Executive Summary / Key Takeaways

• Golar LNG has emerged as the only proven provider of FLNG-as-a-service, with a $17 billion EBITDA backlog from 20-year contracts that provides unprecedented visibility into a quadrupling of earnings by 2028, creating a structural moat that no competitor can replicate today.

• The company's capital recycling strategy—ordering units on speculation, securing long-term charters, then refinancing at the asset level—has created a self-funding growth engine, with the Gimi refinancing alone set to release over $400 million and potential for $3 billion in total proceeds to fund the fourth unit.

• Argentina's Vaca Muerta gas fields represent a concentrated bet but with asymmetric risk-reward: limited downside protection of $210 million over two years versus uncapped commodity upside of $100 million in annual EBITDA for every dollar LNG prices exceed $8/MMBtu, amplified by Golar's 10% equity stake in the Southern Energy consortium.

• Execution risks loom large as AI data center demand stretches long lead item delivery times from 24 to 36 months, while shipyard slots become contested, making Golar's Q4 2025 decision to order long lead items for unit four a critical timing advantage.

• Trading at $38.27 with a market cap of $3.9 billion, the stock prices in a transition period; by 2028, projected free cash flow of $5-6 per share could generate a 13-16% yield on today's price, suggesting patient capital will be rewarded as contracted cash flows materialize.

Setting the Scene: The FLNG Revolution's First Mover

Golar LNG, founded in 1946 and headquartered in Hamilton, Bermuda, spent decades as a traditional LNG shipping company before embarking on its modern transformation around 1999. The pivotal shift began when the company recognized that conventional LNG carriers faced commoditization, prompting a strategic evolution from spot shipping to FSRU conversion, and ultimately to the floating liquefaction concept that defines it today. This journey wasn't linear—it required a $1.8 billion buyout of Seatankers' stake in 2014 to advance the FLNG strategy, a bold move that coincided with an oil market downturn but ultimately delivered the industry's first operational unit, Hilli, in 2018.

The company's decision to exit its 50-year presence in LNG shipping in Q4 2024, through the sale of Avenir LNG and the Golar Arctic, crystallizes its identity as a pure-play FLNG provider. This matters because it eliminates the cyclical volatility of shipping rates and focuses all management attention on the higher-margin, contracted cash flow business of liquefaction services. Golar now sits alone as the only proven operator of FLNG-as-a-service, a positioning that reflects not just technological prowess but a first-mover advantage that competitors have yet to crack.

The FLNG industry mirrors the FPSO sector's trajectory from 1985, when the first floating production unit launched, to over 250 units globally today. With only 14 FLNG units currently on the water and several under construction, the market stands at an inflection point where stranded, associated, and flared gas reserves—previously uneconomic to develop—become viable through floating solutions. Golar's 8.6 million tons per annum of liquefaction capacity leads the industry, but more importantly, its operational track record of 142 cargoes and 9.8 million tons from Hilli alone provides the credibility to win 20-year contracts that competitors can only bid theoretically.

Technology, Products, and Strategic Differentiation: The Conversion Advantage

Golar's technological moat rests on three proprietary FLNG designs—Mark I (2.5 mtpa), Mark II (3.5 mtpa), and Mark III (5.4 mtpa)—each optimized for different gas field characteristics and customer needs. The Mark I design, proven through Hilli and Gimi, demonstrates 100% economic uptime and the ability to exceed nameplate capacity, with Gimi regularly producing above its 2.4 mtpa contracted volume toward its 2.7 mtpa design limit. This operational excellence translates directly into pricing power, as customers pay premium tariffs for reliability and the optionality to debottleneck.

The conversion strategy represents Golar's most durable cost advantage. By repurposing existing LNG carriers rather than building greenfield facilities, Golar achieves all-in costs of approximately $600 per ton of capacity—roughly half the $1,200 per ton required for U.S. land-based projects. This isn't merely a capital efficiency; it's a structural advantage that makes marginal gas reserves economic while protecting returns during price downturns. The 36-38 month conversion timeline for Mark I and II units also compresses time-to-market versus the multi-year development cycles of traditional liquefaction, allowing Golar to capture first-mover economics in emerging basins.

