Shares in Golar LNG saw their largest one-day drop as investors reacted negatively to news the company was dissolving its partnership with oil services giant Schlumberger due to financing delays for one floating LNG project.
But several equity analysts came out in defense of the gas ship owner saying Golar LNG has far better prospects in other projects.
Golar LNG saw its equity value fall by one quarter yesterday, wiping out over $900m of market value. Evercore ISI analyst Jonathan Chappell says investors were sent into a "frenzied panic" by the news that Schlumberger is winding up the OneLNG joint venture.
The two formed the joint venture in 2016 to promote low-cost floating LNG solutions to quickly develop gas reserves. The initial news gave Golar LNG a one day 6% pop in its stock.
But a delay in finding financing for one of its projects, the Fortuna FLNG project off the coast of Equatorial Guinea, lead Schlumberger to drop out of OneLNG.
Chappell says the joint venture actually added "little value" to Golar LNG as it was not providing direct equity participation in projects.
Moreover, other efforts, such as the Hilli Episeyo and the pending Tortue project with BP, demonstrate the viability of Golar's floating LNG business.
Schlumberger's "participation in these efforts was no longer needed for credibility given the fully working (and cash flow positive) Hilli as well as the MoU with BP for another FLNG asset," Chappell said.
Wells Fargo analyst Michael Webber noted a similar move by Schlumberger in April 2016 also resulted in a 23% one-day drop in Golar LNG stock. But this time, "Golar is on stronger ground" Webber says, with the Hilli Episeyo and BP’s Tortue Project.
Webber says it's likely that Fortuna will be on the backburner for Golar LNG for a while and that an offtake agreement with Gunvor for the gas will also likely be dissolved.
But he says the project may resurface with a Chinese or Korean shipyard doing the retrofit work thanks to the potential for export financing.
