Research & Analysis: Stabilis Solutions (NASDAQ: SLNG)

Stabilis Solutions is a small-scale LNG distributor caught between two incomplete growth stories. Its core data center business — providing temporary behind-the-meter power during site construction and commissioning — is structurally high-churn with no durable offtake. Its flagship liquefaction facility at the Port of Galveston, which represents the company’s only credible path to long-term scale, lost a key financing anchor in Q1’26 when a 10-year marine offtake agreement was terminated after the counterparty refused lender-required protections — pushing final investment decision indefinitely. With revenue down 36% in 1H’26 following the conclusion of two major multiyear contracts, a modified loan covenant requiring a 1.20x fixed charge coverage ratio commencing March 2027, and approximately $9.5mm in available liquidity against a business rebuilding from near-zero, the risk profile materially outweighs the near-term opportunity. We initiate SLNG at Sell with a $4.25 price target, representing 0.90x eFY27 price/sales.

Stabilis Solutions (NASDAQ: SLNG) provides midstream operations for the production, transportation, and storage of liquified natural gas [LNG] in the US, offering fueling solutions across multiple end markets. Stabilis operates at a relatively small scale with production capacity of approximately 1 MTPA [million tonnes per annum, delivering LNG through trailer, tank container, or marine vessels. The markets Stabilis serves include aerospace, agriculture, industrial, marine bunkering, mining, O&G, pipeline, remote power, and utility.

One of Stabilis’s biggest growth markets is supporting the lifecycle of large-scale data centers, from construction, commissioning, and longevity. This includes providing LNG capacity throughout the construction phase of the large-scale site in order to provide power for equipment on-site. Stabilis also provides LNG capacity throughout the commissioning process as a temporary solution until a gas pipeline or grid interconnect is established at the site. From there, Stabilis may provide LNG as backup capacity in the event of a pipeline failure or power disruption during peak season.

Stabilis also supports the aerospace market by providing LNG as fuel for rocket launch vehicles. While this market has provided durable growth for Stabilis in recent years, customers have been hesitant to lock in long-term, fixed-volume agreements given the competitive nature of the LNG market. Management is expecting this to change as more large-scale data centers lock in capacity, potentially tightening the market over time. While LNG offtake may expand, supporting LNG for data centers is a temporary solution that may not provide long-term stability to Stabilis. Strategically, Stabilis is aiming to provide LNG as backup capacity for data centers to have on site in the instance of a connection disruption, effectively leasing the equipment as a long-term revenue stream.

Also supporting long-term stability and growth is Stabilis’s planned LNG liquefaction facility at the Port of Galveston. While the facility is gaining traction, Stabilis has faced significant headwinds in gaining counterparties for offtake and the required project financing from lenders, resulting in the postponement of the project.

Overall, Stabilis is a high-risk investment opportunity in a market with a narrow moat. With minimal traction for its flagship liquefaction facility in Galveston, Texas, and its core offering only providing temporary, incremental revenue streams, Stabilis may be in a constant state of churn.

Stabilis’s LNG business directly competes with CNX Resources (NYSE: CNX), a company we covered in May 2024. While the companies compete for LNG offtake capacity, CNX operates as a vertically integrated natural gas producer and midstream operator with primary production in the Appalachia region.

Interested in investing in our model portfolio? You can invest in our model portfolio by trade matching with dub. Dub provides investors with full transparency, meaning that you can see each and every investment and the trade rationale behind it. If you’re a member of the mobile app, you can find our licensed model with the ticker MONTEXX.

This is not investment advice or a recommendation to follow me, my strategy, or any Premium Portfolio on dub. dub Advisors, LLC did not participate or collaborate in the development of this post, nor have I been compensated for any mention of the dub app or portfolios managed by dub Advisors.

DASTA Inc (”dub”) owns and operates the dub app. I’m a paid solicitor promoting dub and receive compensation for my efforts. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results.

