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Why Golar LNG Stock Is Soaring Today

By Matthew DiLallo – May 27, 2020 at 3:10PM

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The LNG solutions company is working with a key customer to keep one of its vessels working for many more years.

What happened

Shares of Golar LNG (GLNG -0.28%) rallied roughly 10% by 3:30 p.m. EDT on Wednesday. Fueling the stock was a report that it's in discussions with a customer to extend a contract on one of its vessels.  

So what

Cameroon's National Hydrocarbons Corp. has started discussions with various partners to increase its production of liquified natural gas (LNG). As part of that negotiating process, it's working with Golar LNG to keep its Hilli Episeyo vessel stationed in the country beyond its current contract, which runs through 2026. That would enable the country to exploit the Rio Del Rey natural gas deposit.

An LNG tanker leaving a terminal.

Image source: Getty Images.

Cameroon started exporting LNG from the Sanga field in early 2018, using Golar LNG's Hilli Episeyo, which is the world's first converted floating LNG (FLNG) vessel. Golar converted a former LNG carrier into a liquefaction and storage facility to enable energy companies to exploit smaller natural gas fields that weren't big enough to justify a major onshore or offshore LNG terminal. 

Now what

The potential extension of Golar LNG's contract would increase the long-term visibility of its revenue. It would also further demonstrate the viability of its FLNG technology, which could increase demand for these vessels in the future. However, with several years remaining on its existing contract, this potential extension won't move the needle for many years. 

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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