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Golar LNG Rides On Strong FLNG Hilli Episeyo Operations

Zacks Equity Research
·2 min read

We recently issued an updated report on Golar LNG Limited GLNG.

In May, Golar LNG delivered an increase in first-quarter 2020 revenues. The upside can be partly attributed to an impressive performance at FLNG and strong seasonal results in shipping. Notably, FLNG Hilli Episeyo maintained its 100% commercial uptime in the March quarter. In the event of FLNG's strong performance continuing in the upcoming quarters, results will be aided significantly. Successful operation of the FLNG Hilli Episeyo is another upside and will likely continue boosting results.

Additionally, the partnership with BR Distribuidora and utilization of spare capacity on FSRU Golar Nanook, in response to low LNG prices is expected to help the company generate substantial earnings in the short-to-medium term.

Besides, commencement of operations from the FLNG Unit, Gimi (production commencing from fourth-quarter 2022) is expected to generate annual EBITDA (earnings before interest, tax, depreciation and amortization) of around $215 million or more.

Like many other transportation companies, Golar LNG is hit by uncertainties related to the COVID-19 pandemic. The outbreak has significantly hampered prospects by disrupting supply chain.

Also, Golar LNG has a debt-laden balance sheet. The company exited the first quarter with cash and cash equivalents of $227 million, far below the short-term debt of $1233 million. This indicates that  the company doesn’t have enough cash to meet its short-term debt burden.

Zacks Rank and Other Stocks to Consider

Golar LNG currently carries a Zacks Rank #2 (Buy).

Investors can also consider some other top-ranked stocks from the broader Zacks Transportation sector like Air Lease Corporation AL, Ryanair Holdings plc RYAAY and Teekay Tankers Ltd. TNK, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings (three to five years) growth rate for Air Lease, Ryanair Holdings and Teekay Tankers is estimated at 3.1%, 20.5% and 3%, respectively.

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