Spin-offGolar LNG Partners is also gaining traction in the belief it will benefit frommore dropdowns as its parent looks to generate cash for the $500m project.
RSPlatou Markets brands the idea to convert up to three ships into floatingLNG production vessels as an emerging game changer for Golar.
“If successful, a massive value transfer from oil companiesto Golar LNG could emerge as the current LNG production cartel could be broken,”Platou analysts Herman Hildan and Frode Morkedal wrote in a note to clients.
Theyadded: “A successful FLNG conversion will be a big game changer for GLNG as itcan offer a full infrastructure solution between gas markets.
“Thereare still many loose ends on the economics, but we highly recommend owning GolarLNG as the details emerge.”
GolarLNG shares were up 9.86% at $42.74 each on the Nasdaq at the time of writing.
Michael Webber of Wells Fargo, who predicted Golar's FLNG debut last month, said: “We view the move into FLNG, where potential unlevered returns could hit the low-to-mid-20% range (albeit with substantial potential operational/construction risks), as a material positive for GLNG, as it diversifies its asset mix and likely leads to higher return, long-term projects with stable cash flows.”
While no FLNG charters are yet in place for Golar, Webbernotes the owner is currently involved in bidding for two potential FLNGprojects that could come to fruition over the next several quarters.
One is in west Africa and the other in Douglas Channel,Canada.
Golar says it expects to use cash, future earnings and debtto fund the first conversion, which Webber prices at $500m. An equity issue hasbeen all but ruled out.
Thereliance on cash reserves means Golar Partners is likely to benefit from extradropdowns.
Itsunits were up 3.14% at $31.21 on the Nasdaq at the time of writing.
Webbersays Golar is expected to drop down two or three vessels to the MLP in the next12 to 18 months.
