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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934

For the month of August 2019

Commission File Number: 000-50113

GOLAR LNG LIMITED
(Translation of registrant's name into English)
 
2nd Floor
 S.E. Pearman Building
9 Par-la-Ville Road
Hamilton HM 11
Bermuda

(Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [ X ]     Form 40-F [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ].

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ].

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.






INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Included is the Overview, Operating and Financial Review for the six months ended June 30, 2019 and the unaudited condensed consolidated interim financial statements of Golar LNG Limited (the "Company" or "Golar") as of and for the six months ended June 30, 2019.

The information contained in this Report on Form 6-K is hereby incorporated by reference into the Company's registration statement on Form F-3 ASR (File no. 333-219095), which was filed with the U.S. Securities and Exchange Commission on June 30, 2017.

EXHIBITS

101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document
101.SCH
XBRL Taxonomy Extension Schema





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
GOLAR LNG LIMITED
 
(Registrant)
 
 
 
 
Date: September 5, 2019
By:
/s/ Graham Robjohns
 
Name:
Graham Robjohns
 
Title:
Principal Financial and Accounting Officer
 
 
 







UNAUDITED CONDENSED INTERIM FINANCIAL REPORT

Forward-Looking Statements

Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this report, the words "believe", "anticipate", "intend", "estimate", "forecast", "project", "plan", "potential", "may", "should", "expect" and similar expressions identify forward-looking statements.

The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. As a result, you are cautioned not to rely on any forward-looking statements.

In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include among other things:

•
our inability and that of our counterparty to meet our respective obligations under the Lease and Operate agreement entered into in connection with the BP Greater Tortue / Ahmeyim Project (“Gimi GTA Project”);
•
our inability to consummate the financing of the Gimi GTA Project;
•
changes in our ability to retrofit vessels as FSRUs or FLNGs and in our ability to obtain financing for such conversions on acceptable terms or at all;
•
changes in our ability to obtain additional financing on acceptable terms or at all;
•
our inability to complete the TFDE shipping spin off;
•
Golar Power's ability to successfully commission the Sergipe power station project and related FSRU contract and to execute its downstream LNG distribution plans;
•
changes in our relationship with Golar Partners, Golar Power or Avenir and the sustainability of any distributions they pay to us;
•
failure of our contract counterparties, including our joint venture co-owners, to comply with their agreements with us or other key project stakeholders;
•
challenges by authorities to the tax benefits we previously obtained under certain of our leasing agreements;
•
changes in liquefied natural gas, or LNG, carrier, floating storage and regasification unit, or FSRU, or floating liquefaction natural gas vessel, or FLNG, or small-scale LNG market trends, including charter rates, vessel values or technological advancements;
•
our ability to close potential future sales of additional equity interests in our vessels, including the Hilli Episeyo, on a timely basis or at all and our ability to contract the full utilization of the Hilli Episeyo or other vessels and the benefits that may to accrue to us as the result of any such modifications;
•
changes in the supply of or demand for LNG carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
•
a material decline or prolonged weakness in rates for LNG carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
•
changes in the performance of the pool in which certain of our vessels operate and the performance of our joint ventures;
•
changes in trading patterns that affect the opportunities for the profitable operation of LNG carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
•
changes in the supply of or demand for LNG or LNG carried by sea;
•
changes in commodity prices;
•
changes in the supply of or demand for natural gas generally or in particular regions;
•
changes in our relationships with our counterparties, including our major chartering parties;
•
a decline or continuing weakness in the global financial markets;
•
changes in general domestic and international political conditions, particularly where we operate;
•
changes in the availability of vessels to purchase and in the time it takes to construct new vessels;

1


•
failures of shipyards to comply with delivery schedules or performance specifications on a timely basis or at all;
•
our ability to integrate and realize the benefits of acquisitions;
•
changes in our ability to sell vessels to Golar Partners or Golar Power;
•
changes to rules and regulations applicable to LNG carriers, FSRUs, FLNGs or other parts of the LNG supply chain;
•
our inability to achieve successful utilization of our expanded fleet or inability to expand beyond the carriage of LNG and provision of FSRUs, FLNGs, and small-scale LNG infrastructure particularly through our innovative FLNG strategy and our joint ventures;
•
actions taken by regulatory authorities that may prohibit the access of LNG carriers, FSRUs, FLNGs or small-scale LNG vessels to various ports;
•
increases in costs, including, among other things, wages, insurance, provisions, repairs and maintenance; and
•
other factors listed from time to time in registration statements, reports or other materials that we have filed with or furnished to the Securities and Exchange Commission, or the Commission, including our most recent annual report on Form 20-F.

We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.

All forward-looking statements included in this report are made only as of the date of this report and, except as required by law, we assume no obligation to update any written or oral forward-looking statements made by us or on our behalf as a result of new information, future events or other factors. If one or more forward-looking statements are updated, no inference should be drawn that additional updates will be made.



2

The following is a discussion of our financial condition and results of operations for the six months ended June 30, 2019 and 2018. Unless otherwise specified herein, references to "the Company", "Golar", "we", "us", and "our" refer to Golar LNG Limited and any one or more of its consolidated subsidiaries, or to all such entities. References to "Golar Partners" or the "Partnership" refer to Golar LNG Partners LP and to any one or more of its direct and indirect subsidiaries. References to "Golar Power" refer to Golar Power Limited and to any one or more of its direct and indirect subsidiaries. References to "Avenir" refer to our affiliate Avenir LNG Limited (Norwegian OTC: AVENIR) and to any one or more of its subsidiaries. References to "OneLNG" refer to OneLNG S.A. You should read the following discussion and analysis together with the financial statements and related notes included elsewhere in this report. For additional information relating to our operating and financial review and prospects, including definitions of certain terms defined herein, please see our annual report on Form 20-F for the year ended December 31, 2018, which was filed with the Commission on March 29, 2019.

Overview

We are a midstream LNG company engaged primarily in the transportation and regasification of LNG and the liquefaction of natural gas. We are engaged in the acquisition, ownership, operation and chartering of LNG carriers and FSRUs, and the development of LNG projects, including the provision of FLNGs, through our subsidiaries, affiliates and joint venture.

As of September 5, 2019, we, together with our affiliates Golar Partners and Golar Power, have a combined fleet of twenty-seven vessels, which is comprised of eighteen LNG carriers, eight FSRUs and one FLNG, split per group as follows:

•
We own twelve LNG carriers, one FSRU and one FLNG. Seven LNG carriers are employed on varying time charter lengths; and three LNG carriers and our FSRU are participating in an LNG carrier pool, referred to as the Cool Pool. Our FLNG, the Hilli Episeyo ("Hilli"), is operating under a long-term tolling agreement. The Gimi, an LNG carrier, entered Keppel Shipyard Limited’s ("Keppel") shipyard in early 2019 to commence work on her conversion into a FLNG to service the Greater Tortue Ahmeyim project and the Gandria, also an LNG carrier, is earmarked for conversion into a FLNG;
•
Golar Partners owns six of the FSRUs and four of the LNG carriers. A majority of the Golar Partners owned vessels are employed on charters of varying lengths; and
•
Golar Power owns one FSRU which is contracted under a long-term charter, one LNG carrier which is participating in the Cool Pool and one LNG carrier which is employed under a medium-term time charter.
  
We intend to leverage our relationships with existing customers and continue to develop relationships with other industry participants. Our goal is to earn higher margins through maintaining strong service-based relationships combined with flexible and innovative LNG shipping, FSRU and FLNG solutions. We believe customers place their confidence in our shipping, storage, regasification and liquefaction services based on the reliable and safe way we conduct our, our affiliates’ and our joint venture's LNG operations.

In line with our ambition to become an integrated LNG midstream asset provider and our experience of converting LNG carriers into FSRUs, we have successfully converted one of our LNG carriers, the Hilli Episeyo, into a FLNG and commenced conversion of another, the Gimi. In addition, we have entered into a definitive contract with Keppel and Black & Veatch Corporation for the conversion of another LNG carrier, the Gandria, into a FLNG. Our aim is to find strong strategic partners that have an interest in utilizing one or more of our FLNGs.

Recent Developments

Since June 30, 2019, the significant developments that have occurred are as follows:

GasLog's departure from Cool Pool
GasLog Carriers Ltd ("GasLog") withdrew its participation of six vessels from the Cool Pool with effect from June 30, 2019. Golar assumed sole ownership of the Cool Pool following GasLog's departure. A ramp down period to allow the conclusion of existing GasLog vessel charter contracts followed, which led to the withdrawal of all of Gaslog's vessels in July 2019.
Margin loan refinancing
In August 2019, we entered into an agreement with a group of lenders to refinance our existing Margin Loan Facility. The new Margin Loan Facility introduces a revolving element, increases the principal amount available to draw to $110 million and has a maturity of one year from execution. The new Margin Loan Facility will continue to be secured by a pledge against our common units in Golar Partners.

3


$150 million term loan facility
In August 2019, we entered into a $150 million term loan facility with a total term of fifteen months.
Organizational Changes

On May 14, 2019, Georgina Sousa replaced Michael Ashford as our Company Secretary. Michael Ashford will continue to remain on our Board of Directors. Ms Sousa is currently a director and the Company Secretary of 2020 Bulkers Ltd and Borr Drilling Ltd.

4

Operating and Financial Review

Six month period ended June 30, 2019 compared with the six month period ended June 30, 2018

Vessel operations segment

 
Six months ended June 30,
 
 
(in thousands of $, except average daily TCE) (1)
2019

2018

Change

% Change

 
 
 
 


Total operating revenues
101,984

106,987

(5,003
)
(5
)%
Vessel operating expenses
(35,172
)
(35,355
)
183

(1
)%
Voyage, charterhire and commission expenses (including expenses from collaborative arrangements)
(30,467
)
(40,496
)
10,029

(25
)%
Administrative expenses
(27,569
)
(24,011
)
(3,558
)
15
 %
Project development expenses
(97
)
(3,196
)
3,099

(97
)%
Depreciation and amortization
(32,182
)
(32,775
)
593

(2
)%
Impairment of long-term assets
(41,597
)
—

(41,597
)
(100
)%
Other operating gains
9,260

10,000

(740
)
(7
)%
Operating loss
(55,840
)
(18,846
)
(36,994
)
196
 %
 
 
 


Equity in net (losses)/earnings of affiliates
(28,946
)
8,693

(37,639
)
(433
)%
 
 
 
 
 
Other Financial Data:
 
 
 
 
 
 
 
 
 
Average daily TCE (1) (to the closest $100)
32,000

27,800

4,200

15
 %
(1) Average Time Charter Equivalent, or TCE, is a non-GAAP financial measure. See the section of this report entitled "Non-GAAP Measures" for a discussion of TCE.

Total operating revenues: Total operating revenues decreased by $5.0 million to $102.0 million for the six months ended June 30, 2019 compared to $107.0 million for the same period in 2018. This was principally due to:

•
$17.3 million decrease in revenue as a result of lower utilization and hire rates, including repositioning fees, from our vessels participating in the Cool Pool for the six months ended June 30, 2019 compared to the same period in 2018; and
•
$2.0 million reduction in revenue from the Golar Artic following the maturity of her charter in January 2019.

This was partially offset by the:

•
$11.3 million increase in revenue from the Golar Viking as she was mostly on-hire during the six months ended June 30, 2019 compared to being in cold lay-up during the same period in 2018; and
•
$2.4 million increase in revenue as a result of the Golar Glacier's higher hire rate under her current charter for the six months ended June 30, 2019 compared to the same period in 2018.

Average daily TCE: As a result of lower voyage expenses offsetting the decrease in operating revenues, the average daily TCE for the six months ended June 30, 2019 increased to $32,000 from $27,800 for the same period in 2018.

Voyage, charterhire and commission expenses: Voyage, charterhire and commission expenses largely relate to charterhire expenses, fuel costs associated with commercial waiting time and vessel positioning costs. While a vessel is on-hire, fuel costs are typically paid by the charterer, whereas during periods of commercial waiting time, fuel costs are paid by us. The decrease in voyage, charterhire and commission expenses of $10.0 million to $30.5 million for the six months ended June 30, 2019 compared to $40.5 million for the same period in 2018, was principally due to:

•
$13.0 million reduction of voyage expenses that arose from the decreased utilization of our vessels participating within the Cool Pool.

5

•
This was partially offset by the $2.7 million increase in costs in relation to the Golar Arctic, as she was mostly on commercial waiting time for the six months ended June 30, 2019, compared to full utilization during the same period in 2018.

Administrative expenses: Administrative expenses increased by $3.6 million to $27.6 million for the six months ended June 30, 2019 compared to $24.0 million for the same period in 2018, mainly due to higher corporate expenses, such as legal fees.

Project development expenses: Project development expenses decreased by $3.1 million to $0.1 million for the six months ended June 30, 2019 compared to $3.2 million for the same period in 2018, mainly due to a decrease in non-capitalized project-related expenses such as professional and consultancy costs.

Impairment of long-term assets: Impairment of long-term assets increased by $41.6 million for the six months ended June 30, 2019 due to a:

•
$34.3 million impairment charge on vessel and equipment associated with our LNG carrier, the Golar Viking. In March 2019, we signed an agreement with LNG Hrvatska for the future sale of the Golar Viking once converted into an FSRU, following the completion of its current charter lease term. Although the sale is not expected to close until the last quarter of 2020, the transaction triggered an immediate impairment test. As the current carrying value of the vessel exceeds the price that a market participant would pay for the vessel at the measurement date, a non-cash impairment charge of $34.3 million was recognized. The fair value was based on average broker valuations as of the measurement date and represents the exit price in the principal LNG carrier sales market.  

•
$7.3 million impairment charge associated with our investment in OLT Offshore LNG Toscana S.P.A. ("OLT-O"). In May 2019, a major shareholder in OLT-O sold its shareholding which triggered an assessment of the recoverability of the carrying value of our 2.6% investment in OLT-O. As the carrying value of our investment exceeded the representative fair value, we recognized a write down of our investment as of June 30, 2019.

Other operating gains: This represents the amounts recovered in connection with the ongoing arbitration proceedings arising from the delays and the termination of the Golar Tundra time charter with a former charterer. The amount of $9.3 million represents the final payment to settle these proceedings.

