay. I'm sure you want to talk about gimmee real quick. And then I want to, we're running up on the very end of our time here. And then I want to ask a few questions. You got a day job.

Yeah, let's do this. Give me. So 75% built BP 20 year deal, similar to Hilly difference. They own 70%, not 45. And then with the escalator, they own 70% of this. They've only sold off 30. It's in a field. As I mentioned, it's absolutely enormous of Mauritania.

in Senegal, so a little bit further north off the continent. So here's what's interesting. BP, this is rougher waters. BP is building breakwaters. They are investing in total $5 billion for phase one. So BP is all in on this gas play. Yep. So when you have a global major investing in these giant, I think it's something like 12 huge breakwater facilities and putting all this infrastructure around it. And Gimmy is the only option. They can either do Gimmy or, which is 20 year contracted it with them. Or if they realize they need even more, maybe they contract for a Mark 3 design, which I'll talk about in a second, which is twice as big, with Golar, because the only ones to do it would be Golar, and then they can get somehow get out of this contract. But

realistically, like, it's gimmee. And so there are options, but it's gimmee. It's absolutely integral to the whole project. So the question is, so what is this thing worth? And what it's worth, in my opinion, is you take the math, it's $215 million of EBITDA for 20 years. They get 70%, it's 151. 151 at EBITDA every single year for a long time is worth like 10 times now. But if 75% goes to 90% goes to 100%, and then it leaves the yard and then it gets on destination and it starts producing, then it moves toward the 12 times multiple. So I think they have this choice. I bet there are buyers for 5% or 10% interest in this asset now. I bet is what I would think. But it's going to have some risk. I mean, they have insurance and all that for Black Swan

events. But as they take it toward completion, they can get a better multiple. That's how they view it. I think that's true. So it's just up to them. What would they do with the cash? Do they want to do that? I think they probably go a while longer. I think they're going to hold it and get to completion. But overall, we get a whole bunch more value here. You would know better than me, but just based on reading a couple of their transcripts and prep for the podcast. I think you're exactly right because they even mentioned, hey, we're at the 75% marker, but the places where most people have overages or have issues, those are 99% behind us. Most of the remaining is, you know, not that it's simple building huge projects like this, but most of the remaining is not where people tend to get tripped up.

This is where you get a little greedy and you keep it for yourself. Yeah. So why don't you quickly do, you mentioned the value for Gimme and Hilly. I don't think we need to talk growth projects because we're running long and I don't think they're critical to the thesis here. But why don't you just quickly layout. What is the whole company worth to you? So, you know, on a consolidated basis, we add up NFE, four bucks. We add up shipping. Now we have $3.50. But they retain a third ownership, which could go up because they're crushing it. So maybe four bucks. So that's $750 or $8 there. And then we added up on a sort of per asset basis. We have a slide. We'll show the EV debt and enterprise value of each asset.

And we come out to per share of, I mean, I can just read it off, but it's like 13 bucks for Hilly, nine bucks for Gimmy. We have a corporate overhead drag. It's not that big. It's sort of 50 cents, 60 cents a share. And then there's corporate net debt away from shipping, away from the Hilly and Gimmy debt, which we staple when we come up with those per share numbers to those assets. And that corporate debt's like $1.75 a share.

So you add it up. It's like $28. bucks. The Matthew just laid out as interesting because you said hilly net of the hilly debt is $13 per share. Corporate drag plus corporate debt is about $2 per share. So that would come out to hilly net of corporate, everything corporate is about 11, which is about today's share price, which would say you get NFE for free, you get gimmee for free, you get shipping for free. Is that how you're looking at them thinking about it? I mean, I look at, I'm creating FLNG for like three bucks. let me ask my first question right i mean i'm not counting corp net debt or whatever so five bucks

a lot of this is visible right i i tweeted this out but in q3 they did a walkthrough of their total company ebada you know out to 2024 as this and they said hey we're projecting 589 million and their q3 earnings they did the same thing and it had gone from 589 to 650 right like none of these things on fire shipping's going nuts that shipping's on fire lnges Today, you know what they used in the press release today? They used the word quadruple when describing FLNG EBITDA over the next two or three years. They use the word quadruple. That's a good word. So everything's on fire, right? Everyone can see these underlines. And I was, and the company lays it all up very clearly. So my first question, why the F, the stock at 11? Yeah, because you see all

of this going up, like EBITDA is going up. Everything's on fire. And the stock is just flat for the past couple months. Not that short-term stock performance means anything, but you know, you tend to see when things go this on fire, the stock responds. So the first question would be, why isn't the stock responding? And we can talk about management after that, but I guess, like, why is the market not waking up to this? Okay. I think it's been a series of explanations. So I mentioned gas and shipping. I think those are real. And then what happened is gas rips, shipping rips. Now everybody's worry that it's all peak. You'll see shipping companies have stalled out, even though they keep crushing it, they become cheaper by the day, they do all the shareholder-friendly stuff, and they're just not going