Stabilis faced significant headwinds at the start of FY26 resulting from two major multiyear offtake agreements concluding at the end of FY25, resulting in a -36% decline in revenue in 1h26 when compared to the prior-year period. Despite facing this major headwind, Stabilis gained some momentum across its aerospace and non-power industrial businesses in q2’26, realizing modest stability in revenue generation.

The aerospace market is expected to continue to support growth in the near future driven by an increased launch cadence for commercial space programs. As of q2’26, Stabilis provides LNG for 3 launch customers and is in the works of adding a 4^th. Methane & LNG is becoming a more common propellant for next generation launch vehicles as the fuel enables reusability, manageable cryogenic temperatures, and can be synthesized in situ on other planetary bodies. Accordingly, Starship [SpaceX] and New Glenn [Blue Origin] use methane and LNG as a propellant. Long March-10B [CNSA/CASC] based in China also uses LNG-derived methane for launch. This may be a long-term growth opportunity as launch cadences continue to expand to support satellite constellations and deep space missions. While launch can be a fruitful market for Stabilis, the company does not presently have any long-term, fixed-volume agreements with aerospace customers.

In q2’26, Stabilis secured a contract to provide LNG capacity for behind-the-meter power generation to support a large-scale data center in the US with service beginning in eq3’26. The term of the contract has been set for a period of six months with the possibility of extending further out. While this is a major step in the right direction for Stabilis, this project may be one that was previously announced in q1’26 that was set to commence in q2’26. If this is the case, the project appears to have faced a delay, likely the result of materials sourcing at the data center site [given the tightness of power components market].

Stabilis also has a major SPA for a similar project on a larger scale that is expected to generate $100mm in annual revenue over the course of two years beginning in 2027. In support of the project, Stabilis has received $20mm in prepayments to fund equipment and program readiness.

To support large-scale agreements like this, Stabilis is sourcing LNG from both first- and third-party liquefaction facilities, combining both own production with purchased supply, mobile equipment, and logistics to meet customer demand.

In December 2025, Stabilis announced a definitive, 10-year offtake agreement with Carnival Corporation (CCL) to support LNG in support of the company’s cruise operations at the Port of Galveston. This agreement is the second offtake agreement that anchors Stabilis’s flagship LNG liquefaction facility in Galveston, Texas, following the company’s agreement with an unnamed global marine operator.

In March 2026, the 10-year offtake agreement with the unnamed global marine operator was terminated as the counterparty wouldn’t accept modifications to the agreement as required by third-party project financiers. The lenders required a certain amount of protections under the agreement that Stabilis’s counterparty wouldn’t agree to, resulting in the termination of the agreement. This deal would have accounted for 40% of the planned facility capacity with a minimum volume commitment of 32% of capacity. As a result of the terminated agreement, Stabilis terminated a lease for an LNG bunkering vessel in q2’26, incurring a cost of $2.9mm.

In the press release disclosing the agreement with Carnival Corporation, Stabilis disclosed that “long-term customer commitments now in place [account] for approximately 55% of the facility’s planned capacity,” creating some uncertainty regarding the offtake capacity used by Carnival Corporation. Assuming that the terminated agreement is a component of the 55% capacity figure, we can assume that Carnival Corporation accounted for the incremental 15% of capacity, equating to approximately 18.75MMgal of LNG production, assuming total capacity of the facility will be 12MMgal. While the disclosure of the terminated contract predated the announcement with Carnival Corporation, the verbiage in the announcement suggests multiple offtake agreements while only two agreements have been announced.

Given the termination of the one offtake agreement, Stabilis has pushed out final investment decision [FID] as additional capacity offtake will be required to acquire project financing.

We’re expecting Stabilis to experience a modest decline in revenue in eFY26 following contract churn throughout the fiscal year. While revenue is expected to improve in e2h26, we’re expecting revenue to decline by -18.35% for eFY26 when compared to the previous fiscal year. Stabilis should realize a step-up in revenue in eFY27 as its behind-the-meter offtake agreement commences, which should grow to a $100mm annual run-rate throughout eFY28 before diminishing in eFY29. Given the temporary nature of the data center business, we’re expecting incremental additions to support growth over the coming years while experiencing revenue stability from the aerospace market.