Equity in net (losses)/earnings of affiliates:

 
Six months ended June 30,
 
 
(in thousands of $)
2019

2018

Change

% Change

Equity in net (losses)/earnings in Golar Partners
(27,659
)
8,630

(36,289
)
(420
)%
Share of net (losses)/earnings in other affiliates
(1,287
)
63

(1,350
)
(2,143
)%
Equity in net (losses)/earnings of affiliates
(28,946
)
8,693

(37,639
)
(433
)%


The share of net earnings in Golar Partners represents our share of equity in Golar Partners. As of June 30, 2019, we held a 32.0% (2018: 31.8%) ownership interest in Golar Partners (including our 2% general partner interest) and 100% of the incentive distribution rights ("IDRs"). The decrease in the share of net earnings in Golar Partners is due to a decrease in underlying performance of Golar Partners and fair value adjustment for the six months ended June 30, 2019.

The share of net earnings in other affiliates represents our share of equity in Egyptian Company for Gas Services S.A.E and Avenir LNG Limited.
 


6

FLNG segment

 
Six months ended June 30,
 
 
(in thousands of $)
2019

2018

Change

% Change

 
 
 
 
 
Total operating revenues
109,048

18,577

90,471

487
 %
Vessel operating expenses
(26,894
)
(3,556
)
(23,338
)
656
 %
Voyage, charter-hire and commission expenses
(460
)
(508
)
48

(9
)%
Administrative expenses
(136
)
(81
)
(55
)
68
 %
Project development expenses
(1,370
)
(8,027
)
6,657

(83
)%
Depreciation and amortization
(24,102
)
(4,091
)
(20,011
)
489
 %
Other operating gains
5,183

101,366

(96,183
)
(95
)%
Operating income
61,269

103,680

(42,411
)
(41
)%
 
 
 
 
 
Equity in net losses of affiliates
—

(2,047
)
2,047

(100
)%

Total operating revenues: On May 31, 2018, the Hilli was accepted by the customer and, accordingly, commenced operations. As a result, she generated $109.0 million of total operating revenues in relation to her liquefaction services for the six months ended June 30, 2019 compared to $18.6 million for the same period in 2018.

Vessel operating expenses: Following the Hilli's commencement of operations on May 31, 2018, she incurred $26.9 million of vessel operating expenses for the six months ended June 30, 2019 compared to $3.6 million for the same period in 2018.

Project development expenses: This relates to non-capitalized project related expenses comprising of legal, professional and consultancy costs. The decrease was due to the commencement of capitalization of engineering consultation fees in relation to the Greater Tortue/Ahmeyim Project following the Gimi entering Keppel Shipyard Limited’s ("Keppel") shipyard for her conversion into a FLNG in December 2018.

Depreciation and amortization: Following the Hilli's commencement of operations on May 31, 2018, depreciation and amortization of the vessel was recognized. A full six months of depreciation was recognized for the six months ended June 30, 2019 compared to the 31 days of depreciation in same period last year.

Other operating gains: Net realized and unrealized gains on the oil derivative instrument resulted in a net gain of $5.2 million for the six months ended June 30, 2019 compared to a net gain of $101.4 million for the six months ended 2018, as a result of the decreased forward price of Brent Crude. Included in other operating gains, we have written off $3.0 million of unrecoverable receivables relating to OneLNG.

Equity in net losses of affiliates: Pursuant to the formation of OneLNG in July 2016, we equity accounted for our share of net losses in OneLNG. Given the difficulties in finalizing an attractive debt financing package along with other capital and resource priorities, in April 2018, Golar and Schlumberger decided to wind down OneLNG and work on FLNG projects as required on a case-by-case basis.


Power segment

 
Six months ended June 30,
 
 
(in thousands of $)
2019

2018

Change

% Change

 
 
 


 
Equity in net losses of affiliates
(10,923
)
(12,861
)
1,938

(15
)%

The equity in net losses of Golar Power principally relates to trading activity of the Golar Celsius and the Golar Penguin operating as LNG carriers within the Cool Pool arrangement (further described in note 17 "Related Parties" of our consolidated financial statements included herein) and the administrative cost of business development activities from Golar Power's Brazilian subsidiaries. The main Brazilian activity relates to the CELSE project, which is not yet operational as the power plant is still under construction.

7



Other operating results

The following details our other consolidated results for the six months ended June 30, 2019 and 2018:
 
Six months ended June 30,
 
 
(in thousands of $)
2019
2018
Change
% Change
 
 
 
 
 
Interest income
6,437

4,044

2,393

59
 %
Interest expense
(53,728
)
(38,012
)
(15,716
)
41
 %
(Losses)/gains on derivative instruments
(20,418
)
1,068

(21,486
)
(2,012
)%
Other financial items, net
(3,339
)
(474
)
(2,865
)
604
 %
Income taxes
(381
)
(484
)
103

(21
)%
Net income attributable to non-controlling interests
(48,554
)
(29,444
)
(19,110
)
65
 %

Interest income: Interest income increased by $2.4 million to $6.4 million for the six months ended June 30, 2019 compared to $4.0 million for the same period in 2018. The increase was primarily due to an increase in the returns on our fixed deposits that had been made during the six months ended June 30, 2019, and income derived from the lending capital of our lessor VIEs, that we are required to consolidate under U.S. GAAP.

Interest expense: Interest expense increased by $15.7 million to $53.7 million for the six months ended June 30, 2019 compared to $38.0 million for the same period in 2018. In addition to an increase in LIBOR rates, this was principally due to $29.3 million lower capitalized interest on borrowing costs in relation to our investment in the Hilli FLNG conversion prior to acceptance of the vessel by the charterer in May 2018.

This is partially offset by the:

•
$4.5 million decrease in interest expense incurred on the deposits received from Golar Partners in relation to the Hilli Disposal. These deposits were applied to the purchase price for the Hilli acquisition in July 2018;
•
$2.5 million decrease in interest expense arising on the loan facilities of our consolidated lessor VIEs;
•
$2.1 million decrease in amortization of deferred financing costs as a result of our refinancings; and
•
$1.6 million decrease in interest expense due to the conversion of the Hilli shareholder loans to equity following the Hilli Disposal.

(Losses)/ gains on derivative instruments: Losses on derivative instruments increased by $21.5 million to a loss of $20.4 million for the six months ended June 30, 2019 compared to a gain of $1.1 million for the same period in 2018. The movement was primarily due to:

Net realized and unrealized gains/(losses) on interest rate swap agreements: As of June 30, 2019, we have an interest rate swap portfolio with a notional amount of $950 million, none of which are designated as hedges for accounting purposes. Net unrealized gains/(losses) on the interest rate swaps decreased to a loss of $12.2 million for the six months ended June 30, 2019 compared to a gain of $7.7 million for the same period in 2018. The decrease was due to the decline in the long-term swap rates for the six months ended June 30, 2019. Realized gains on our interest rate swaps increased to a gain of $4.1 million for the six months ended June 30, 2019, compared to a gain of $2.6 million for the same period in 2018. The increase was primarily due to higher LIBOR rates for the six months ended June 30, 2019.

Unrealized losses on total return swap (or equity swap): In December 2014, we established a three month facility for a Stock Indexed Total Return Swap Programme or Equity Swap Line with DNB Bank ASA in connection with a share buyback scheme. The facility has been extended to September 2019. The equity swap derivatives mark-to-market adjustment resulted in a net loss of $12.6 million recognized in the six months ended June 30, 2019 compared to a net loss of $4.4 million for the same period in 2018.

Other financial items, net: Other financial items, net decreased by $2.9 million to a loss of $3.3 million for the six months ended June 30, 2019 compared to a loss of $0.5 million for the same period in 2018 primarily as a result of consolidating our VIEs.

Net income attributable to non-controlling interests: Net income attributable to non-controlling interests increased by $19.1 million to $48.6 million for the six months ended June 30, 2019 compared to $29.4 million for the same period in 2018 mainly

8

due to the completion of the Hilli Disposal in July 2018, amounting to $13.7 million. There were no comparable amounts in the period ended June 30, 2018.

The net income attributable to non-controlling interests comprises of (i) $33.4 million and $11.2 million in relation to the non-controlling shareholders who hold interests in Hilli LLC and Hilli Corp for the six months ended June 30, 2019 and 2018, respectively, and (ii) $15.2 million and $18.2 million in relation to the equity interests in our remaining lessor VIEs for the six months ended June 30, 2019 and 2018, respectively. We are party to sale and leaseback arrangements for eight vessels with these lessor VIEs. While we do not hold any equity investments in these lessor VIEs, we are the primary beneficiary. Accordingly, these lessor VIEs are consolidated into our financial results and thus the equity attributable to the financial institutions in their respective variable interest entities are included in non-controlling interests in our consolidated results.
  

Liquidity and Capital Resources

Our short-term liquidity requirements are primarily for the servicing of debt, working capital requirements, potential investments in our joint venture and conversion project related commitments due within the next 12 months. We may require additional working capital for the continued operation of our vessels in the spot market (via the Cool Pool), which is dependent upon vessel employment and fuel costs incurred during idle time. We remain responsible for the manning and technical management of our vessels within the Cool Pool.

As of June 30, 2019, we had cash and cash equivalents (including restricted cash and short-term deposits) of $545.4 million, of which $405.6 million is restricted cash. Included within restricted cash is $152.0 million with respect to the issuance of the letter of credit by a financial institution to our project partner involved in the Hilli FLNG project, an aggregate of $96.8 million cash collateral relating to requirements under our total return equity swap, and the balance which mainly relates to the cash belonging to our lessor VIEs that we are required to consolidate under U.S. GAAP.

Since June 30, 2019, significant transactions impacting our cash flows include:

Receipts of:

•
$9.2 million in August 2019, in respect of cash distributions for the quarter ended June 30, 2019, from Golar Partners in relation to our interests in its common and general partner units held at the relevant record date; albeit $1.6 million was used to satisfy interest repayment on the margin loan facility as a result of 21,226,586 of Golar Partners common units held by us being pledged as security for the obligations under the facility;

•
a net amount of $30.9 million from restricted cash as a result of the refinancing of our margin loan with a new facility; and

Payments of:

•
$37.4 million in relation to capital expenditure commitments on the Gimi conversion;

•
$15.1 million cash distribution to our shareholders in July 2019, in respect of the quarter ended March 31, 2019;

•
$7.1 million scheduled interest repayments;

•
$6.7 million, with respect to cash distributions from Hilli LLC; and

•
an additional capital contribution of $5.0 million to Golar Power.

As previously disclosed in our annual financial statements for the year ended December 31, 2018, note 5, a pre-condition of the Golar Tundra lease financing with CMBL, is for the vessel to be employed under an effective charter.  Under the terms of our sale and lease back facility for the Golar Tundra, by virtue of our prior termination of the WAGL charter, we were required to find a replacement charter by June 30, 2019 or we could be required to refinance the FSRU. In May 2019, the June 2019 call option date was extended to June 2021. 

In February 2019, Golar entered into an agreement with BP for the charter of a FLNG unit, the Gimi, after conversion, for a 20-year period expected to commence in the second half of 2022. Golar also entered into a Shareholders Agreement with Keppel

9

Capital with respect to their participation in a 30% share of the project. Total conversion works, which incorporate lessons learned from FLNG Hilli, including some improvements and modifications, are expected to cost approximately $1.3 billion. We anticipate annual contracted revenues less forecasted operating costs of approximately $215.0 million. Golar has received a $700 million underwritten financing commitment for a long-term financing facility, which is subject to the satisfaction of certain conditions by the parties and final documentation. The facility will be available during the Gimi conversion and has a tenure of 7 years post commissioning and a 12 year amortization profile.

To address our anticipated capital expenditure (in particular those associated with our initial commitments related to the Gimi conversion) and working capital requirements over the next 12 months, we are in ongoing discussions with various financial institutions for funding sources which we could utilize for the funding of our capital commitments, investments, working capital and the scheduled repayments of long and short-term debt balances. While we believe we will be able to obtain the necessary funds and have a track record of successfully financing our conversion projects, we cannot be certain that the proposed new credit facilities will be executed in time or at all. In addition, if market and economic conditions are favorable, we may also consider further issuances of corporate debt or equity to increase liquidity. Sources of funding for our medium and long-term liquidity requirements include new loans, refinancing of existing financing arrangements, public and private debt or equity offerings, and potential sales of our interests in our vessel owning subsidiaries operating under long-term charters.

Accordingly, we believe that, based on our plans as outlined above, we will have sufficient facilities to meet our anticipated liquidity requirements for our business for at least the next 12 months from September 5, 2019 and that our working capital is sufficient for our present requirements. While we cannot be certain of execution or timing of all or any of the above financings, we are confident of our ability to do so. We have performed stress testing of our forecast cash reserves under various theoretical scenarios, which include assumptions such as prudent revenue contributions from our fleet and full operating costs, and accordingly are confident of our ability to manage through the near term cash requirements.

Borrowing activities

During the six months ended June 30, 2019, we did not enter into any new debt facilities.

During May 2019, the pre-condition of the Golar Tundra lease financing with CMBL for the FSRU to be employed under an effective charter by June 30, 2019 was extended to June 30, 2021.

Security, debt and lease restrictions
Certain of our financing agreements are collateralized by ship mortgages and, in the case of some debt, pledges of shares by each guarantor subsidiary. The existing financing agreements impose operating and financing restrictions which may significantly limit or prohibit, among other things, our ability to incur additional indebtedness, create liens, sell capital shares of subsidiaries, make certain investments, engage in mergers and acquisitions, purchase and sell vessels, enter into time or consecutive voyage charters or pay dividends without the consent of the relevant lenders. In addition, lenders may accelerate the maturity of indebtedness under financing agreements and foreclose upon the collateral securing the indebtedness upon the occurrence of certain events of default, including a failure to comply with any of the covenants contained in the financing agreements. Many of our debt agreements contain certain covenants, which require compliance with certain financial ratios. Such ratios include maintaining positive working capital ratio, tangible net worth covenant and minimum free cash restrictions. With regards to cash restrictions, Golar has covenanted to retain at least $50 million of cash and cash equivalents on a consolidated group basis. In addition, as of June 30, 2019, there are cross default provisions in certain of our and Golar Partners' and Golar Power's loan and lease agreements.
 