higher. I think people are taking profits, long-languishing PE firms finally cash out. So there's been sort of an overhang, a digestion period on anything that just ramps the way gas, the way shipping has ramped. It's remained muddy. And if he's gone down, the convert was a big worry. It was coming due. People wondered about it. Now that's tackled. Parenko was an issue. Now that's tackled. So in our minds, there were all these things. Will Parenko take more? Will they deal with the convert? What about NFE? They've ticked a lot of boxes. I think spinning shipping is another good one. And I'm hoping it starts making the difference. And then the other thing is this is one of those sort of value conundrums of at some point, will anyone care? And when you have jaded, shareholders and a stock that's gone down so much, it's a non-trivial question. So our bet is that the math has gotten too crazy, that here, gimmee is going to turn on. Shipping is happening, Q1. I think they could announce a mark three, and that's a big announcement. It's twice as big

as hilly or jimmy, we'll see. And so our bet here is that we have a margin of safety. We believe in the long-term demand creation that's happened over the last 18 months. We're created. trading FLNG so cheap, we don't, we think it's approached that sort of critical moment where it has to either private or strategic or public markets, it's eventually going to resolve itself and we're happy owning it here. That's my best answer. The stock is languishing. I'm with you. Everything seems to be on fire. The company is not unaware of this, right? They put out press releases, they talk about it, all this sort of stuff. So I was a little interested on the Q3 call. Someone laid out a lot of this math and said, hey, you've got, I know you don't want to sell NFE and Avenera's the

other one. You don't want to sell them, but those are liquid. Your company trades for a huge discount. You've got most of the financing taking care of this at this point. Why don't you guys think about buying back stocks at this stock at this huge discount? And the CEO basically said, we have no plans to buy back stock right now. So I look at that and say, what does he not get? Like, does he not believe the math? Well, they reduced it. Okay, so they reduced a little bit of the share count. It was 109 something. That's 108 something. I believe one of the refinancing transactions might have inhibited their ability to do that. I need to double check that. That's just off the back of my mind, but I believe that happened. So let's double check that

and someone should ask the company on the next call, if I'm wrong, like, are you inhibited in any way from buying back stock at all? I think they might be, and it might be a temporary thing, or I might be wrong. But I think they're- Based on their response, I mean, you would know better And just based on the response, it didn't seem like they were inhibited because they said the recent, I think it's a recent development. But look, big picture, these guys need to take out the convert. They have a lot of debt. And they are building gimmie. So, you know, they have uses of capital right now beyond just the stock.

And so I hear you. And over time, if this, if they have a strategy, which is, the shipping divestiture or separation, a gimmie and telling the market what's going on and then putting up massive numbers next year. That's their plan to unlock value. If it doesn't work, dot, dot, dot, they'll do some other stuff. Tor owns stock and it's his baby. We actually met with him recently. He was traveling through the U.S. He is all in on this thing. These guys are very aligned. Carl, the CEOs, I believe was a banker before. He's incredibly savvy. And what's interesting is, if you step back, when you deal with values, cyclicals, industrial, sometimes

management teams, you know, they range in how sharp they are. I am not, you can talk about promotional this, promotional that. The team here is razor sharp. Every number they have to a decimal point. And they are value maximizers and they're looking to make the stock go up, period. I definitely hear that, but I hear all this. Like earlier you mentioned, give me, they're going to create huge value. They're at the 75%. You thought they could sell a piece of it if they wanted to now, but they're waiting to next year because they think it's going to be worth a lot more next year. And I get that. That makes sense. But when you look at the stock and we walk through the math that you believe in the math suggests, you're buying hilly, the steer price right now reflects hilly

and you get everything else for free, right? Like, why not sell 5% of giving me right now and go buy it for free on the open market or something? You know, I just, I look at it there. Well, what I can tell you is I have this conversation with the company. And it's a bunch of us saying this math is obvious and the economics are contracted. On the other side, when I talk to people who aren't involved and don't want to get involved, I hear I don't want any NFE. That's something different, whatever. And so I quibble with that.

I'm like, take $4 and cut it in half again. What do I care? It doesn't change my math. And they do, I don't want NFE. Fine. So they're over here. Forget them. That's a subset.

Another bunch is shipping. Now we can talk to that. Those incremental buyers can wake up once shipping's done. And that's another thing I've heard. And then the other one I've heard is, well, gas is backwardated. LNG is in the freaking title of the ticker. And it's like, well, first of all, it's backwardated most of the time. It's still really high.

And even if it goes where the curve says it's going to go, they're going to make a ton of money and it's crazy cheap. And there are reasons for hedging and other things in the real world why the front end and the long end are different. And it's predominantly midstream, not upstream. They have upstream optionality. So maybe the linked stuff next year comes back. But oh, by the way, the path is pretty smooth because next year they crush it on commodity. And in late 2023 and into 2024, Gimmie turns on and it doubles EBITDA. And then probably after that, they'll do a mark three.