The "as-a-service" model fundamentally alters the risk-reward equation for customers. Unlike competitors who only monetize gas they control, Golar enables upstream partners to commercialize reserves without committing billions to infrastructure. This creates a buffer between Golar's cash flows and host government risks, as customers bear the reservoir risk while Golar collects fixed tariffs plus commodity upside. The model's stickiness is evident in the contract structure: English law, U.S. dollar payments offshore, pass-through of operating costs, and 30-year non-interruptible export licenses in Argentina that protect against regulatory changes.

Financial Performance & Segment Dynamics: The 2028 Inflection

Golar's Q3 2025 results, with $83 million in adjusted EBITDA and $31 million in net income, represent the first quarter of full operations for both Hilli and Gimi. This $221 million LTM EBITDA figure is merely the baseline.

The math from contracted backlog is compelling: Gimi contributes $150 million annually at 90% utilization, Hilli's Argentina redeployment adds $285 million, and Mark II delivers $400 million upon startup in 2028. After corporate expenses, this yields $800 million in base EBITDA—nearly a fourfold increase that management projects will generate $500-600 million in free cash flow to equity, or $5-6 per share.

The commodity leverage provides explosive upside. In Argentina, Golar receives 25% of all LNG prices above $8 per MMBtu, translating to $70 million in annual EBITDA per dollar of price appreciation. Combined with its 10% equity stake in Southern Energy, which contributes another $28 million per dollar, Golar's total exposure reaches $100 million per dollar of price upside with no ceiling. This asymmetry is critical: while downside is capped at $105 million annually if prices fall below $7.50, the upside is unlimited. In a $10/MMBtu environment—a reasonable long-term assumption given global LNG demand growth—Golar's Argentina exposure alone would add $200 million to EBITDA, pushing total run-rate earnings above $1 billion.

The balance sheet is positioned to fund growth without dilution. With $1 billion in cash and a net debt position of $1.4 billion, Golar's fully delivered net debt-to-EBITDA ratio will fall to 2.8x by 2028.

More importantly, the refinancing playbook unlocks capital: the upcoming $1.2 billion Gimi facility will release over $400 million, Hilli's existing debt could be refinanced to release up to $1 billion, and the unencumbered Mark II could support $2 billion in financing. This $3 billion in potential proceeds fully funds the fourth unit and demonstrates the self-funding flywheel in action.

Outlook, Management Guidance, and Execution Risk

Management's guidance for quadrupling EBITDA by 2028 rests on firm contractual foundations, not speculative demand. The $17 billion backlog represents $800 million in annual EBITDA for 20 years, inflation-adjusted at 30% of U.S. CPI from year six—terms more favorable than U.S. tolling arrangements that typically adjust at 20-30% of CPI. This visibility is rare in energy infrastructure and underpins the confidence to order long lead items for unit four before securing a charter, a strategy that proved successful with Mark II.

Execution risk centers on three variables: construction timeline, long lead item availability, and Argentina concentration. The Mark II conversion is 45% complete and on schedule for Q4 2027 delivery, but the AI data center boom has stretched gas turbine lead times from 24 to 36 months. Golar's board approval to order long lead items in Q4 2025—before finalizing the fourth unit's design—represents a calculated bet that securing delivery slots now outweighs the cost of early commitment. This timing advantage could prove decisive if competitors face 12-18 month delays due to equipment shortages.

Argentina's political landscape introduces headline risk, but the contract structure provides robust protection. The FID for Mark II preceded the recent election cycle, and the RIGI framework—Argentina's large investment protection regime—shields the project from fiscal or regulatory changes for 30 years. Corporate guarantees from Pan American Energy, YPF (YPF), Pampa Energia (PAM), and Harbour Energy cover a significant portion of the $8 billion Argentina backlog, creating a buffer between Golar's cash flows and sovereign risk. The pipeline construction from Vaca Muerta to the Gulf of San Matias, while a SESA responsibility, is on track for EPC award in H1 2026 and completion within two years, well before Mark II's arrival.