10

Cash Flow

 
Six Months Ended
June 30,
 
 
(in thousands of $)
2019
2018
Change
% Change
Net cash provided by operating activities
10,272

48,334

(38,062
)
(79
)%
Net cash used in investing activities
(22,353
)
(162,425
)
140,072

(86
)%
Net cash (used in)/ provided by financing activities
(146,760
)
328,799

(475,559
)
(145
)%
Net (decrease)/ increase in cash, cash equivalents and restricted cash
(158,841
)
214,708

(373,549
)
(174
)%
Cash, cash equivalents and restricted cash at beginning of period
704,261

612,677

91,584

15
 %
Cash, cash equivalents and restricted cash at end of period
545,420

827,385

(281,965
)
(34
)%

Net cash provided by operating activities was $10.3 million for the six months ended June 30, 2019, compared to $48.3 million for the same period in 2018, representing a decline of $38.1 million largely due to general timing of working capital and a decrease in charter rates and utilization of our vessels in the Cool Pool.

Net cash used in investing activities of $22.4 million for the six months ended June 30, 2019 arose mainly due to:

•
the addition of $105.3 million to asset under development relating to payments made in respect of the conversion of the Gimi into a FLNG;
•
additions of $12.2 million due to capital expenditures predominately in relation to the Golar Viking, Golar Crystal and Golar Arctic; and
•
additions of $8.3 million to our investments in Golar Power and Avenir.

This was partially offset by the:

•
$72.2 million proceeds from Keppel's subscription of 30% of the equity interest in Gimi MS Corporation ("Gimi MS");
•
$18.4 million of dividends received from Golar Partners; and
•
$9.7 million of cash consideration received from Golar Partners in respect of the remaining net purchase price less working capital adjustments in connection with the Hilli acquisition.

Net cash used in investing activities of $162.4 million for the six months ended June 30, 2018 arose mainly due to:

•
the addition of $116.7 million to asset under development relating to payments made with respect to the conversion of the Hilli into a FLNG; and
•
additions of $62.2 million to investments in affiliates, which relates principally to capital contributions made to Golar Power.

This was partially offset by dividends received from Golar Partners of $18.3 million.

Net cash used in financing activities was $146.8 million for the six months ended June 30, 2019 and arose principally due to:

•
scheduled debt repayments of $123.5 million; and
•
payment of dividends of $38.1 million.

This was partially offset by $14.8 million of debt proceeds drawn down by the lessor VIE.

Net cash provided by financing activities for the six months ended June 30, 2018 was principally generated from funds from new debt, debt refinancings, debt repayments and cash dividends. Net cash provided by financing activities was $328.8 million for the six months ended June 30, 2018 and arose primarily due to total proceeds of $1.2 billion from our debt facilities, including:

•
$115.0 million further drawdown on the Hilli pre-delivery financing in relation to the conversion of the Hilli into a FLNG;
•
$960.0 million drawdown on the post-acceptance Hilli sale and leaseback financing in relation to the FLNG Hilli facility;
•
$101.0 million of debt proceeds drawn down by the lessor VIE, which owns the Golar Crystal, upon refinancing of its

11

debt into a long-term loan facility (see note 8 "Variable Interest Entities" of our consolidated financial statements included herein); and
•
$36.5 million of cash reserves held by the Hilli Lessor VIE as of the date that we determined ourselves to be its primary beneficiary and are therefore required to consolidate the VIE (see note 9 "Variable Interest Entities" of our consolidated financial statements included herein).

This was partially offset by:

•
loan repayments of $874.3 million, which includes (i) the repayment of $640.0 million on the Hilli pre-delivery arrangement under the FLNG Hilli facility, (ii) payment of $105.0 million in connection with the refinancing of the Golar Crystal facility mentioned above and (iii) payments of $38.9 million in connection with the Golar Tundra lease financing arrangement; and
•
payment of dividends of $9.9 million.

Non-GAAP Measures

Average Daily Time Charter Equivalent

The average TCE rate of our fleet is a measure of the average daily revenue performance of a vessel. TCE is calculated only in relation to our vessel operations segment. For time charters, TCE is calculated by dividing total operating revenues (including revenue from the Cool Pool but excluding vessel and other management fee and liquefaction service revenue), less any voyage expenses, by the number of calendar days minus days for scheduled off-hire. Under a time charter, the charterer pays substantially all of the vessel voyage related expenses. However, we may incur voyage related expenses when positioning or repositioning vessels before or after the period of a time charter, during periods of commercial waiting time or while off-hire during drydocking. TCE rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in an entity's performance despite changes in the mix of charter types (i.e. spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods. We include average daily TCE, a non-GAAP measure, as we believe it provides additional meaningful information in conjunction with total operating revenues, the most directly comparable GAAP measure, because it assists our management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. Our calculation of TCE may not be comparable to that reported by other entities. The following table reconciles our total operating revenues to average daily TCE:

 
Six months ended June 30,
(in thousands of $ except number of days and average daily TCE)
2019
 
2018
Total operating revenues
211,032

 
125,564

Less: Liquefaction service revenue
(109,048
)
 
(18,577
)
Less: Vessel and other management fees
(10,594
)
 
(11,201
)
Time and voyage charter revenues (1)
91,390

 
95,786

Voyage and commission expenses (1)(3)
(30,467
)
 
(40,496
)
 
60,923

 
55,290

Calendar days less scheduled off-hire days (2)
1,904

 
1,991

Average daily TCE (to the closest $100)
32,000

 
27,800

(1) This includes revenue and voyage expenses from the collaborative arrangement in respect of the Cool Pool amounting to $23.4 million and $19.4 million and $18.9 million and $30.9 million, respectively, for the six months ended June 30, 2019 and 2018.
(2) This excludes days when vessels are in cold lay-up, undergoing dry dock or undergoing conversion.
(3) "Voyage and commission expenses" is derived from the caption "Voyage, charterhire and commission expenses" and "Voyage, charterhire and commission expenses - collaborative arrangement" less voyage and commission expenses in relation to the Hilli of $0.5 million and $0.5 million for the six months ended June 30, 2019 and 2018, respectively.


12

Risk Factors

You should carefully consider the risk factors discussed in Part I, Item 3. Key Information - Risk Factors in our Annual Report for the year ended December 31, 2018 filed with the Securities and Exchange Commission ("SEC") on March 29, 2019 as well as other factors listed from time to time in registration statements, reports or other materials that we have filed with or furnished to the SEC, which could materially affect our business, financial condition or results of operations.

As a Bermuda exempted company incorporated under Bermuda law with subsidiaries in the Marshall Islands and other offshore jurisdiction, our operations may be subject to economic substance requirements of the European Union, which could harm our business.
On December 5, 2017, following an assessment of the tax policies of various countries by the Code of Conduct Group for Business Taxation of the European Union (the “COCG”), the Council of the European Union (the “Council”) approved and published Council conclusions containing a list of “non-cooperative jurisdictions” for tax purposes. On March 12, 2019, the Council adopted a revised list of non-cooperative jurisdictions (the “2019 Conclusions”). In the 2019 Conclusions, Bermuda and the Republic of the Marshall Islands, among others, were placed by the E.U. on its list of non-cooperative jurisdictions for tax purposes for failing to implement certain commitments previously made to the E.U. by the agreed deadline. However, it was announced by the Council on May 17, 2019 that Bermuda had been removed from the list of non-cooperative tax jurisdictions. E.U. member states have agreed upon a set of measures, which they can choose to apply against the listed countries, including increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The European Commission has stated it will continue to support member states’ efforts to develop a more coordinated approach to sanctions for the listed countries in 2019. E.U. legislation prohibits E.U. funds from being channeled or transited through entities in non-cooperative jurisdictions. In July 2019, the Registrar of Corporations for the Republic of the Marshall Islands announced that the Republic of the Marshall Islands expects to be removed from the blacklist following the September and October meetings of the EU Code of Conduct Group and the Economic and Financial Affairs Council. However, it is not assured that such removal will occur at that time, or at all.
We are a Bermuda exempted company incorporated under Bermuda law with principal executive offices in Bermuda. Certain of our subsidiaries are Marshall Islands entities. At present, the impact of the Republic of the Marshall Islands being included on the list of non-cooperative jurisdictions for tax purposes is unclear. Both Bermuda and the Marshall Islands have enacted, and may enact further or amended, economic substance laws and regulations with which we may be obligated to comply. For example, on December 17, 2018, the House of Assembly of Bermuda passed the Economic Substance Act 2018 of Bermuda (the “Economic Substance Act”), which became operative on December 31, 2018, along with the Economic Substance Regulations 2018 of Bermuda. The Economic Substance Act requires each registered entity to maintain a substantial economic presence in Bermuda and provides that a registered entity that carries on a relevant activity must comply with economic substance requirements set out in the legislation. New regulations adopted in the Marshall Islands (which came into force on January 1, 2019) require certain entities that carry out particular activities to comply with an economic substance test.
If we fail to comply with our obligations under this legislation, as it may be amended from time to time, or any similar or supplemental law applicable to us in these or any other jurisdictions, we could be subject to financial penalties and spontaneous disclosure of information to foreign tax officials, or could be removed from the register of companies, in related jurisdictions. Any of the foregoing could be disruptive to our business and could have a material adverse effect on our business, financial conditions and operating results.
We do not know: whether the E.U. will remove the Marshall Islands from the list of non-cooperative jurisdictions; what additional actions the Marshall Islands may take, if any, to remove itself from the list; how quickly the E.U. would react to any changes in legislation of the Marshall Islands; or how E.U. banks or other counterparties will react while we or any of our subsidiaries remain as entities organized and existing under the laws of listed countries. The effect of the E.U. list of non-cooperative jurisdictions, and any noncompliance by us with any legislation adopted by applicable countries to achieve removal from the list, could have a material adverse effect on our business, financial conditions and operating results.

13

GOLAR LNG LIMITED
INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PAGE



Unaudited Consolidated Statements of Income for the six months ended June 30, 2019 and 2018
 
 
Unaudited Consolidated Statements of Comprehensive Income for the six months ended June 30, 2019 and 2018
 
 
Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018
 
 
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018
 
 
Unaudited Consolidated Statements of Changes in Equity for the six months ended June 30, 2019 and 2018
 
 
Notes to the Unaudited Condensed Consolidated Financial Statements




 





  



GOLAR LNG LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF (LOSS)/INCOME
(in thousands of $, except per share data)
 
Six months ended June 30,
Notes
2019

2018

Time and voyage charter revenues
 
68,031

76,433

Time charter revenues - collaborative arrangement
17
23,359

19,353

Liquefaction services revenue
5
109,048

18,577

Vessel and other management fees
5
10,594

11,201

Total operating revenues
4, 17
211,032

125,564

 
 
 

Vessel operating expenses
 
(62,066
)
(38,911
)
Voyage, charterhire and commission expenses
17
(11,994
)
(10,107
)
Voyage, charterhire and commission expenses - collaborative arrangement
17
(18,933
)
(30,897
)
Administrative expenses
 
(27,705
)
(24,092
)
Project development expenses
 
(1,467
)
(11,223
)
Depreciation and amortization
 
(56,284
)
(36,866
)
Impairment of long-term assets
2
(41,597
)
—

Total operating expenses
 
(220,046
)
(152,096
)
 
 
 
 
Other operating income
 
 
 
Realized and unrealized gain on oil derivative instrument
2
8,145

111,348

Other operating gains and losses
18
6,298

18

Total other operating income
 
14,443

111,366

 
 
 

Operating income
 
5,429

84,834

 
 
 
 
Financial income/(expenses)
 
 
 
Interest income
 
6,437

4,044

Interest expense
17
(53,728
)
(38,012
)
(Losses)/gains on derivative instruments
2
(20,418
)
1,068

Other financial items, net
2, 7
(3,339
)
(474
)
Net financial expenses
 
(71,048
)
(33,374
)
 
 
 
 
(Loss)/income before taxes and equity in net losses of affiliates
 
(65,619
)
51,460

Income taxes
 
(381
)
(484
)
Equity in net losses of affiliates
12
(39,869
)
(6,215
)
 
 
 
 
Net (loss)/income
 
(105,869
)
44,761

Net income attributable to non-controlling interests
 
(48,554
)
(29,444
)
Net (loss)/income attributable to stockholders of Golar LNG Limited
 
(154,423
)
15,317

Basic and dilutive (loss)/earnings per share ($)
6
(1.53
)
0.15

 
 
 
 
Cash dividends declared and paid per share ($)

 
$
0.15

$
0.10



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


13

GOLAR LNG LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of $)
 
Six months ended June 30,
Notes
2019

2018

 
 
 
 
Net (loss)/income
 
(105,869
)
44,761

 
 
 
 
Other comprehensive income/(loss):
 
 
 
Net gain/(loss) on foreign currency translation
 
651

(24,137
)
Other comprehensive income/(loss)
15
651

(24,137
)
Comprehensive (loss)/income
 
(105,218
)
20,624

 
 
 
 
Comprehensive (loss)/income attributable to:
 
 
 
 
 
 
 
Stockholders of Golar LNG Limited
 
(153,772
)
(8,820
)
Non-controlling interests
 
48,554

29,444

Comprehensive (loss)/income
 
(105,218
)
20,624


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


14

GOLAR LNG LIMITED
CONSOLIDATED BALANCE SHEETS
 
 
2019

2018

(in thousands of $)
Notes
June 30

December 31

 
 
Unaudited

Audited

ASSETS
 
 
 
Current
 
 
 
Cash and cash equivalents
 
139,834

217,835

Restricted cash and short-term deposits 
10
252,843

332,033

Trade accounts receivable (1)
 
33,720

64,918

Inventories
 
8,195

7,006

Other current assets
 
14,625

18,720

Amounts due from related parties
17
5,207

9,425

Total current assets
 
454,424

649,937

Non-current
 
 
 
Restricted cash
10
152,743

154,393

Investments in affiliates
12
522,538

571,782

Asset under development
11
186,960

20,000

Vessels and equipment, net
 
3,190,969

3,271,379

Other non-current assets
13
116,663

139,104

Total assets
 
4,624,297

4,806,595

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current
 
 
 
Current portion of long-term debt and short-term debt
14
(802,323
)
(730,257
)
Trade accounts payable
 
(45,411
)
(9,701
)
Accrued expenses
 
(70,292
)
(133,234
)
Other current liabilities
 
(128,136
)
(121,529
)
Amounts due to related parties
17
(4,719
)
(5,417
)
Total current liabilities
 
(1,050,881
)
(1,000,138
)
Non-current
 
 
 
Long-term debt
14
(1,665,185
)
(1,835,102
)
Other non-current liabilities
 
(147,717
)
(145,564
)
Total liabilities
 
(2,863,783
)
(2,980,804
)
 
 
 
 
Equity
 
 
 
Stockholders' equity
 
(1,577,063
)
(1,745,125
)
Non-controlling interests
 
(183,451
)
(80,666
)
 
 
 
 
Total liabilities and stockholders' equity
 
(4,624,297
)
(4,806,595
)

(1) This includes amounts arising from transactions with related parties (see note 17).


