Golar LNG Limited (USA) (NASDAQ: GLNG)
Golar LNG is having an incredible day in the market today, and for good reason. The company has finally come to an agreement with Schlumberger (NYSE: SLB). Today, we’ll discuss the details of the agreement, what it means for GLNG, how the stock reacted to the news, and what we can expect to see from the stock moving forward.
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GLNG Signs A Memorandum Of Understanding With SLB
As mentioned above, GLNG is having a great day in the market today after announcing that it has signed a Memorandum of Understanding with Schlumberger. Under the new agreement, the two companies will cooperate with regard to the development of greenfield, brownfield, and stranded gas reserves. According to the agreement, the two companies will work together with regard to investors, governments, and market gas monetization solutions to owners. The companies seem to be working relatively quickly as well. They expect to announce the first project under the agreement within the next two months.
How The Market Reacted To The News
Any time we see positive news with regard to a publicly traded company, we can expect to see gains in the value of the stock. That’s exactly what we’re seeing as a result of the news of this agreement. Currently (11:31), GLNG is trading at $16.79 per share after a gain of $4.85 per share or 40.62%.
What We Can Expect To See Moving Forward
Moving forward, I have a bit of a mixed opinion with regard to what we can expect to see. Ultimately, there’s good and bad surrounding GLNG. Here are the factors I’m watching:
- The Good – The good news is the agreement. After all, the agreement between GLNG and SLB will likely lead to revenue. Under the agreement, the companies will be working together on several natural gas projects that were previously halted. This is great news as there is quite a bit of product to be extracted through these projects. This should drive some revenue and excite investors. Naturally, this would lead to gains.
- The Bad – While the agreement is a great thing, there are a couple of bad things that we have to think about. First and foremost, global market conditions are in shambles. Sure, we’re seeing gains at the moment, but that doesn’t mean that the positive movement is going to continue. With resistance on the market, we can’t expect to see exponential growth from the stock over a long period of time. Also, it’s important to take a look at the energy sector. After all, the entire deal is associated with energy. When we look at the energy sector, we see more bad news for GLNG. Unfortunately, the price of oil has been at crisis levels for quite some time, driving prices down throughout the entire energy sector. This is likely to weigh heavy on any gains GLNG and SLB are expecting to see out of the new projects that are upcoming.
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The bottom line here is that while the agreement is a great thing, current market conditions simply don’t support strong long-run gains. So, I’m expecting to see relatively flat movement and the occasional downtrend while the world market attempts to recover.
What Do You Think?
Where do you think GLNG is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]