September was nothing short of a wild roller coaster for investors in New Fortress Energy (NFE -6.38%). The stock nosedived over 45% in the second week of September, only to stage a stunning comeback and soar over 40% in a single day on Sept. 17 after the company negotiated a multibillion-dollar contract.
While shares of New Fortress Energy still closed the month of September down 10.2%, investors are now wondering if the contract can spark one of the biggest energy turnarounds in recent times.
Image source: Getty Images.
The good news, and the bad
New Fortress Energy is a liquified natural gas (LNG) company. It has faced mounting challenges over the past year or so, with management even issuing a going-concern warning in late 2024. More recently, in July, New Fortress Energy suffered a major setback when the Puerto Rican government rejected its proposed $20 billion, 15-year LNG supply contract.
However, on Sept. 16, the Puerto Rican government agreed to a $4 billion, seven-year contract with an option to add three more years.
Though smaller than the rejected deal, this contract is still a major breakthrough for New Fortress Energy given its dire financial situation. The company believes the deal will provide financial stability while locking in "sustainable long-term margins," and that explains why the stock rebounded so dramatically after plunging just days before on a dismal earnings report.
For its second quarter, New Fortress Energy posted a 30% drop in revenue and a net loss of $557 million, putting the company at risk of non-compliance with debt covenants.
That tells me it's too early to bet on New Fortress Energy. The Puerto Rico contract is still awaiting approval from the Financial Oversight and Management Board. Meanwhile, New Fortress has had to sell major assets in recent months -- like its Jamaican business -- to raise funds to repay debt. With the risk of lenders accelerating repayments now looming over New Fortress Energy's head, the stock is best watched from the sidelines.