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


15

GOLAR LNG LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CASHFLOWS
 
 
2019

2018

(in thousands of $)
Notes
Jan-Jun

Jan-Jun

 
 
 
 
OPERATING ACTIVITIES
 
 
 
Net (loss)/income
 
(105,869
)
44,761

Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
 
56,284

36,866

Impairment of non-current assets
 
7,347

—

Impairment of long-lived assets
 
34,250

—

Amortization of deferred charges and debt guarantees
 
2,712

5,035

Equity in net (losses) of affiliates
 
39,869

6,215

Dividends received
 
—

8,119

Drydocking expenditure
 
(7,001
)
—

Compensation cost related to employee stock awards
 
5,008

5,367

Net foreign exchange loss
 
573

618

Change in fair value of derivative instruments
2
25,152

1,528

Change in fair value of oil derivative instrument
2
(750
)
(108,300
)
Change in assets and liabilities:
 
 
 
Trade accounts receivable
 
31,198

(12,880
)
Inventories
 
(1,189
)
(35
)
Other current and non-current assets
2
(11,790
)
6,443

Amounts due to related companies
 
(5,778
)
5,687

Trade accounts payable
 
164

(5,135
)
Accrued expenses
 
(57,268
)
15,008

Other current and non-current liabilities
2
(2,640
)
39,037

Net cash provided by operating activities
 
10,272

48,334

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Additions to vessels and equipment
 
(12,178
)
(1,801
)
Additions to asset under development
 
(105,339
)
(116,715
)
Additions to investments in affiliates
 
(8,292
)
(62,244
)
Dividends received
 
18,408

18,335

Proceeds from disposals to Golar Partners
 
9,652

—

Proceeds from subscription of equity interest in Gimi MS Corporation
 
72,236

—

Proceeds from disposal of fixed assets
 
3,160

—

Net cash used in investing activities
 
(22,353
)
(162,425
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Proceeds from short-term and long-term debt
 
14,824

1,176,000

Repayments of short-term and long-term debt
 
(123,495
)
(874,256
)
Cash effect of consolidating Hilli Lessor VIE
 
—

36,532

Cash dividends paid
 
(38,089
)
(9,906
)
Proceeds from exercise of share options
 
—

1,183

Financing costs paid
 
—

(754
)
Net cash (used in)/provided by financing activities
 
(146,760
)
328,799

Net (decrease)/increase in cash, cash equivalents and restricted cash
 
(158,841
)
214,708

Cash, cash equivalents and restricted cash at beginning of period
10
704,261

612,677

Cash, cash equivalents and restricted cash at end of period
10
545,420

827,385





16


Supplemental note to the consolidated statements of cash flows

The following table identifies the balance sheet line-items included in cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows:
(in thousands of $)
June 30, 2019

December 31, 2018

June 30, 2018

December 31, 2017

Cash and cash equivalents
139,834

217,835

375,067

214,862

Restricted cash and short-term deposits (current portion)
252,843

332,033

276,289

222,265

Restricted cash (non-current portion)
152,743

154,393

176,029

175,550

 
545,420

704,261

827,385

612,677



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


17

GOLAR LNG LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands of $)
Share Capital
Treasury Shares
Additional Paid-in Capital
Contributed Surplus (1)
Accumulated Other Comprehensive Loss
Accumulated Retained (Losses)/Earnings
Total before Non- controlling Interests
Non-controlling Interests
Total Equity
Balance at December 31, 2017
101,119

(20,483
)
1,538,191

200,000

(7,769
)
(95,742
)
1,715,316

80,988

1,796,304

 
 
 
 
 
 
 
 
 
 
Net income
—

—

—

—

—

15,317

15,317

29,444

44,761

Dividends
—

—

—

—

—

(9,906
)
(9,906
)
—

(9,906
)
Exercise of share options
120

—

1,063

—

—

—

1,183

—

1,183

Grant of employee stock compensation
—

—

7,214

—

—

—

7,214

—

7,214

Forfeiture of employee stock compensation
—

—

(1,426
)
—

—

—

(1,426
)
—

(1,426
)
Effect of consolidating Hilli Lessor VIE

—

—

—

—

—

—

—

28,702

28,702

Other comprehensive loss
—

—

—

—

(24,137
)
—

(24,137
)
—

(24,137
)
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2018
101,239

(20,483
)
1,545,042

200,000

(31,906
)
(90,331
)
1,703,561

139,134

1,842,695

 
 
 
 
 
 
 
 
 
 
(in thousands of $)
Share Capital
Treasury Shares
Additional Paid-in Capital
Contributed Surplus (1)
Accumulated Other Comprehensive Loss
Accumulated Retained Losses
Total before Non- controlling Interests
Non-controlling Interests
Total Equity
Balance at December 31, 2018
101,303

(20,483
)
1,857,196

200,000

(28,512
)
(364,379
)
1,745,125

80,666

1,825,791

 
 
 
 
 
 
 
 
 
 
Net (loss)/ income
—

—

—

—

—

(154,423
)
(154,423
)
48,554

(105,869
)
Dividends
—

—

—

—

—

(29,288
)
(29,288
)
(8,016
)
(37,304
)
Grant of employee stock compensation
—

—

5,097

—

—

—

5,097

—

5,097

Forfeiture of employee stock compensation
—

—

(88
)
—

—

—

(88
)
—

(88
)
Proceeds from subscription of equity interest in Gimi MS Corporation (note 9)
—

—

9,989

—

—

—

9,989

62,247

72,236

Other comprehensive income
—

—

—

—

651

—

651

—

651

 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2019
101,303

(20,483
)
1,872,194

200,000

(27,861
)
(548,090
)
1,577,063

183,451

1,760,514

(1) Contributed Surplus is 'capital' that can be returned to shareholders without the need to reduce share capital, thereby giving us greater flexibility when it comes to declaring dividends.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


18

GOLAR LNG LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.    GENERAL

Golar LNG Limited (the "Company" or "Golar") was incorporated in Hamilton, Bermuda on May 10, 2001 for the purpose of acquiring the liquefied natural gas ("LNG") shipping interests of Osprey Maritime Limited, which was owned by World Shipholding Limited.

As of June 30, 2019, our fleet comprises of 12 LNG carriers, one Floating Storage Regasification Unit (''FSRU'') and one Floating Liquefaction Natural Gas vessel ("FLNG"). We also operate, under management agreements, Golar LNG Partners LP's ("Golar Partners" or the "Partnership") fleet of 10 vessels and Golar Power Limited's ("Golar Power") fleet of three vessels. Collectively with Golar Partners and Golar Power, our combined fleet is comprised of 18 LNG carriers, eight FSRUs and one FLNG.

We are listed on the Nasdaq under the symbol: GLNG.

As used herein and unless otherwise required by the context, the terms "Golar", the "Company", "we", "our" and words of similar import refer to Golar or anyone or more of its consolidated subsidiaries, or to all such entities.

Gimi MS Corporation

In April 2019, Gimi MS Corporation ("Gimi MS") entered into a Subscription Agreement with First FLNG Holdings Pte. Ltd. ("First FLNG Holdings"), an indirect wholly-owned subsidiary of Keppel Capital, in respect of their participation in a 30% share of FLNG Gimi.  Gimi MS will construct, own and operate FLNG Gimi and First FLNG Holdings will subscribe for 30% of the total issued ordinary share capital of Gimi MS for a subscription price equivalent to 30% of the project cost. Under the Subscription Agreement, Gimi MS may call for cash from the shareholders for any future funding requirements and shareholders are required to contribute to such cash calls up to a defined cash call contribution.

The Gimi is currently undergoing its FLNG conversion with an expected completion and redelivery date in 2022.

Going concern

The condensed consolidated financial statements have been prepared on a going concern basis.

As previously disclosed in our annual financial statements for the year ended December 31, 2018, note 5, a pre-condition of the Golar Tundra lease financing with CMBL, is for the vessel to be employed under an effective charter.  Under the terms of our sale and lease back facility for the Golar Tundra, by virtue of our prior termination of the WAGL charter, we were required to find a replacement charter by June 30, 2019 or we could be required to refinance the FSRU. In May 2019, the June 2019 call option date was extended to June 2021. 

In February 2019, Golar entered into an agreement with BP for the charter of a FLNG unit, the Gimi, after conversion, for a 20-year period expected to commence in the second half of 2022. Golar also entered into a Shareholders Agreement with Keppel Capital in respect of their participation in a 30% share of the project. Total conversion works, which incorporate lessons learned from FLNG Hilli Episeyo, including some improvements and modifications, are expected to cost approximately $1.3 billion. We anticipate annual contracted revenues less forecasted operating costs of approximately $215.0 million. Golar has received a $700 million underwritten financing commitment for a long-term financing facility, which is subject to the satisfaction of certain conditions by the parties and final documentation. The facility will be available during the Gimi conversion and has a tenure of 7 years post commissioning and a 12 year amortization profile.

To address our anticipated capital expenditure (in particular those associated with our initial commitments related to the Gimi conversion) and working capital requirements over the next 12 months, we are in ongoing discussions with various financial institutions for funding sources which we could utilize for the funding of our capital commitments, investments, working capital and the scheduled repayments of long and short-term debt balances. While we believe we will be able to obtain the necessary funds and have a track record of successfully financing our conversion projects, we cannot be certain that the proposed new credit facilities will be executed in time or at all. In addition, if market and economic conditions are favorable, we may also consider further issuances of corporate debt or equity to increase liquidity. Sources of funding for our medium and long-term liquidity

19

requirements include new loans, refinancing of existing financing arrangements, public and private debt or equity offerings, and potential sales of our interests in our vessel owning subsidiaries operating under long-term charters.

Accordingly, we believe that, based on our plans as outlined above, we will have sufficient facilities to meet our anticipated liquidity requirements for our business for at least the next 12 months from September 5, 2019 and that our working capital is sufficient for our present requirements. While we cannot be certain of execution or timing of all or any of the above financings, we are confident of our ability to do so. We have performed stress testing of our forecast cash reserves under various theoretical scenarios, which include assumptions such as prudent revenue contributions from our fleet and full operating costs, and accordingly are confident of our ability to manage through the near term cash requirements.

2.    ACCOUNTING POLICIES

Basis of accounting

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The condensed consolidated financial statements do not include all of the disclosures required under U.S. GAAP in the annual consolidated financial statements, and should be read in conjunction with our audited annual financial statements for the year ended December 31, 2018, which are included in our annual report on Form 20-F.

Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated financial statements for the six months ended June 30, 2019 are consistent with those followed in the preparation of our audited consolidated financial statements for the year ended December 31, 2018, except for "Leases" as a result of adopting the requirements of ASU 2016-02 “Leases (Topic 842)”(hereafter, ASC 842).

Our revenue contracts and related expense recognition

Contracts relating to our LNG carriers, FSRUs and FLNG asset can take the form of operating leases, finance leases, tolling agreements and management agreements. In addition, we contract a portion of our vessels in the spot market through our collaborative arrangement, the "Cool Pool". Although the substance of these contracts are similar, (they allow our customers to hire our assets and to avail of Golar's management services for a specified day rate) the accounting treatment varies. We outline our policies for determining the appropriate GAAP treatment below.

Lease accounting versus revenue accounting

To determine whether a contract conveys a lease agreement for a period of time, the Group has assessed whether, throughout the period of use, the customer has both of the following:

•
the right to obtain substantially all of the economic benefits from the use of the identified asset; and
•
the right to direct the use of that identified asset.

If a contract relating to an asset fails to give the customer both of the above rights, we account for the agreement as a revenue contract. A contract relating to an asset will generally be accounted for as a revenue contract if the customer does not contract for substantially all of the capacity of the asset (i.e. another third party could contract for a meaningful amount of the asset capacity).

In situations where we provide management services unrelated to an asset contract, we account for the contract as a revenue contract.

Lease accounting

When a contract is designated as a lease, we make an assessment on whether the contract is an operating lease or a finance lease. An agreement will be a finance lease if any of the following conditions are met:

•
ownership of the asset is transferred at the end of the lease term;
•
the contract contains an option to purchase the asset which is reasonably certain to be exercised;
•
the lease term is for a major part of the remaining useful life of the contract, although contracts entered into the last 25% of the asset's useful life are not subject to this criterion;

20

•
the discounted value of the fixed payments under the lease represent substantially all of the fair value of the asset; or
•
the asset is heavily customized such that it could not be used for another charter at the end of the term.

Lessor accounting

In making the classification assessment, we estimate the residual value of the underlying asset at the end of the lease term with reference to broker valuations. None of our lease contracts contain residual value guarantees and any purchase options are disclosed in note 9. Agreements which include renewal and termination options are included in the lease term if we believe they are "reasonably certain" to be exercised by the lessee or if controlled by the lessor. The determination of whether lessee extension clauses are reasonably certain depends whether the option contains an economic incentive.

Generally, lease accounting commences when the asset is made available to the customer, however, where the contract contains specific customer acceptance testing conditions, lease accounting will not commence until the asset has successfully passed the acceptance test. We assess a lease under the modification guidance when there is a change to the terms and conditions of the contract that results in a change in the scope or the consideration of the lease.

Costs directly associated with the execution of the lease or costs incurred after lease inception (the execution of the contract) but prior to the commencement of the lease that directly relate to preparing the asset for the contract (for example bunker costs), are capitalized and amortized to the consolidated statement of income over the lease term. We also defer upfront revenue payments (for example positioning fees) to the consolidated balance sheet and amortize to the consolidated statement of income over the lease term.

