Why Golar LNG's Stock Tanked Despite a $13.7 Billion Deal

On May 2, 2025, Golar LNG Limited (GLNG) announced a landmark $13.7 billion, 20-year contract for its Floating Liquefied Natural Gas (FLNG) units in Argentina—a deal that should have sent its stock soaring. Instead, GLNG’s shares plummeted 6.86%, closing at $39.64, with trading volume surging to 5.4 million shares, nearly four times its usual pace. The sell-off raises a critical question: Why did investors penalize a company for securing a transformative, long-term revenue stream?

The Paradox of Long-Term Gains and Short-Term Fears

The answer lies in the interplay of contractual complexities, execution risks, and market skepticism about Golar’s ability to deliver on its ambitious timeline. While the contracts with Southern Energy S.A. (SESA) guarantee $13.7 billion in earnings over 20 years, the immediate market reaction highlighted three critical concerns:

1. Delayed Revenue Streams

The FLNG Hilli is not slated to begin operations until 2027, and the MKII FLNG unit will not start until 2028. Investors, accustomed to instant gratification, may have balked at the lengthy wait for cash flows. By comparison, reveal a 76% surge in the prior 12 months—gains that now faced a reckoning. The market’s focus on near-term profitability left little room for patience.

2. Contract Terms with Hidden Risks

While the contracts include upside from rising gas prices (25% of FOB prices above $8/mmbtu), they also expose Golar to downside risks. If gas prices fall below $7.5/mmbtu, charter hire rates could be reduced, with a $210 million cap on accumulated discounts. This complexity may have spooked investors accustomed to straightforward revenue models. As one analyst noted, “The terms are a double-edged sword—investors feared the downside more than they bet on the upside.”

3. Infrastructure and Regulatory Hurdles

The projects depend on a dedicated pipeline from Argentina’s Vaca Muerta shale fields to the FLNG vessels—a critical link that remains unbuilt. SESA’s plans for the pipeline lack a clear timeline, raising concerns about delays. Meanwhile, Argentina’s political instability and history of energy policy shifts added to anxieties. A shows gross debt at $1.5 billion as of Q4 2024, with net debt exceeding $800 million—a reminder that funding execution could strain liquidity.

The Role of Analysts and Market Psychology

Analyst reports added to the skepticism. While Stifel maintained a “Buy” rating, it had already lowered its price target to $50 in February 2025, citing concerns about the contracts’ terms. GuruFocus, meanwhile, estimated a one-year target of $36.69—a 12.77% discount to May 2’s closing price—reflecting valuation pessimism. The data underscores a divide: long-term optimists versus short-term pragmatists.

A Market Correction, Not a Death Knell

The sell-off may have been a necessary recalibration. Golar’s Q4 2024 results—$66 million in operating revenue (just shy of forecasts) and a 52-week trading range of $26.20 to $44.30—suggest investors were already questioning the company’s ability to navigate debt and project risks. The May 2 decline could also reflect profit-taking ahead of its May 21 earnings report, with implied volatility spiking to 57.32%.

Conclusion: A High-Reward, High-Risk Gamble

Golar’s stock drop on May 2 was a vote of no confidence in its ability to execute a complex, multi-year project in a volatile market. The $13.7 billion contracts are undeniably transformative, but investors remain fixated on near-term risks: delayed revenue timelines, infrastructure dependencies, and Argentina’s geopolitical instability.

The numbers tell the story: a 6.86% single-day drop after a 76% year-to-date gain suggests overexuberance had run its course. With gross debt at $1.5 billion and equity contributions for the MKII FLNG still pending, Golar must prove it can manage execution risks while navigating a commodities market prone to wild swings. For now, the market is demanding more than promises—it wants proof.