On Tuesday, Deutsche Bank (ETR:DBKGn) reaffirmed its Hold rating on shares of New Fortress Energy (NASDAQ:NFE), with a steady price target of $21.00. The firm's analysis follows the recent approval of a non-Free Trade Agreement (non-FTA) permit by the Department of Energy (DOE) for New Fortress Energy's Altamira FLNG (OL:FLNG) 1 liquefaction asset. This permit is the first of its kind granted to an LNG export terminal since the DOE put a hold on such authorizations earlier in the year.
The DOE's permit will allow the company to operate on a shorter-term basis, expiring in August 2029, which is a more limited duration than previous projects. The DOE has indicated that it will reassess the export term no earlier than August 2026, based on a more comprehensive record at that time.
Despite concerns about economic and environmental impacts, the DOE has decided to proceed with the five-year approval following a federal district judge's order in July, which overturned the Biden Administration's pause on non-FTA permits after several states challenged the moratorium.
The decision is seen as beneficial for New Fortress Energy, providing the company with the opportunity to sell LNG produced at FLNG 1 directly into the global market. This bypasses the need for cost-increasing cargo swaps, which could have potentially reduced the company's profit margins by approximately $0.50 to $1.00 per million British thermal units (MMbtu).
The company's strategy with FLNG 1 has been to produce LNG at competitive prices, aligned with or lower than its current sales purchase agreement (SPA) volumes.
Market participants are anticipated to react favorably to the news today, although some may express concerns regarding the shorter lifespan of the permit. The authorization is a significant development for New Fortress Energy as it seeks to navigate the complexities of the global LNG market and maintain profitability amidst regulatory challenges.
In other recent news, New Fortress Energy Inc. announced the resumption of production at its 1.4 MTPA Fast LNG 1 asset located offshore Altamira, Mexico, following a scheduled maintenance outage. This comes after the asset's significant milestone of delivering its first liquefied natural gas (LNG) cargo. The company expects the FLNG unit to increase its output until it reaches full production capacity later this month.
New Fortress Energy reported Q2 2024 earnings with an EBITDA of $120 million, falling short of the targeted $275 million. This was due to delays in deploying the FLNG 1 asset, which is now operational and expected to generate $500 million in annual free cash flow.
Despite the setback, the company projects a positive outlook with quarterly earnings of $275 million for the rest of the year, and an annual EBITDA range between $1.4 billion and $1.5 billion.
In line with recent developments, the company is planning for organic growth with minimal additional capital expenditure and is looking to refinance its 2025 notes. The company is also bidding for 2.5 gigawatts of power in a Brazilian auction, which could potentially boost EBITDA by $400 million. New Fortress Energy's power systems development is expanding into the data center industry.
InvestingPro Insights
As New Fortress Energy (NASDAQ:NFE) navigates the complexities of the global LNG market, real-time data and expert analysis provide a deeper understanding of the company's financial health and stock performance. According to InvestingPro, New Fortress Energy operates with a substantial debt burden, which is an important consideration for investors. The company's stock is currently in oversold territory based on the Relative Strength Index (RSI), potentially indicating a buying opportunity for contrarian investors.
InvestingPro Data shows that New Fortress Energy has a market capitalization of $2.41 billion and a P/E ratio of 10.53, which adjusts to 7.9 for the last twelve months as of Q2 2024. Despite a slight revenue contraction of 1.16% over the same period, the company maintains a robust gross profit margin of 57.56%. However, investors should note that the stock has experienced a significant price drop, trading near its 52-week low and falling about 61% over the past year.
For those considering investment in New Fortress Energy, there are additional InvestingPro Tips available, offering a comprehensive analysis of the company's financial and stock performance. Interested readers can find more tips by visiting the InvestingPro platform for New Fortress Energy.
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