Fixed revenue from operating leases is accounted for on a straight line basis over the life of the lease; while variable revenue is accounted for as incurred in the relevant period. Fixed revenue includes fixed payments and variable payments based on a rate or index. For our operating leases, we have elected the practical expedient to combine our service revenue and operating lease income as both the timing and the pattern of transfer of the components are the same.

On inception of a finance lease, we derecognize the related asset and record a "net investment in finance lease" financial asset on our consolidated balance sheet. The net investment represents the fixed payments due from the lessee and unguaranteed residual value, discounted at the discount rate implicit in the lease. We recognize finance lease income in the consolidated statement of income (“interest income”) to reflect the implicit rate of interest applied to the outstanding financial asset balance.

Revenue accounting

Contracts within the scope of revenue accounting include our liquefaction services contract relating to the Hilli asset and our management fee services provided to our affiliates (Golar Partners and Golar Power) and customers who lease our assets under finance lease arrangements.

For liquefaction services revenue, the provision of liquefaction services capacity is considered a single performance obligation recognised evenly over time. We consider our services (the receipt of customer's gas, treatment and temporary storage on board our FLNG and delivery of LNG to waiting carriers) to be a series of distinct services that are substantially the same and have the same pattern of transfer to our customer. We recognize revenue when obligations under the terms of our contract are satisfied. We have applied the practical expedient to recognize liquefaction services revenue in proportion to the amount we have the right to invoice.

Contractual payment terms for liquefaction services is monthly in arrears. Contract liabilities arise when the customer makes payments in advance of receiving services. The period between when invoicing and when payment is due is not significant.

Management fees are generated from commercial and technical vessel-related services and corporate and administrative services.
The management services we provide are considered a single performance obligation recognized evenly over time as our services are rendered. We consider our services a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. We recognize revenue when obligations under the terms of our contracts with our customers are satisfied. We have applied the practical expedient to recognize management fee revenue in proportion to the amount that we have the right to invoice.

Our contracts generally have an initial term of one year or less, after which the arrangement continues with a short notice period until the end of the contract, ranging from 30 days to 180 days. Contract assets arise when we render management services in advance of receiving payment from our customers.


21

Derivatives

Changes in presentation of fair value of derivative instruments and oil derivative instrument

Effective from the quarter ended September 30, 2018, we presented two new line items in operating activities on the face of the statements of cash flows. Given the significance of the oil derivative instrument in the current year, we believe that the introduction of this new line item in the statements of cash flows provides users of our financial statements with greater transparency over a key element of our business. This presentation change has been retrospectively restated in prior periods. The change in presentation for the period ended June 30, 2018 is as follows:
 
Six Months Ended June 30, 2018
(in thousands of $)
As previously reported
Adjustments (decrease) increase
As adjusted
Change in fair value of derivative instruments
—

1,528

1,528

Change in fair value of oil derivative instrument

—

(108,300
)
(108,300
)
Change in assets and liabilities:
 
 
 
    Other current and non-current assets
(105,056
)
111,499

6,443

    Other current and non-current liabilities
43,764

(4,727
)
39,037



Gains/(losses) on derivative instruments

Effective from the quarter ended September 30, 2018, we presented a new line item under financial income/(expense) on the face of the statements of income. The new line item, "Losses on derivative instruments", includes the movement of our derivative instruments. Previously, these items were presented within "Other financial items, net" along with our general finance costs. We believe that the introduction of these new line items will provide users of our financial statements with greater transparency over our derivative instruments. This presentation change has been retrospectively applied for all prior periods. The change in presentation for the six months ended June 30, 2018 is as follows:
 
Six Months Ended June 30, 2018
(in thousands of $)
As previously reported
Adjustments Increase/
(Decrease)
As adjusted
Gains on derivative instruments
—

1,068

1,068

Other financial items, net
594

(1,068
)
(474
)


Oil Derivative Instrument

In relation to the oil derivative instrument, the fair value was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the Liquefication Tolling Agreement ("LTA"). Significant inputs used in the valuation of the oil derivative instrument include management’s estimate of an appropriate discount rate and the length of time necessary to blend the long and short-term oil prices obtained from quoted prices in active markets. The changes in fair value of our oil derivative instrument is recognized in each period within "Realized and unrealized gain on oil derivative instrument" as part of the consolidated statement of income.

The realized and unrealized gain on oil derivative instrument is as follows:
(in thousands of $)
Six months ended June 30,
 
2019

2018

Realized gain on oil derivative instrument
7,395

3,048

Unrealized gain on oil derivative instrument
750

108,300

 
8,145

111,348



For further information on the nature of this derivative, refer to note 16. The unrealized gain results from movement in oil prices above a contractual floor price over term of the LTA; whereas the realized gain results from monthly billings above the base tolling fee under the LTA.



22

Impairment of non-current assets

In March 2019, we entered into a number of contracts relating to the conversion and subsequent disposal of the Golar Viking. As of March 31, 2019, although we were still awaiting on LNG Hrvatska to issue Golar a final notice to proceed, we determined that there was sufficient probability of the sale being finalized to trigger an impairment test on the vessel.  The impairment test resulted in a charge of $34.3 million. The fair value of the LNG carrier Golar Viking is categorized within level 2 of the fair value hierarchy, and is based on the average of third party broker valuations. The fair value does not factor in any cash flows associated with the conversion project. The value represents the price that a market participant would pay for a LNG carrier as this is the principal market for the vessel. This is consistent with the fair value methodology that we use for all of our LNG carriers.

In May 2019, a major shareholder of OLT Offshore LNG Toscana S.P.A. (OLT-O) sold its shareholdings which triggered a re-assessment of the carrying value of our investment in OLT-O that was previously recorded at a measurement alternative of cost less impairment as no readily determinable fair value was available. This resulted in an impairment charge of $7.3 million for the write down of the carrying value in our investment in OLT-O to its fair value.

Use of estimates

The preparation of financial statements in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP") requires that management make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

As of June 30, 2019, we leased eight vessels under finance leases from wholly-owned special purpose vehicles ("Lessor SPVs") of financial institutions in connection with our sale and leaseback transactions. While we do not hold any equity investments in these Lessor SPVs, we have determined that we are the primary beneficiary of these entities and, accordingly, we are required to consolidate these VIEs into our financial results. The key line items impacted by our consolidation of these VIEs are short and long-term debt, restricted cash and short-term deposits, non-controlling interests, interest income and interest expense. In consolidating these lessor VIEs, on a quarterly basis, we must make assumptions regarding (i) the debt amortization profile; (ii) the interest rate to be applied against the VIEs' debt principal; and (iii) the VIE's application of cash receipts. Our estimates are therefore dependent upon the timeliness of receipt and accuracy of financial information provided by these lessor VIE entities. Upon receipt of the audited annual financial statements of the lessor VIEs, we will make a true-up adjustment for any material differences.

3.    RECENTLY ISSUED ACCOUNTING STANDARDS

Adoption of new accounting standards

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842) along with subsequent amendments ASU 2019-20 Leases (Topic 842): Narrow scope improvements for lessors in December 2018 and ASU 2019-01 Leases (Topic 842): Codification improvements in March 2019. Topic 842 modifies the definition of a lease, requires reassessment of the lease term upon the occurrence of certain triggers and introduces new disclosures. Lessors are required to classify leases as sales-type, direct financing or operating, with classification affecting the pattern of income recognition and provide guidance for sale and leaseback transactions. Topic 842 requires a lessee to recognize leases on its balance sheet by recording a lease liability (representing the obligation to make future lease payments) and a right of use asset (representing the right to use the asset for the lease term). Leases for lessees will be classified as either financing or operating with classification affecting the pattern of expense recognition in the income statement.

We adopted this Topic 842 on January 1, 2019 under a modified retrospective transition approach. In contracts where we act as either the lessor or lessee, we have elected to use the "package" of practical expedients available, which means no reassessment on transition of whether an agreement contains a lease, lease classification, and initial direct costs under ASC 842. As part of this package the lease term has been determined using hindsight up to the date of transition when considering lessee options to extend or terminate the agreement or to purchase the underlying asset. Furthermore, where available we have elected not to separate the components in our lease arrangements, instead accounting for them on a combined component basis under ASC 842. Our election of the practical expedient providing transition relief will result in our prior periods not being restated and will continue to be represented in accordance with Topic 840.

The impact on the Company of applying ASU 842 as a lessee, based on contractual arrangements in place at December 31, 2018, was the recognition of lease liabilities of $15.8 million, along with right-of-use assets with a similar aggregate value, which mainly relates to our office leases. This liability corresponds to our lessee related liability for future lease payments presented on the face

23

of the consolidated balance sheet as other current liabilities of $5.5 million and other non-current liabilities of $10.3 million, while the carrying value of the lessee right-of-use assets is disclosed in note 13 to these condensed consolidated financial statements.

For contracts where we are the lessor, the practical expedients that we have elected has resulted in no change to our Balance Sheet on adoption. Our legacy leases will continue to be classified in accordance with Topic 840, while modifications and subsequent accounting will follow the accounting under Topic 842. Leases entered into on or after January 1, 2019 have been assessed under the requirements of Topic 842. New lessor presentation and disclosure requirements have been applied to our new and existing lease agreements. The carrying value of the assets subject to lessor operating leases, and the maturity analysis of operating lease payments under arrangements where we are the lessor, are disclosed in note 8 to the condensed consolidated financial statements.

In July 2018, the FASB issued ASU 2018-09 Codification improvements. The amendments in this ASU cover a wide range of topics including primarily minor corrections, clarifications and codification improvements. We adopted the codification improvements that were not effective on issuance on January 1, 2019 under the specified transition approach connected with each of the codification improvements. This amendment has not had a material impact on our consolidated financial statements or related disclosures, including retained earnings, as January 1, 2019.

Accounting pronouncements that have been issued but not adopted

The following table provides a brief description of recent accounting standards that have been issued but not yet adopted:

Standard
Description
Date of Adoption
Effect on our Consolidated Financial Statements or Other Significant Matters
ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments, including ASU 2018-19 & ASU 2019-04 Codification Improvements to Topic 326 ‘‘Financial Instruments-Credit Losses”
Replaces the incurred loss impairment methodology with an expected loss methodology that requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
January 1, 2020
Under evaluation
ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement
Removes some disclosure requirements relating to transfers between Level 1 and Level 2 of the FV hierarchy. Introduces new disclosure requirements for Level 3 measurements
January 1, 2020
No material impact on our disclosure requirements as we have no Level 3 measurements.
ASU 2018-14 Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.
Removes some disclosure requirements that are not expected to materially change Golar’s existing note. Introduces new disclosure requirements including an explanation of the reasons for significant gains and losses relating to changes in the benefit obligation.
January 1, 2021
No material impact on disclosure requirements.
ASU 2018-15 Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.
Aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software.
January 1, 2020
No material impact on disclosure requirements.
ASU 2018-17 Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest Entities
For the purposes of determining whether a decision making fee is a variable interest, a company is now required to consider indirect interests held through related parties under common control on a proportionate basis as opposed to as a direct investment in the entity.
January 1, 2020
No impact on historical consolidation assessments.
ASU 2018-18 Collaborative Arrangements (Topic 808) - Clarifying the Interaction between
Topic 808 and Topic 606.
Provides guidance on determining when transactions between collaborative arrangement participants should be accounted for as revenue under 606.
January 1, 2020
Under evaluation




24

4.    SEGMENT INFORMATION


We own and operate LNG carriers, a FLNG and FSRUs and provide these services under time charters under varying periods. Our reportable segments consist of the primary services each provides. Although our segments are generally influenced by the same economic factors, each represents a distinct product in the LNG industry. Segment results are evaluated based on net income. The accounting principles for the segments are the same as for our consolidated financial statements. "Project development expenses" are allocated to each segment based on the nature of the project. Indirect general and administrative expenses are allocated to each segment based on estimated use.
The split of the organization of the business into three reportable segments is based on differences in management structure and reporting, economic characteristics, customer base, asset class and contract structure. As of June 30, 2019, we operate in the following three reportable segments:

•
Vessel operations – We operate and subsequently charter out vessels on fixed terms to customers.
•
FLNG – In 2014, we ordered our first FLNG based on the conversion of our existing LNG carrier, the Hilli. The Hilli FLNG conversion has been completed and the vessel was accepted by the customer under the LTA on May 31, 2018.
In July 2016, we entered into an agreement with Schlumberger B.V. ("Schlumberger") to form OneLNG, a joint venture, with the intention to offer an integrated upstream and midstream solution for the development of low cost gas reserves to LNG. In May 2018, it was decided that Golar and Schlumberger will wind down OneLNG and work on FLNG projects as required on a case-by-case basis.
In December 2018, we entered into a FLNG conversion contract for our existing LNG Carrier, the Gimi. See note 11.
•
Power – In July 2016, we entered into certain agreements forming a 50/50 joint venture, Golar Power, with private equity firm Stonepeak. Golar Power offers integrated LNG based downstream solutions, through the ownership and operation of FSRUs and associated terminal and power generation infrastructure.

 
 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
(in thousands of $)
 
Vessel operations
FLNG
Power
Other (1)
Total
 
Vessel operations
FLNG
Power
Other (1)
Total
Statement of Operations:
 
 
 
 
 
 
 
 
 
 
 
 
Total operating revenues
 
101,984

109,048

—

—

211,032

 
106,987

18,577

—

—

125,564

Depreciation and amortization
 
(32,182
)
(24,102
)
—

—

(56,284
)
 
(32,775
)
(4,091
)
—

—

(36,866
)
Other operating expenses
 
(93,305
)
(28,860
)
—

—

(122,165
)
 
(103,058
)
(12,172
)
—

—

(115,230
)
Impairment of long-term assets (2) (3)

 
(41,597
)
—

—

—

(41,597
)
 
—

—

—

—

—

Other operating gains (note 18)
 
9,260

5,183

—

—

14,443

 
10,000

101,366

—

—

111,366

Operating (loss)/income
 
(55,840
)
61,269

—

—

5,429

 
(18,846
)
103,680

—

—

84,834

 
 
 
 
 
 
 
 
 
 
 
 
 
Inter segment operating income/(loss) (4)
 
342

—

—

(342
)
—

 
205

—

—

(205
)
—

Segment operating/(loss) income
 
(55,498
)
61,269

—

(342
)
5,429

 
(18,641
)
103,680

—

(205
)
84,834

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in net (losses)/earnings of affiliates
 
(28,946
)
—

(10,923
)
—

(39,869
)
 
8,693

(2,047
)
(12,861
)
—

(6,215
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet:
 
June 30, 2019
 
December 31, 2018
(in thousands of $)
 
Vessel operations
FLNG
Power
Other (1)
Total
 
Vessel operations
FLNG
Power
Other (1)
Total
Total assets
 
2,683,867

1,682,697

263,526

(5,793
)
4,624,297

 
2,990,506

1,555,389

266,151

(5,451
)
4,806,595

Investment in affiliates
 
259,012

—

263,526

—

522,538

 
305,631

—

266,151

—

571,782


(1) Eliminations required for consolidation purposes.
(2) On March 29, 2019 we signed an agreement with LNG Hrvatska for the future sale of the Golar Viking once converted into an FSRU, following the completion of its current charter lease term, which triggered an impairment indicator. The impairment loss of $34.3 million is recognized in operating costs for the write down of the Golar Viking asset to its fair value. Fair value is based on average broker valuation at date of measurement and represents the exit price in the principal LNG carrier sales market.