Risks and Asymmetries: Where the Thesis Can Break

The most material risk is execution slippage on Mark II. A 6-12 month delay would push cash flows into 2029, testing investor patience and potentially requiring additional bridge financing. While Golar's $1 billion cash position provides cushion, any cost overruns on the $2.2 billion budget would compress returns on the project. The company's track record—Hilli delivered on time and Gimi started operations in June 2025 as planned—suggests this risk is manageable, but FLNG conversions remain complex engineering feats where minor delays cascade.

Long lead item inflation presents a margin threat. If gas turbine costs rise 20-30% due to AI data center demand, the CapEx per ton for future units could exceed the $600 target, raising the EBITDA multiple above the 5.5x achieved on Mark II.

Golar's strategy of pre-ordering equipment mitigates timing risk but locks in pricing, potentially missing future cost declines. This trade-off is necessary to maintain delivery certainty, but it sacrifices flexibility.

Argentina's concentration creates a binary outcome. While contract protections are robust, a sovereign default or currency crisis could impede SESA's ability to pay tariffs, even in U.S. dollars. The $210 million downside cap over two years provides limited protection against a multi-year disruption. However, the asymmetry favors Golar: the maximum loss is bounded while upside is unlimited, and the 30-year export license ensures regulatory continuity regardless of political shifts.

Valuation Context: Pricing the Transition

At $38.27, Golar trades at a market capitalization of $3.9 billion and an enterprise value of $5.2 billion. Current multiples—69.6x earnings and 23.5x EBITDA—reflect a company in transition, not mature cash generation. These metrics are misleading because they capture only the early stages of the 2028 inflection. Looking through the cycle, the $800 million contracted EBITDA implies an EV/EBITDA multiple of 6.5x on 2028 earnings power, compressing to 5.9x if Gimi's debottlenecking and commodity upside add another $100 million.

The free cash flow yield provides a clearer valuation anchor. Management's projection of $5-6 per share in 2028 free cash flow represents a 13-16% yield on today's price, a figure that would command a premium multiple in a stabilized infrastructure business. By comparison, traditional LNG shipping companies trade at 8-10% FCF yields, while U.S. liquefaction projects with no commodity upside trade at 6-8% yields. Golar's combination of contracted base cash flows and uncapped commodity participation justifies a mid-teens multiple, implying a fair value range of $75-90 per share based on 2028 earnings power.

Peer comparisons highlight Golar's uniqueness. Excelerate Energy (EE) trades at 11.9x EBITDA but lacks FLNG exposure, focusing solely on regasification where tariffs are lower and competition is fiercer. New Fortress Energy (NFE), with its integrated LNG-to-power model, trades at 32.5x EBITDA but generates negative free cash flow and carries 8.3x debt-to-equity, reflecting execution risk that Golar's pure-play model avoids. FLEX LNG (FLNG) and Dynagas (DLNG), as pure shipping plays, trade at 11.4x and 3.6x EBITDA respectively, but their businesses lack growth and commodity upside. Golar's multiple appropriately reflects its hybrid profile: infrastructure-like contracted cash flows with energy-like optionality.

Conclusion: The Only Proven Play on Stranded Gas Monetization

Golar LNG has engineered a unique position in the global energy landscape as the sole proven provider of FLNG-as-a-service, backed by $17 billion in contracted EBITDA and an operational track record that competitors cannot match. The company's capital recycling strategy—deploying speculative capital to secure long-term charters, then refinancing to fund the next unit—creates a self-sustaining growth engine that requires minimal equity dilution. By 2028, the combination of quadrupling base EBITDA and uncapped commodity upside should generate $5-6 per share in free cash flow, transforming the valuation narrative from speculative to undeniable.

The investment thesis hinges on two variables: flawless execution of the Mark II conversion and successful commercialization of the fourth unit. While long lead item pressures and Argentina concentration introduce risks, the contract structure and operational track record provide substantial mitigation. For patient investors, the disconnect between today's transition-phase valuation and tomorrow's cash flow reality presents a compelling opportunity. Golar isn't just participating in the FLNG revolution—it is the revolution, and the market has yet to price the durability of its first-mover advantage.