Shares of New Fortress Energy (NFE -2.47%) jumped on Wednesday, finishing the day up 8% as of 3:18 p.m. ET, and they had gained as much as 42.5% earlier in the day. The jump came as the S&P 500 and Nasdaq Composite fell by 0.1% and 0.4%.
The energy company's stock is rallying for its second day after Puerto Rico's governor announced the completion of negotiations for a massive natural gas supply contract.
New Fortress secures Puerto Rico lifeline
New Fortress Energy has secured a $4 billion agreement to supply liquefied natural gas to Puerto Rico over the next seven years, with the option for a three-year extension.
While the news is positive, this agreement follows the rejection of a much larger proposal from New Fortress earlier this year. A 15-year, $20 billion deal was denied by Puerto Rico's Financial Oversight and Management Board in July. The same board must now approve the new deal.
Image source: Getty Images.
New Fortress still has issues
New Fortress has been dealing with increasing financial pressures, struggling to turn a profit as it faces mounting debt. It had been in months of contentious negotiations with Puerto Rico and was recently forced to sell billions in revenue-producing assets elsewhere in an attempt to get a handle on its balance sheet issues. This buys New Fortress time, but it hurts long-term cash flow.
There are too many issues facing New Fortress Energy, and I think it will continue to struggle. This isn't a stock that I would recommend, even at today's price.