25

(3) In May 2019, a major shareholder sold its shareholding which triggered a re-assessment of the carrying value of our investment in OLT-O. This resulted in an impairment charge of $7.3 million for the write down of the carrying value in our investment in OLT-O to its fair value.
(4) Inter segment operating income/(loss) relates to management fee revenues and charter revenues between the segments.

Revenues from external customers

During the six months ended June 30, 2019, our vessels operated predominately under charters within the Cool Pool and tolling fees under our LTA with Perenco and SNH.

For the six months ended June 30, 2019 and 2018, revenues from the following customers accounted for over 10% of our total operating revenues, excluding vessel and other management fees:
 
Six months ended June 30,
(in thousands of $)
2019
2018
Cool Pool (note 17)
66,691

33
%
83,959

74
%
Perenco and SNH
109,048

54
%
18,577

16
%


5.    REVENUE

Contract assets arise when we render services in advance of receiving payment from our customers. Contract liabilities arise when the customer makes payments in advance of receiving the services. Changes in our contract balances during the period are as follows:
(in thousands of $)
Contract assets (1)
Contract liabilities (2)
Opening balance on January 1, 2019
24,376

(31,296
)
Payments received for services billed
(19,937
)
—

Services provided and billed in current period
112,845

—

Payments received for services billed in current period
(93,475
)
—

Deferred commissioning period revenue
—

2,110

Closing balance on June 30, 2019
23,809

(29,186
)
(1) Relates to management fee revenue and liquefaction services revenue, see a) and b) below.
(2) Relates to liquefaction services revenue, see b) below.

a) Management fee revenue:

By virtue of an agreement to offset intercompany balances entered into between us and Golar Partners, of our total contract asset balances above:

•
$3.1 million is included in balance sheet line item "Amounts due from related parties" under current assets ($3.1 million at December 31, 2018), and
•
$3.7 million is included in "Amounts due to related parties" under current liabilities ($4.3 million at December 31, 2018).

Refer to note 17 for further details of our management fee revenue and contract terms.

b) Liquefaction services revenue:

The Hilli is moored in close proximity to the customer’s gasfields, providing liquefaction service capacity over the term of the LTA. Liquefaction services revenue recognized comprises the following amounts:
 
Six months ended June 30,
(in thousands of $)
2019

2018

Base tolling fee (1)
102,250

17,427

Amortization of deferred commissioning period billing (2)
2,110

357

Amortization of Day 1 gain (3)
4,975

841

Other
(287
)
(48
)
Total
109,048

18,577


26

(1) The LTA bills at a base rate in periods when the oil price is $60 or less per barrel (included in "Liquefaction services revenue" in the consolidated statements of income), and at an increased rate when the oil price is greater than $60 per barrel (recognized as a derivative and included in "Realized and unrealized gain on oil derivative instrument" in the consolidated statements of income, excluded from revenue and from the transaction price).
(2) Customer billing during the commissioning period, prior to vessel acceptance and commencement of the contract term, of $33.8 million is considered an upfront payment for services. These amounts billed are deferred (included in "Other current liabilities" and "Other non-current liabilities" in the consolidated balance sheets) and recognized as part of "Liquefaction services revenue" in the consolidated statements of income evenly over the contract term.
(3) The Day 1 gain was established when the oil derivative asset was initially recognized in December 2017 for $79.6 million (recognized in "Other current liabilities" and "Other non-current liabilities" in the consolidated balance sheets). This amount is amortized and recognized as part of "Liquefaction services revenue" in the consolidated statements of income evenly over the contract term.

6.    (LOSS)/EARNINGS PER SHARE

Basic (loss)/earnings per share ("EPS") is calculated with reference to the weighted average number of common shares outstanding during the period.

The components of the numerator for the calculation of basic and diluted EPS are as follows:
(in thousands of $)
Six months ended June 30,
 
2019

2018

Net (loss)/income attributable to Golar LNG Limited stockholders - basic and diluted
(154,423
)
15,317


The components of the denominator for the calculation of basic and diluted EPS are as follows:
(in thousands)
Six months ended June 30,
 
2019

2018

Basic:
 
 
Weighted average number of common shares outstanding
100,802

100,628

 
 
 
Dilutive:
 
 
Dilutive impact of share options
—

100

Weighted average number of common shares outstanding
100,802

100,728


(Loss)/earnings per share are as follows:
 
Six months ended June 30,
 
2019

2018

Basic and diluted
$
(1.53
)
$
0.15



For the six months ended June 30, 2019 and 2018, convertible bonds and employee share plans have been excluded from the calculation of diluted EPS because the effect was anti-dilutive.

7.     OTHER FINANCIAL ITEMS, NET

(Losses)/gains on derivative instruments comprise of the following:
(in thousands of $)
Six months ended June 30,
 
2019

2018

Mark-to-market adjustment for interest rate swap derivatives
(12,226
)
7,713

Mark-to-market adjustment for equity derivatives
(12,605
)
(4,374
)
Interest income on undesignated interest rate swaps
4,093

2,596

Mark-to-market adjustment for foreign exchange swap derivatives

320

(367
)
Unrealized mark-to-market losses on Earn-Out Units
—

(4,500
)
 
(20,418
)
1,068




27

Other financial items, net comprise of the following:
(in thousands of $)
Six months ended June 30,
 
2019

2018

Foreign exchange loss on operations
(573
)
(618
)
Amortization of debt guarantee
633

361

Financing arrangement fees and other costs
(3,480
)
(53
)
Others
81

(164
)
 
(3,339
)
(474
)


8.
OPERATING LEASES

Rental income

The minimum contractual future revenues to be received on non-cancellable time charter leases in respect of our vessels as of June 30, 2019, were as follows:
Period ending December 31,
 
(in thousands of $)
 
2019
20,079

2020
6,580

Total
26,659



Subsequent to June 30, 2019, the Golar Artic, Golar Seal, Golar Snow and Golar Ice commenced charters ranging from 8 to 60 months.

With the exception of the Hilli which has a carrying value of $1,239.5 million as of June 30, 2019, management's intention is that all owned vessels are available to be used by customers under operating lease arrangements.

The components of operating lease income were as follows:
 
Six months ended June 30, 2019

(in thousands of $)
 
Operating lease income
22,001

Variable lease income (1)
2,698

Total operating lease income
24,699

(1) "Variable lease income" is excluded from lease payments that comprise the minimum contractual future revenues from non-cancellable operating leases.

Rental expense

We lease certain office premises, equipment on-board our fleet of vessels and service boats supporting the Hilli under operating leases. Many lease agreements include one or more options to renew. We will include these renewal options when we are reasonably certain that we will exercise the option. The exercise of these lease renewal options is at our discretion.

Variable lease cost relates to certain of our lease agreements which include payments that vary. These are primarily generated from service charges related to our usage of office premises, usage charges for equipment on-board our fleet of vessels, adjustments for inflation, and fuel consumption for the rental of service boats supporting the Hilli.

The components of operating lease cost were as follows:

28

(in thousands of $)
Six months ended June 30, 2019

Operating lease cost (1)
3,430

Variable lease cost (2)
975

Total operating lease cost
4,405



(1) "Operating lease cost" includes short-term lease cost.
(2) "Variable lease cost" is excluded from lease payments that comprise the operating lease liability.

Total operating lease cost is included in income statement line-items "Vessel operating expenses" and "Administrative expenses".

Right-of-use assets obtained in exchange for new operating lease liabilities during the six months ended June 30, 2019 amounted to $12.1 million.

Our weighted average remaining lease term for our operating leases is 5.6 years. Our weighted-average discount rate applied for the majority of our operating leases is 5.5%.

The maturity of our lease liabilities is as follows:
(in thousands of $)
 
Year ending December 31,
Operating leases

2019 (1)
2,304

2020
3,452

2021
2,288

2022
1,223

2023
491

Thereafter
2,462

Total operating lease liabilities on June 30, 2019
12,220

(1) For the six months ending December 31, 2019.

9.     VARIABLE INTEREST ENTITIES ("VIE")

9.1 Lessor VIEs

As of June 30, 2019, we leased eight (December 31, 2018: eight) vessels from VIEs as part of sale and leaseback agreements, of which four were with ICBCL entities, one with a CMBL entity, one with a CCBFL entity, one with a COSCO Shipping entity and one with a CSSC entity. Each of the ICBCL, CMBL, CCBFL, COSCO Shipping and CSSC entities are wholly-owned, newly formed special purpose vehicles ("Lessor SPVs"). In each of these transactions, we sold our vessel and then subsequently leased back the vessel on a bareboat charter for a term of ten years. We have options to repurchase each vessel at fixed predetermined amounts during their respective charter periods and an obligation to repurchase each vessel at the end of the ten year lease period. Refer to note 5 to our consolidated financial statements filed with our annual report on Form 20-F for the year ended December 31, 2018, for additional details.  
 
While we do not hold any equity investments in the above Lessor SPVs, we have determined that we have a variable interest in these SPVs and that these lessor entities, that own the vessels, are VIEs. Based on our evaluation of the agreements, we have concluded that we are the primary beneficiary of these VIEs and, accordingly, these lessor VIEs are consolidated into our financial results. We did not record any gains or losses from the sale of these vessels as they continued to be reported as vessels at their original costs in our consolidated financial statements at the time of each transaction. Similarly, the effect of the bareboat charter arrangement is eliminated upon consolidation of the Lessor SPV. The equity attributable to the respective lessor VIEs are included in non-controlling interests in our consolidated results. As of June 30, 2019 and December 31, 2018, the respective vessels are reported under "Vessels and equipment, net" in our consolidated balance sheets.

A summary of our payment obligations (excluding repurchase options and obligations) under the bareboat charters with the lessor VIEs as of June 30, 2019, are shown below:

(in thousands of $)



2019 (1)
2020
2021
2022
2023
2024+
Golar Glacier
8,620
17,147
17,100
17,100
17,100
12,884
Golar Kelvin
8,620
17,147
17,100
17,100
17,100
15,695
Golar Snow
8,620
17,147
17,100
17,100
17,100
15,695
Golar Ice
8,620
17,147
17,100
17,100
17,100
18,599
Golar Tundra (2)
10,284
19,963
19,196
18,449
17,703
30,527
Golar Seal
6,840
13,717
13,717
13,717
13,754
27,433
Golar Crystal (2)
5,617
11,151
11,066
11,016
10,952
35,092
Hilli (2)
58,322
113,845
109,915
105,984
102,148
389,916

(1) For the six months ending December 31, 2019.
(2) The payment obligations relating to the Golar Tundra, Golar Crystal and Hilli above includes variable rental payments due under the lease based on an assumed LIBOR plus margin.

The assets and liabilities of these lessor VIEs that most significantly impact our consolidated balance sheet as of June 30, 2019 and December 31, 2018, are as follows:

29

(in thousands of $)
Golar Glacier
Golar Kelvin
Golar Snow
Golar Ice
Golar Tundra
Golar Seal
Golar Crystal
Hilli
June 30, 2019
 
December 31, 2018
Assets
 
 
 
 
 
 
 
 
Total
 
Total
Restricted cash and short-term deposits
10,652

9

8,707

11,346

—

23,370

4,103

56,789

114,976

 
176,428

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Debt:
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt and short-term debt (1)
146,203

155,626

144,742

120,748

11,065

—

5,748

139,884

724,016

 
646,513

Long-term interest bearing debt - non-current portion (1)
—

—

—

—

102,256

123,105

88,036

718,800

1,032,197

 
1,200,774

 
146,203

155,626

144,742

120,748

113,321

123,105

93,784

858,684

1,756,213

 
1,847,287

(1) Where applicable, these balances are net of deferred finance charges.

The most significant impact of lessor VIE's operations on our unaudited consolidated statements of income is interest expense of $35.9 million and $19.1 million for the six months ended June 30, 2019 and 2018, respectively. The most significant impact of lessor VIE's cash flows on our unaudited consolidated statements of cash flows is receipts of $91.6 million and $864.7 million in financing activities for the six months ended June 30, 2019 and 2018, respectively.

9.2    Golar Hilli LLC

Following to the sale of common units in Golar Hilli LLC, we have retained sole control over the most significant activities and the greatest exposure to variability in residual returns and expected losses from the Hilli. Accordingly, management has concluded that Hilli LLC is a VIE and that we are the primary beneficiary.

Summarized financial information of Hilli LLC

The assets and liabilities of Hilli LLC(1) that most significantly impact our consolidated balance sheet are as follows:
(in thousands of $)
June 30, 2019
December 31, 2018
Balance sheet
 
 
Current assets
112,646

172,554

Non-current assets
1,366,869

1,392,713

Current liabilities
(200,633
)
(278,728
)
Non-current liabilities
(805,686
)
(842,786
)
(1) As Hilli LLC is the primary beneficiary of the Hilli Lessor VIE (see above) the Hilli LLC balances include the Hilli Lessor VIE.