So even if commodities go like this, you're going to have Gimmie turn on and go like this. And so I sort of push back. But that's what I hear. commodity, uh, NFE, eh, and shipping, eh, and then the company. You and I haven't talked about this one too much, but it's funny you said all that because those are all of my, uh, so. And I get it. And I get it. But my point is look at the math and look at the long term demand for FLNG as a product and service in the market. It has a reason to exist. I see signs of it all around, and I cut off a billion of debt for shipping 850 today and another 150 if they do more.

I simplify and get that out of the picture. We make give me progress, and we see the numbers inflect from here with Perenko starting January 1st. And I look at the creation, and I just say, I will own this for three, four, five years, whatever it takes. And I don't care about all those bullshit reasons to not own it. And it's a free country. If those hang you up, don't buy it.

You know, I'm not, I really hear I'm being an investor with a fun idea. This is not, I don't mean to promote it. If those things hang you up, God bless. Last question for me. So you mentioned shipping. And anyone who's invested for a while and has looked at shipping for a second knows, like, the shipping teams are very, they're very promotional. And, you know, you'll go, I think of STNG.

I don't know if you ever looked at this. But this is the company that once a month they put out a press release that says, we're so bullish that our CEO just bought short term call options. on us. And the stock always gets hammered. So I do worry, like, the math seems to work here and the company won't buy back stock. Lots of people think the CEO is quite promotional. And then you've just got the shipping overhang. Chairman, that Carl's not promotion. Chairman, I'm sorry. You believe that the alignment is here, the chairman, this is baby, he's going to make this work. So why do you think like the traditional

shipping, promotional, all that sort of stuff, it doesn't apply here? For anyone listening, if you like investing, you should go read the shipping man. Oh, I loved the shipping man. Actually, I loved it so much. I did a write up on a old blog where I wrote anonymous and the shipping man sequel. My blurb was actually quoted on the shipping man sequel. They liked my blurb so much. I thought it was one of the best books. I didn't know there's a sequel. Oh, I'm so excited. I'll go read it. Although I got to get through your cradle series first. I'm like book four or five, but then I'll read the sequel. Bottom line, I think tour is great. I've heard I've talked to a dozen shipping teams. I get what you're saying. But I, I don't even want to say one bad thing about Toro, frankly, because I genuinely like them. But I understand the point. People have been burned, promises have been made that have not been kept. It is a brutal industry. When it's good, rates double.

When it's bad, they get cut by 90%. Shipping is going away. What do you have left? Hilly contracted producing. Give me 20-year deal. When it turns on, it's BP 20-year-s midstream asset. NFE is a public stock. What is there to promote once shipping is off to the side?

So fine, whatever. Like, I just, I'm going back to the basics of the business and the fundamental math, and I'm fine with it. And I'm impressed with the team. And I don't have the baggage. And if I've talked to people who do and they will say different things, I get that. Carl hasn't been in the seat for all that long. And I think he gets it and he's really savvy. And then I like the other guys we've talked to.

so yeah that's that's my story it's crazy compelling i need to do so much more work here but you lay out such a crazy compelling story i mean really the only thing look i'm not an expert and it's tough as an expert to dive into these so i've got a lot more work to do but the the thing that just really strikes me they know the math you know the math i know the math i know the math it's just strange to me that they won't buy that shares yeah i mean i told you what i know about it yeah yeah yeah i'm just Well, here's the other thing. I would point out one of the downsides of having a lot of debt is it can hamstring you. Yeah. And they have a lot of debt. Now, shipping is de-leverging, and a bunch of debt goes away. And when they ramp up, EBITDA, they will ramp up free cash flow.

And so free cash flow gives you options. And so I think that's just sort of this ancillary benefit of maybe if the stock doesn't move and they finish shipping and they unlock, they change their leverage metrics and unlock some cash, maybe they can do something. But I know, I talked to them about, yeah, I would love a buyback. And so I think either the stock goes up or one day they do a buyback if I had a guess. It's one or the other. Hopefully it's both, right? Buyback and stock goes up. But look, I've got to wrap it up here because I have a hard stop. Jacob, two ideas. And I mean, both are very compelling, but GL and GS, G.L. and G.S. We went through it. Woo. Really appreciate it's simpler. Yeah. It's just like, that's what it is.

really appreciate you coming on this is our last episode of the year so i just want to say to all the listeners thank you guys so much this has been a fantastic time i'm looking forward to doing a ton more of these in the new year hopefully having jacob back on i mean we did one episode one idea the first time two ideas this time we'll we'll do a four-partner next time but uh jacob let's rude look i i people should understand my motivation in part i this is redemption man we got we got to we got to level the score i got to improve my my andrew walker uh batting average so fingers crossed some of this stuff uh i don't look as stupid as i did last time no i look i think these were all very well but jacob thank you for uh coming on again listeners thank you guys and

we'll see you guys in the new year