Why Did New Fortress Energy Stock (NFE) Jump Today?

Key Points

• After months of contentious negotiations, New Fortress Energy has secured a deal to supply Puerto Rico with LNG for at least the next seven years.

• The agreement still must be approved by the Puerto Rico regulator that denied a previous deal.

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Shares of New Fortress Energy (NASDAQ: NFE) jumped on Wednesday, finishing the day up 8% as of 3:18 p.m. ET, and they had gained as much as 42.5% earlier in the day. The jump came as the S&P 500 and Nasdaq Composite fell by 0.1% and 0.4%.

The energy company's stock is rallying for its second day after Puerto Rico's governor announced the completion of negotiations for a massive natural gas supply contract.

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New Fortress secures Puerto Rico lifeline

New Fortress Energy has secured a $4 billion agreement to supply liquefied natural gas to Puerto Rico over the next seven years, with the option for a three-year extension.

While the news is positive, this agreement follows the rejection of a much larger proposal from New Fortress earlier this year. A 15-year, $20 billion deal was denied by Puerto Rico's Financial Oversight and Management Board in July. The same board must now approve the new deal.

Image source: Getty Images.

New Fortress still has issues

New Fortress has been dealing with increasing financial pressures, struggling to turn a profit as it faces mounting debt. It had been in months of contentious negotiations with Puerto Rico and was recently forced to sell billions in revenue-producing assets elsewhere in an attempt to get a handle on its balance sheet issues. This buys New Fortress time, but it hurts long-term cash flow.

There are too many issues facing New Fortress Energy, and I think it will continue to struggle. This isn't a stock that I would recommend, even at today's price.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.