The most significant impact of Hilli LLC VIE's operations on our unaudited consolidated statements of income, and unaudited consolidated statements of cash flows, are as follows:
(in thousands of $)
Six months ended June 30, 2019
Six months ended June 30, 2018
Statement of operations
 
 
Liquefaction services revenue
109,048

18,577

Realized and unrealized gains on the oil derivative instrument
8,145

111,348

 
 
 
Statement of cash flows
 
 
Net debt repayments
39,297

—

Net debt receipts
—

928,280



9.3    Gimi MS


30

On April 16, 2019, the subscription of 30% of the equity interests in Gimi MS by First FLNG Holdings was completed. Concurrent with the closing of the sale of the common units, we have determined that (i) Gimi MS is a VIE, (ii) we are the primary beneficiary and retain sole control over the most significant activities and the greatest exposure to variability in residual returns and expected losses from the Gimi. Thus Gimi MS continues to be consolidated into our financial statements.

Summarized financial information of Gimi MS

The assets and liabilities of Gimi MS that most significantly impact our consolidated balance sheet are as follows:
(in thousands of $)
June 30, 2019
Balance sheet
 
Current assets
48,328

Non-current assets
187,056

Current liabilities
(40,837
)

The most significant impact of Gimi MS VIE's operations on our unaudited consolidated statements of cash flows, are as follows:
(in thousands of $)
Six months ended June 30, 2019
Statement of cash flows
 
Additions to asset under development

105,339



10.     RESTRICTED CASH AND SHORT-TERM DEPOSITS

Our restricted cash and short-term deposits balances are as follows:
(in thousands of $)
June 30, 2019

December 31, 2018

Restricted cash relating to the total return equity swap
96,763

82,863

Restricted cash in relation to the Hilli
151,957

174,597

Restricted cash and short-term deposits held by lessor VIEs
114,976

176,428

Collateral on the Margin Loan Facility

33,413

33,413

Restricted cash relating to the $1.125 billion debt facility
7,648

17,657

Restricted cash relating to office lease
786

777

Bank guarantee
43

691

Total restricted cash and short-term deposits
405,586

486,426

Less: Amounts included in current restricted cash and short-term deposits
(252,843
)
(332,033
)
Long-term restricted cash
152,743

154,393





31

11.    ASSET UNDER DEVELOPMENT

(in thousands of $)
June 30, 2019

Opening asset under development balance
20,000

Transfer from other non-current assets (note 13)
31,048

Additions
127,444

Interest costs capitalized
1,888

Other costs capitalized
6,580

Closing asset under development balance
186,960



In October 2014, we entered into agreements for the conversion of the Gimi to a FLNG. The primary vessel conversion contract was entered into with Keppel in December 2018. In February 2019, Golar entered into an agreement with BP for the charter of a FLNG unit, the Gimi, to service the Greater Tortue Ahmeyim project for a 20-year period expected to commence in 2022. The Gimi was delivered to Keppel shipyard in Singapore to undergo initial works in connection with her conversion in early 2019. Various preparatory work on the Gimi conversion continues with the first steel being cut in April 2019 and the overall project remains on track and the charter is expected to commence in 2022.

In April 2019, we issued the shipyard with a Final Notice to Proceed with conversion works that had been initiated under the Limited Notice to Proceed. The estimated conversion cost of the Gimi is approximately $1.3 billion. As at June 30, 2019, the estimated timing of the outstanding payments in connection with the Gimi conversion are as follows:
Period ending December 31,
 
(in thousands of $)
June 30, 2019

2019 (1)

235,923

2020
364,748

2021
213,203

2022
230,724

2023
134,231

 
1,178,829



(1) For the six months ending December 31, 2019

$700 million facility

On April 16, 2019, we received a $700 million underwritten financing commitment for a long-term financing facility, which is subject to the satisfaction of certain conditions by the parties and final documentation. The facility will be available during the Gimi conversion and has a tenure of 7 years post commissioning and a 12-year amortization profile. Drawdown from the facility is dependent upon reaching project spend of $300 million. Concurrent with receipt of this financing commitment, First FLNG Holdings, an indirect wholly-owned subsidiary of Keppel Capital Holdings Pte Ltd, subscribed to 30% of the total issued ordinary share capital of Gimi MS.


32

12.     INVESTMENTS IN AFFILIATES AND JOINT VENTURES

 
Six months ended June 30,
(in thousands of $)
2019

2018

Share of net (losses)/earnings in Golar Partners
(27,659
)
8,630

Share of net loss in Golar Power
(10,923
)
(12,861
)
Share of net loss in OneLNG
—

(2,047
)
Share of net (losses)/earnings in others
(858
)
63

Share of net loss in Avenir
(429
)
—

 
(39,869
)
(6,215
)



The carrying amounts of our investments in our equity method investments as at June 30, 2019 and December 31, 2018 are as follows:
(in thousands of $)
June 30, 2019

December 31, 2018

Golar Partners
225,094

271,160

Golar Power
263,526

266,151

Avenir
28,927

28,710

Others
4,991

5,761

Equity in net assets of affiliates
522,538

571,782



13.     OTHER NON-CURRENT ASSETS

Other non-current assets comprise of the following:

(in thousands of $)
June 30, 2019

December 31, 2018

Oil derivative instrument (1)
85,572

84,730

Operating lease right-of-use-assets (2)
12,093

—

Investment in OLT-O (3)
—

7,347

Other non-current assets (4)
18,780

40,729

Mark-to-market interest rate swaps valuation
218

6,298

 
116,663

139,104



(1) "Oil derivative instrument" refers to a derivative embedded in the Hilli LTA. See note 2 for further details.

(2) Following the adoption of ASC 842, the balance sheet presents right-of-use-assets which mainly comprise of our office leases. This standard has been adopted under a modified retrospective transition approach as of January 1, 2019.

(3) Investment in OLT-O refers to our investment in an Italian incorporated unlisted company which is involved in the construction, development, operation and maintenance of a FSRU terminal to be situated off the Livorno coast of Italy, representing a 2.7% interest in OLT-O’s issued share capital. In May 2019, a major shareholder sold its shareholding which triggered a re-assessment of the carrying value of our investment in OLT-O. This resulted in an impairment charge of $7.3 million for the write down of the carrying value in our investment in OLT-O.

(4) "Other non-current assets" as of June 30, 2019 includes payments made for long lead items ordered in preparation for the conversion of the Viking into an FSRU. As of June 30, 2019 the aggregate carrying value of Viking long lead items was $9.1 million.


33

"Other non-current assets" as of December 31, 2018 was mainly comprised of payments made relating to long lead items ordered in preparation for the conversion of the Gimi into a FLNG vessel. Subsequent to the receipt of a Limited Notice to Proceed from BP in relation to the Greater Tortue in December 2018, initial works of the FLNG conversion commenced in January 2019. Consequently, as of June 30, 2019, the aggregate carrying value of $31.0 million has been reclassified to "Asset under development" (see note 11).

14.    DEBT

As of June 30, 2019, and December 31, 2018, our debt was as follows:

(in thousands of $)
June 30, 2019

December 31, 2018

Golar Arctic facility
54,650

58,300

Golar Viking facility
44,271

46,875

2017 convertible bonds
360,665

353,661

Margin loan
100,000

100,000

$1.125 billion facility
162,873

173,732

Subtotal (excluding lessor VIE loans)
722,459

732,568

ICBCL VIE loans (1)
568,608

609,220

CCBFL VIE loan (1)
123,105

123,524

CMBL VIE loan (1)
113,321

121,741

COSCO Shipping VIE loan (1)
94,351

97,163

CSSC VIE loan (1)
858,684

897,980

Total debt
2,480,528

2,582,196

Less: Deferred finance charges, net
(13,020
)
(16,837
)
Total debt, net of deferred financing costs
2,467,508

2,565,359


At June 30, 2019, our debt, net of deferred financing costs, is broken down as follows:
 
Golar debt

VIE debt (1)

Total debt

(in thousands of $)
 
 
 
Current portion of long-term debt and short-term debt
78,307

724,016

802,323

Long-term debt
632,988

1,032,197

1,665,185

Total
711,295

1,756,213

2,467,508

(1) These amounts relate to certain lessor entities (for which legal ownership resides with financial institutions) that we are required to consolidate under U.S. GAAP into our financial statements as variable interest entities (see note 9).

15.    ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss consisted of the following:
(in thousands of $)
Pension and post-retirement benefit plan adjustments
Share of affiliates' comprehensive income
Total accumulated comprehensive loss
Balance at December 31, 2017
(12,799
)
5,030

(7,769
)
Other comprehensive loss
—

(24,137
)
(24,137
)
Balance at June 30, 2018
(12,799
)
(19,107
)
(31,906
)
 
 
 
 
Balance at December 31, 2018
(9,218
)
(19,294
)
(28,512
)
Other comprehensive income
—

651

651

Balance at June 30, 2019
(9,218
)
(18,643
)
(27,861
)


16.     FINANCIAL INSTRUMENTS

Fair values
We recognize our fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value of hierarchy has three levels based on reliability of inputs used to determine fair value as follows:


34

Level 1: Quoted market prices in active markets for identical assets and liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.

The carrying values and estimated fair values of our financial instruments at June 30, 2019 and December 31, 2018 are as follows:

 
 
June 30, 2019
December 31, 2018
(in thousands of $)
Fair value
hierarchy
Carrying value
Fair value
Carrying value
Fair value
Non-Derivatives:
 
 
 
 
 
Cash and cash equivalents
Level 1
139,834

139,834

217,835

217,835

Restricted cash and short-term deposits
Level 1
405,586

405,586

486,426

486,426

Current portion of long-term debt and short-term debt (1)(2)
Level 2
(806,999
)
(906,999
)
(732,184
)
(732,184
)
Long-term debt - convertible bonds (2)
Level 2
(360,665
)
(372,651
)
(353,661
)
(373,029
)
Long-term debt (2)
Level 2
(1,312,864
)
(1,212,864
)
(1,496,351
)
(1,496,351
)
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
Oil derivative instrument(3)(6)
Level 2
85,572

85,572

84,730

84,730

Interest rate swaps asset (3)(4)
Level 2
1,928

1,928

10,770

10,770

Interest rate swaps liability (3)(4)
Level 2
(3,384
)
(3,384
)
—

—

Foreign exchange swaps asset (3)
Level 2
92

92

—

—

Foreign exchange swaps liability (3)
Level 2
(1,094
)
(1,094
)
(1,322
)
(1,322
)
Total return equity swap liability (3)(4)(5)
Level 2
(83,410
)
(83,410
)
(70,804
)
(70,804
)

(1) The carrying amounts of our short-term debt approximate their fair values because of the near term maturity of these instruments.
(2) Our debt obligations are recorded at amortized cost in the consolidated balance sheets. The amounts presented in the table above are gross of the deferred finance charges amounting to $13.0 million and $16.8 million at June 30, 2019 and December 31, 2018, respectively.
(3) Derivative liabilities are captured within other current liabilities and derivative assets are generally captured within other current assets and non-current assets on the balance sheet.
(4) The fair value of certain derivative instruments is the estimated amount that we would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates, foreign exchange rates, closing quoted market prices and our creditworthiness and that of our counterparties.
(5) The fair value of total return equity swaps is calculated using the closing prices of the underlying listed shares, dividends paid since inception and the interest rate charged by the counterparty.
(6) The fair value of the oil derivative instrument was determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the LTA. Significant inputs used in the valuation of the oil derivative include management’s estimate of an appropriate discount rate and the length of time to blend the long and short-term oil prices obtained from quoted prices in active markets.

As of June 30, 2019, we were party to the following interest rate swap transactions involving the payment of fixed rates in exchange for LIBOR as summarized below:

Instrument (in thousands of $)
Notional value

Maturity dates
Fixed interest rates
Interest rate swaps:
 
 
 
Receiving floating, pay fixed
950,000

2019 to 2025
1.28% to 2.37%

During the six months ended June 30, 2019, we entered into new interest rate swaps with a notional value of $250.0 million and terminated existing interest rate swaps with a notional value of $250.0 million.


35

The credit exposure of our interest rate and equity swap agreements are represented by the fair value of contracts with a positive fair value at the end of each period, reduced by the effects of master netting agreements. It is our policy to enter into master netting agreements with the counterparties to derivative financial instrument contracts, which give us the legal right to discharge all or a portion of amounts owed to the counterparty by offsetting them against amounts that the counterparty owes to us. We have elected not to offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable master netting arrangements. However, if we were to offset and record the asset and liability balances of derivatives on a net basis, the amounts presented in our consolidated balance sheets as of June 30, 2019 and December 31, 2018 would be adjusted as detailed in the following table:
 
June 30, 2019
 
December 31, 2018
 
(in thousands of $)
Gross amounts presented in the consolidated balance sheet
 
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
 
Net amount
 
Gross amounts presented in the consolidated balance sheet
 
Gross amounts not offset in the consolidated balance sheet subject to netting agreements
 
Net amount
 
Total asset derivatives
1,928

 
(917
)
 
1,011

 
10,770

 
—

 
10,770

 
Total liability derivatives
(3,384
)
 
917

 
(2,467
)
 
—

 
—

 
—

 


The total return equity swap has a credit arrangement that requires us to provide cash collateral equalling 20% of the initial purchase price and to subsequently post additional cash collateral that corresponds to any unrealized loss. As at June 30, 2019, cash collateral amounting to $96.8 million has been provided.

17.    RELATED PARTY TRANSACTIONS

a) Transactions with Golar Partners and subsidiaries:

Net revenues (expenses): The transactions with Golar Partners and its subsidiaries for the six months ended June 30, 2019 and 2018 consisted of the following:
 
Six months ended 
 June 30,
(in thousands of $)
2019

2018

Management and administrative services revenue (a)
4,747

3,877

Ship management fees revenue (b)
2,230

2,600

Interest expense on deposits payable (c)
—

(4,484
)
Total
6,977

1,993



Payables: The balances with Golar Partners and its subsidiaries as of June 30, 2019 and December 31, 2018 consisted of the following:
(in thousands of $)
June 30, 2019

December 31, 2018

Trading balances owing to Golar Partners and affiliates (d)
247

4,091

Methane Princess lease security deposit movement (e)
(2,383
)
(2,835
)
Total
(2,136
)
1,256


a)
Management and administrative services agreement - On March 30, 2011, Golar Partners entered into a management and administrative services agreement with Golar Management Limited ("Golar Management"), a wholly-owned subsidiary of Golar, pursuant to which Golar Management will provide to Golar Partners certain management and administrative services. The services provided by Golar Management are charged at cost plus a management fee equal to 5% of Golar Management’s costs and expenses incurred in connection with providing these services. Golar Partners may terminate the agreement by providing 120 days written notice.