A major risk Stabilis faces is sourcing LNG, which will, in part, be delivered by third-party producers over the coming years to support its behind-the-meter offtake agreement. We’re expecting this to compress gross margins in eFY27-28 as the company’s primary revenue source will effectively be tariff-derived, similar to how pipeline operators generate revenue. Another major risk is the depreciation of the assets acquired to serve this large customer as Stabilis will retain ownership of the equipment following the dissolution of the agreement, requiring the company to either reroute infrastructure or impair the assets.

At the end of June 2026, Stabilis modified its loan agreement with The Huntington National Bank, amending its 2023 issuance. The modification agreement amends certain financial covenants, including:

• Required fixed charge coverage ratio of 1.20-1.00x, which will commence in March 2027.

• The establishment of a cash reserve with the bank to be held as collateral with $5mm in funding. Funding will be released once Stabilis becomes compliant with the fixed charge coverage ratio requirement.

• Once Stabilis is compliant with the minimum fixed charge coverage ratio for two consecutive quarters, $10mm will become available under a revolving credit facility.

In April 2026, Stabilis entered into an Equity Distribution Agreement with Johnson Rice & Company for the issuance and sale of $10mm in share value. Proceeds will be used to pay down debt, financing capital investments, expanding liquefaction infrastructure, scaling operations, or financing acquisitions, amongst other opportunities that may benefit the company and its shareholders.

Stabilis closed q2’26 with $18.8mm in cash & equivalents and restricted cash and $8.2mm in debt and interest-bearing liabilities on the balance sheet for a net cash position of $10.6mm. $14mm of the cash position falls under restricted cash made up of $5mm for equipment purchases under a customer prepayment and the remainder held as collateral. Stabilis currently has $5mm available in borrowing capacity, providing the company with approximately $9.5mm in liquidity.

SLNG shares are currently trading at 1.86x price/sales, a relative premium above the stock’s historical midpoint of approximately 1.03x, making shares expensive to own at this time.

While the stock can be viewed as a value investment strategy in today’s market environment, the company’s operations present significant risks that outweigh the upside potential. Without firm-fixed agreements in place, the likelihood of Stabilis acquiring the financing to develop the liquefaction site at the Port of Galveston is thin. In addition to this, Stabilis will be in a constant state of churn for LNG offtake for short-term power solutions for large-scale data center developments. While the short-term opportunity may be robust, the strategy provides limited longevity and long-term growth potential.

Given the risks associated with operations and the high trading premium, we cannot recommend SLNG for investment at this time. While there may be a significant growth opportunity for shares through incremental steps towards FID at its liquefaction facility, we do not believe that the risk profile suits our investment strategy. Given the risk profile, we recommend SLNG shares with a Sell rating at a price target of $4.25/share at 0.90x eFY27 price/sales.

Using the model: the valuation table above references our financial forecast in the firm’s “financial position” section and ties it to the stock’s historical trading premiums. The trading premium array is derived through the normal operating cycle with the blue-sky scenario being the stock’s peak multiple and the gray-sky scenario being the lowest point. The target multiple aims for the midpoint, or the most likely trading range for the company’s stock. The trading multiples from there are weighted by a probability factor reflecting the likelihood of the stock trading at that premium given its historical trading range. From there, the trading multiple is tied to the probability factor to derive its relative market capitalization and relative multiple.

Disclaimer: No information found within this publication should be considered as investment advice. Information shared in this newsletter should ONLY be used for educational purposes. Monte Independent Investment Research and author are not liable for any financial decisions in relation to the information provided or discussed whether written or verbal. Information within this newsletter should not be shared or replicated. Information presented was independently written and is solely the opinion of the author.