Golar LNG Jumps After Securing $8 Billion Argentine FLNG Charter
The 20-year deal with Southern Energy more than doubles Golar's contracted earnings backlog, securing long-term revenue visibility and drawing analyst upgrades.
Golar LNG (NASDAQ: GLNG) saw its shares gain ground in morning trading after the company announced it had satisfied all conditions for a landmark 20-year charter for its floating liquefied natural gas (FLNG) unit in Argentina, securing an $8 billion fixed EBITDA backlog.
The deal, signed with Argentine energy company Southern Energy S.A. (SESA), locks in a two-decade deployment for Golar’s 3.5 million tonnes per annum (mtpa) MK II FLNG unit. This single contract is set to provide approximately $400 million in annual revenue, fundamentally reshaping the company's financial outlook. The new backlog is more than double Golar’s current market capitalization of roughly $3.9 billion, a fact that has captured the attention of investors and analysts.
This agreement marks a significant de-risking event for Golar, providing exceptional long-term earnings visibility in a historically volatile energy market. The addition of the Argentine charter boosts the company’s total contracted EBITDA backlog to approximately $17 billion, according to market reports, cementing a stable, infrastructure-like revenue stream for the next two decades.
“Finalizing this 20-year contract provides a solid foundation for our future earnings and growth,” the company stated in its announcement. The FLNG unit is scheduled for delivery to Argentina in 2028, where it will be crucial for developing the country's offshore gas reserves.
Wall Street has responded positively to the strategic implications of the deal. The consensus among analysts covering Golar LNG is a firm “Buy,” with an average price target of over $51 per share, suggesting significant upside from its current trading level. Underscoring this sentiment, Citigroup recently upgraded the stock to a “strong-buy” rating, signaling renewed confidence in the company's long-term strategy and execution.
Beyond the fixed revenue, the charter includes a potentially lucrative upside. The contract structure contains a commodity-linked tariff that gives Golar a 25% share of incremental revenue whenever LNG prices rise above $8 per MMBtu. Analysts at Seeking Alpha noted this could add an estimated $100 million in annual EBITDA for every dollar the LNG price exceeds that threshold, offering shareholders direct exposure to a strong gas market.
Floating LNG technology, Golar's specialty, is becoming increasingly vital for unlocking offshore natural gas resources that are otherwise stranded or uneconomical to develop via traditional onshore facilities. By liquefying the gas at the source, FLNG units enable its transport to global markets, providing a flexible and cost-effective infrastructure solution.
With its earnings base now secured well into the next decade, Golar LNG is positioned to capitalize on the growing global demand for natural gas as a key transition fuel. The successful finalization of the Argentine charter not only validates its technology and business model but also provides the financial stability to pursue future growth projects and enhance shareholder returns.