36

b)
Ship management fees - Golar and certain of its affiliates charge ship management fees to Golar Partners for the provision of technical and commercial management of Golar Partners' vessels. Each of Golar Partners’ vessels is subject to management agreements pursuant to which certain commercial and technical management services are provided by Golar Management. Golar Partners may terminate these agreements by providing 30 days written notice.

c)
Interest expense on deposits payable

Deferred purchase price - In May 2017, the Golar Tundra had not commenced her charter and, accordingly, Golar Partners elected to exercise the Tundra Put Right to require us to repurchase Tundra Corp at a price equal to the original purchase price. In connection with Golar Partners exercising the Tundra Put Right, we and Golar Partners entered into an agreement pursuant to which we agreed to purchase Tundra Corp from Golar Partners on the date of the closing of the Tundra Put Sale in return we were required to pay an amount equal to $107.2 million (the "Deferred Purchase Price") plus an additional amount equal to 5% per annum of the Deferred Purchase Price (the "Additional Amount"). The Deferred Purchase Price and the Additional Amount was applied to the net sale price of the Hilli Disposal (defined below) on July 12, 2018.

Deposit received from Golar Partners - On August 15, 2017, we entered into the Hilli Sale Agreement with Golar Partners for the Hilli, or the Hilli Disposal, from the Sellers of the Hilli Common Units in Hilli LLC. On the Closing Date of the Hilli Disposal, Hilli LLC will be the disponent owner of the Hilli. The Disposal Interests represent the equivalent of 50% of the two liquefaction trains, out of a total of four, that are contracted to Perenco and SNH under an eight-year LTA. Concurrent with the execution of the Hilli Sale Agreement, we received a further $70 million deposit from Golar Partners, upon which we pay interest at a rate of 5% per annum. We applied the deposit received and interest accrued to the purchase price on July 12, 2018, upon completion of the Hilli Disposal.

We have accounted for $nil and $2.7 million, and $nil and $1.8 million from the above arrangements as interest expense on the Deferred Purchase Price and the $70 million deposit for the six months ended June 30, 2019 and 2018, respectively.

d)
Trading balances - Receivables and payables with Golar Partners and its subsidiaries are comprised primarily of unpaid management fees, interest expense and expenses for management, advisory and administrative services and may include working capital adjustments with respect to disposals to the Partnership, as well as charterhire expenses. In addition, certain receivables and payables arise when we pay an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Trading balances owing to or due from Golar Partners and its subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business. They primarily relate to recharges for trading expenses paid on behalf of Golar Partners, including ship management and administrative service fees due to us.

e)
Methane Princess Lease security deposit movements - This represents net advances from Golar Partners since its IPO, which correspond with the net release of funds from the security deposits held relating to the Methane Princess Lease. This is in connection with the Methane Princess tax lease indemnity provided to Golar Partners under the Omnibus Agreement. Accordingly, these amounts will be settled as part of the eventual termination of the Methane Princess Lease.

Other transactions:


During the six months ended June 30, 2019 and 2018, we received total distributions from Golar Partners of $18.3 million and $26.2 million, respectively with respect to the common units and general partner units owned by us.

During the six months ended June 30, 2019, Hilli LLC had declared distributions totalling $9.0 million with respect to the common units owned by Golar Partners. In connection with the Hilli Disposal we have agreed to indemnify Golar Partners for certain costs incurred in Hilli operations when these costs exceed a contractual ceiling. We have accounted for $0.8 million as the net Hilli indemnification cost for the six months ended June 30, 2019. As of June 30, 2019, we have a payable of $6.8 million to Golar Partners, recorded in "amounts due to related parties", in respect of the Hilli quarterly distribution and Hilli cost indemnification.


37

b) Transactions with Golar Power and affiliates:

Net revenues: The transactions with Golar Power and its affiliates for the six months ended June 30, 2019 and 2018 consisted of the following:
 
Six months ended 
 June 30,
(in thousands of $)
2019

2018

Management and administrative services revenue
3,011

2,457

Ship management fees income
606

700

Debt guarantee compensation (a)
633

361

Other
—

(247
)
Total
4,250

3,271


Payables: The balances with Golar Power and its affiliates as of June 30, 2019 and December 31, 2018 consisted of the following:
(in thousands of $)
June 30, 2019

December 31, 2018

Trading balances due to Golar Power and affiliates (b)
(2,583
)
(5,417
)
Total
(2,583
)
(5,417
)

a)
Debt guarantee compensation - In connection with the closing of the formation of the joint venture Golar Power with Stonepeak, Golar Power entered into agreements to compensate Golar in relation to certain debt guarantees relating to Golar Power and its subsidiaries. This compensation amounted to an aggregate of $0.6 million and $0.4 million income for the six months ended June 30, 2019 and 2018, respectively.

b)
Trading balances - Receivables and payables with Golar Power and its subsidiaries are comprised primarily of unpaid management fees, charterhire expenses, advisory and administrative services and may include working capital adjustments in connection with the initial formation of the joint venture and transaction with Stonepeak. In addition, certain receivables and payables arise when we pay an invoice on behalf of a related party and vice versa. Receivables and payables are generally settled quarterly in arrears. Trading balances owing to or due from Golar Power and its subsidiaries are unsecured, interest-free and intended to be settled in the ordinary course of business. They primarily relate to recharges for trading expenses paid on behalf of Golar Power, including ship management and administrative service fees due to us.

Guarantees:

Debt guarantees - The debt guarantees on the Golar Penguin and the Golar Celsius were previously issued by Golar to third party banks in respect of certain secured debt facilities relating to Golar Power and subsidiaries. As described in (a) above we receive compensation from Golar Power in relation to the provision of the guarantees. In addition, a debt guarantee was provided on the newbuild Golar Nanook. The liability which is recorded in "Other non-current liabilities" is being amortized over the remaining term of the respective debt facilities with the credit being recognized in "Other financial items". As of June 30, 2019 and December 31, 2018, the Company guaranteed $376.8 million and $393.5 million, respectively of Golar Power's gross long-term debt obligations. The debt facilities are secured against specific vessels.

c) Transactions with OneLNG and subsidiaries:

Net revenues: The transactions with OneLNG and its subsidiaries for the six months ended June 30, 2019 and 2018 consisted of the following:
 
Six months ended 
 June 30,
(in thousands of $)
2019

2018

Management and administrative services revenue
—

1,399

Total
—

1,399



38

Receivables: The balances with OneLNG and its subsidiaries as of June 30, 2019 and December 31, 2018 consisted of the following:
(in thousands of $)
June 30, 2019

December 31, 2018

Trading balances due from OneLNG (a)
5,207

8,169

Total
5,207

8,169



a)
Trading balances - Receivables and payables with One LNG and its subsidiaries are comprised primarily of unpaid management fees, charterhire expenses, advisory, administrative services and payment on behalf of a related party and vice versa. In 2018, it was decided that Golar and Schlumberger will wind down OneLNG and work on FLNG projects as required on a case-by-case basis.

During the six months ended June 30, 2019, we have written off $3.0 million of the unrecoverable trading balance with OneLNG.

d) Transactions with the Cool Pool:

The table below summarizes our earnings generated from our participation in the Cool Pool:
 
Six Months Ended 
 June 30,
(in thousands of $)
2019

2018

Time and voyage charter revenues
43,332

64,605

Time charter revenues - collaborative arrangement
23,359

19,353

Voyage, charterhire and commission expenses
(8,092
)
(8,600
)
Voyage, charterhire and commission expenses - collaborative arrangement
(18,933
)
(30,897
)
Net income from the Cool Pool
39,666

44,461


Receivables from other related parties:
(in thousands of $)
June 30, 2019

December 31, 2018

Cool Pool
11,205

43,985

 
11,205

43,985



18.     OTHER COMMITMENTS AND CONTINGENCIES

Assets pledged
(in thousands of $)
June 30, 2019

December 31, 2018

Book value of vessels secured against long-term loans
3,165,857

3,244,291



As at June 30, 2019 and December 31, 2018, 21,226,586 Golar Partners common units were pledged as security for the obligations under the Margin Loan Facility.

Capital Commitments

We have agreed contract terms for the conversion of the Gandria to a FLNG. The Gandria is currently in lay-up awaiting delivery to Keppel for conversion. The conversion agreement is subject to certain payments and lodging of a full Notice to Proceed.

UK tax lease benefits

As described under note 30 in our audited consolidated financial statements filed with our annual report on Form 20-F for the year ended December 31, 2018, during 2003 we entered into six UK tax leases. Under the terms of the leasing arrangements, the benefits are derived primarily from the tax depreciation assumed to be available to the lessors as a result of their investment in the vessels. As is typical in these leasing arrangements, as the lessee we are obligated to maintain the lessor’s after-tax margin. Accordingly, in the event of any adverse tax changes or a successful challenge by the UK Tax Authorities (''HMRC'') with regard to the initial tax basis of the transactions, or in relation to the 2010 lease restructurings, or in the event of an early termination of the Methane

39

Princess lease, we may be required to make additional payments principally to the UK vessel lessor, which could adversely affect our earnings or financial position. We would be required to return all, or a portion of, or in certain circumstances significantly more than, the upfront cash benefits that we received in respect of our lease financing transactions, including the 2010 restructurings and subsequent termination transactions. The gross cash benefit we received upfront on these leases amounted to approximately £41 million (before deduction of fees).

Of these six leases, we have since terminated five, with one lease remaining, the Methane Princess lease. Pursuant to the deconsolidation of Golar Partners in 2012, Golar Partners is no longer considered a controlled entity but an affiliate and therefore as at June 30, 2019, the capital lease obligation relating to this remaining UK tax lease is not included on our consolidated balance sheet. However, under the indemnity provisions of the Omnibus Agreement or the respective share purchase agreements, we have agreed to indemnify Golar Partners in the event of any tax liabilities in excess of scheduled or final scheduled amounts arising from the Methane Princess leasing arrangements and termination thereof.

HMRC has been challenging the use of similar lease structures and has been engaged in litigation of a test case for some years. In August 2015, following an appeal to the Court of Appeal by the HMRC which set aside previous judgments in favor of the tax payer, the First Tier Tribunal (UK court) ruled in favor of HMRC. The tax payer in this particular ruling had the election to appeal the courts’ decision, but no appeal was filed. The judgments of the First Tier Tribunal do not create binding precedent for other UK court decisions and therefore the ruling in favor of HMRC is not binding in the context of our structures. Further, we consider there are differences in the fact pattern and structure between this case and our 2003 leasing arrangements and therefore is not necessarily indicative of any outcome. HMRC have written to our lessor to indicate that they believe our lease may be similar to the case noted above, however we remain confident that our fact pattern is sufficiently different. We have reviewed the details of the case and the basis of the judgment with our legal and tax advisers to ascertain what impact, if any, the judgment may have on us and the possible range of exposure has been estimated at approximately £nil to £115.0 million. We continue to have discussions with HMRC on this matter, although we deem it unlikely that the inquiry will be brought to a mutually satisfactory conclusion. Accordingly, we are determining how best to proceed in conjunction with our lessor. This will likely involve obtaining supplementary legal advice in addition to the advice we have previously received. We remain confident of our legal position, however given the complexity of these discussions it is impossible to quantify the reasonably possible loss, and we continue to estimate the possible range of exposures as set out above.

Legal proceedings and claims

We may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. A provision will be recognized in the financial statements only where we believe that a liability will be probable and for which the amounts are reasonably estimable, based upon the facts known prior to the issuance of the financial statements.

Other

In December 2005, we signed a shareholders' agreement in connection with the setting up of a jointly owned company to be named Egyptian Company for Gas Services S.A.E ("ECGS"), which was to be established to develop hydrocarbon business and in particular LNG related business in Egypt. As at June 30, 2019, we had a commitment to pay $1.0 million to a third party, contingent upon the conclusion of a material commercial business transaction by ECGS as consideration for work performed in connection with the setting up and incorporation of ECGS.

We are party to a shareholders’ agreement with a consortium of investors to fund the development of pipeline infrastructure and a FSRU which are intended to supply two power plants in the Ivory Coast. The project is currently in the initial design phase. Negotiations are underway with third party lenders for the financing of construction costs in the event a positive investment decision is made. During the initial phase of the project, our remaining contractual commitments for this project are estimated to be around €1.0 million. In the event a positive FID is taken on the project, this could increase up to approximately €15.0 million. This figure is dependent upon a variety of factors such as whether third party financing is obtained for a portion of the construction costs. The timing of this range of payments is dependent on whether and when FID is made, progress of negotiations with lenders for non-investor financing, and the progress of eventual construction work. The nature of payments to the project could be made in a combination of capital contributions or interest-bearing shareholder loans.

In 2017, we commenced arbitration proceedings arising from the delays and the termination of the Golar Tundra time charter with a former charterer. For the period ended June 30, 2019 we recovered $9.3 million, which represents the last installment settlement, recognized in 'Other operating income' in the unaudited consolidated statements of operations.

In relation to our investment in small-scale LNG services provider Avenir LNG Limited ("Avenir") (see note 12), we are party to a combined commitment of up to $182.0 million from initial Avenir shareholders Stolt-Nielsen Limited ("Stolt-Nielsen"), Höegh

40

LNG Holdings Limited ("Höegh") and us. In November 2018, Avenir was capitalised with the placement of 110,000,000 new shares at a par price of US$1.00 per share. Following the initial equity offering, the founding partners are committed to fund $72.0 million of which Golar is committed to approximately $18.0 million.

Following the execution of the conversion and subsequent sale of the Golar Viking with LNG Hrvatska d.o.o., the estimated timing of the outstanding payments in connection with the conversion of the Golar Viking is $8.7 million and $86.7 million for the six months ending December 31, 2019 and twelve months ending December 2020. The outstanding payment will be largely funded by stage payments from LNG Hrvatska d.o.o. under the conversion agreement.

19.    SUBSEQUENT EVENTS

Margin loan refinancing
In August 2019, we entered into an agreement with a group of lenders to refinance our existing Margin Loan Facility. The new Margin Loan Facility introduces a revolving element, increases the principal amount available to draw to $110 million and has a maturity of one year from execution. The new Margin Loan Facility will continue to be secured by a pledge against our common units in Golar Partners.

$150 million term loan facility
In August 2019, we entered into a $150 million term loan facility with a total term of fifteen months.

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