Units of Hamilton, Bermuda-based limited partnership Golar LNG Partners LP (GMLP) tumbled almost 11% after Golar LNG Ltd. (GLNG) decided to sell a part of its interest in the partnership. Notably, Golar LNG Partners was formed by midstream energy player Golar LNG Ltd.
Golar LNG Ltd is expected to vend 7,170,000 common units of Golar LNG Partners at a price of $29.90 per unit. The net proceeds from the secondary offering will likely be utilized by the company to partly finance its recent deal with Keppel Shipyard − primarily involves in repairing, converting and upgrading vessels of diverse quality.
The agreement entails the conversion of one of Golar LNG Ltd’s first-generation liquefied natural gas vessels to a floating natural gas liquefaction facility (GoFLNG). The contract represents the second GoFLNG conversion development for the company and is in sync with its long-term growth plan.
Following the closure of the unit offering, the company will have 1,668,096 common units along with 15,949,831 subordinated units in Golar LNG Partners. Golar LNG Ltd is also expected to have incentive distribution rights and a 2% general partner interest in the partnership. The common, subordinated and general partner, interest is almost equivalent to 30% of the total units of the partnership.
Investors should keep in mind that with the sale of 7,170,000 common units of Golar LNG Partners, the partnership’s fundamentals will not change as it will not get any cash flows from it.
Golar LNG Partners – which owns a fleet of liquefied natural gas vessels and regasification units – currently sports a Zacks Rank #1 (Strong Buy), while Golar LNG Ltd carries a Zacks Rank #3 (Hold).
One can consider players in the energy sector like Enbridge Energy Management LLC (EEQ) and Seadrill Partners LLC (SDLP). Both stocks presently carry a Zacks Rank #1.
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