Highlights
- Golar LNG Limited ("Golar" or "the Company") reports net income
of $66.2 million for the third quarter of 2018 ("3Q").
- Total operating revenues of $123.1 million reported for the
quarter.
- Adjusted EBITDA1 of $83.5 million for the quarter excluding
$77.5 million of unrealized Brent oil linked mark-to-market
derivative instrument income.
- Net financial expenses of $37.8 million including
mark-to-market derivatives related to interest and equity swaps of
$10.7 million.
- Completed the sale of initial equity interest in Golar Hilli
LLC to Golar LNG Partners LP ("Golar Partners" or the
"Partnership").
- Joint venture Golar Power Limited ("Golar Power") closed $235.5
million financing facility for FSRU Golar Nanook and took delivery
of vessel.
- The shipping fleet records Time Charter Equivalent1 ("TCE")
earnings of $41,200 per day ($48,100 for TFDE vessels and $11,000
for steam vessels).
Subsequent Events
- Established small-scale LNG entity Avenir LNG Limited
("Avenir") in conjunction with Stolt-Nielsen Limited
("Stolt-Nielsen") and Höegh LNG Holdings Limited ("Höegh").
- FLNG Hilli Episeyo maintains 100% commercial uptime following
acceptance. Export of the vessel's 10th LNG cargo currently in
progress.
- Shipping market improvement continues. Expected 4Q 2018 TCE1
based on fixtures to date in range of $70,000 - $80,000 for all
ships and $85,000 - $95,000 for TFDE vessels.
- The Board approved an increase in the quarterly dividend to
$0.15 cents per share in light of a solid cash position, a
significantly improved shipping market and the successful startup
of Hilli Episeyo.
Financial Review
Business Performance
|
2018 |
|
Jul-Sep |
Apr-Jun |
(in thousands of $) |
Vessel and other operations |
FLNG |
Total |
Vessel and other operations |
FLNG |
Total |
Total operating revenues |
68,577 |
|
54,524 |
|
123,101 |
|
40,797 |
|
18,577 |
|
59,374 |
|
Vessel operating expenses |
(16,785 |
) |
(12,065 |
) |
(28,850 |
) |
(16,940 |
) |
(3,556 |
) |
(20,496 |
) |
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(23,280 |
) |
(1,457 |
) |
(24,737 |
) |
(16,030 |
) |
(453 |
) |
(16,483 |
) |
Administrative expenses(2) |
(14,804 |
) |
29 |
|
(14,775 |
) |
(13,257 |
) |
(99 |
) |
(13,356 |
) |
Project development expenses(2) |
(1,037 |
) |
(4,704 |
) |
(5,741 |
) |
(1,145 |
) |
(6,798 |
) |
(7,943 |
) |
Realized gain on oil derivative instrument(3) |
- |
|
11,270 |
|
11,270 |
|
- |
|
3,048 |
|
3,048 |
|
Other operating gains (losses) |
26,000 |
|
(2,740 |
) |
23,260 |
|
10,000 |
|
(9,982 |
) |
18 |
|
Adjusted EBITDA(1) |
38,671 |
|
44,857 |
|
83,528 |
|
3,425 |
|
737 |
|
4,162 |
|
|
|
|
|
|
|
|
Reconciliation to operating income (loss) |
|
|
|
|
|
|
Unrealized gain on oil derivative instrument(3) |
- |
|
77,470 |
|
77,470 |
|
- |
|
94,700 |
|
94,700 |
|
Depreciation and amortization |
(16,477 |
) |
(12,051 |
) |
(28,528 |
) |
(16,366 |
) |
(4,091 |
) |
(20,457 |
) |
Operating income (loss) |
22,194 |
|
110,276 |
|
132,470 |
|
(12,941 |
) |
91,346 |
|
78,405 |
|
(2) With effect from the quarter ended June 30,
2018, we presented a new line item, "Project development expenses",
which includes costs associated with pursuing future contracts and
developing our pipeline of activities that have not met our
internal threshold for capitalization. Previously, these costs were
presented within "Administrative expenses" along with our general
overhead costs. This presentation change has been retrospectively
adjusted in prior periods.
(3)With effect from the quarter ended September
30, 2018, we have split the line item "Realized and unrealized gain
on oil derivative instrument" relating to income from the FLNG
Hilli Episeyo Liquefaction Tolling Agreement into two line items,
"Realized gain on oil derivative instrument" and "Unrealized gain
on oil derivative instrument". The unrealized component includes a
mark-to-market movement of $77.5 million (June 30, 2018: $94.7
million) on the oil embedded derivative, which represents the
estimate of expected receipts under the remainder of the Brent oil
linked clause of the Hilli Episeyo Liquefaction Tolling Agreement.
The realized component amounts to $11.3 million (June 30, 2018:
$3.0 million) and represents the income in relation to the Hilli
Episeyo Liquefaction Tolling Agreement receivable in cash. This
presentation change has been retrospectively adjusted in prior
periods.
Including Golar Partners' interest in FLNG Hilli
Episeyo, which is consolidated by Golar, the Company reports today
3Q 2018 operating income of $132.5 million compared to $78.4
million in 2Q 2018 ("2Q").
Total operating revenues net of voyage,
charterhire and commission expenses increased from $42.9 million in
2Q to $98.4 million in 3Q. Of the 3Q total, $45.3 million is
derived from vessel and other operations and $53.1 million is from
FLNG operations.
Revenues from vessel and other operations,
including management fee income, net of voyage, charterhire and
commission expenses increased by $20.5 million to $45.3 million in
3Q. Revenue was negatively impacted by one vessel dry-docking
during the quarter. Rising LNG production and ton miles together
with a seasonal increase in trading activity absorbed vessels
resulting in improving utilization and increasing charter rates.
Fleet utilization increased from 62% in 2Q to 86% in 3Q. Daily TCE1
earnings increased from $19,600 in 2Q to $41,200 in 3Q.
FLNG Hilli Episeyo completed its first full
quarter of operations. Operating revenues of $54.5 million include
base tolling fees and amortization of pre-acceptance amounts
recognized. Assuming uninterrupted operations, future quarterly
operating revenues should be consistent at around the $54 million
level recorded in 3Q.
Total vessel operating expenses increased by
$8.4 million to $28.9 million in 3Q. FLNG operating costs for Hilli
Episeyo were slightly higher than expected average operating costs
for the vessel.
At $14.8 million for the quarter, total
administrative expenses were $1.4 million higher than 2Q.
Additional employment costs, including non-cash share option
expenses which totaled $3.7 million, together with higher property
and office expenses as a result of an office move account for the
increase.
Project development expenses include costs
associated with the pursuit of potential projects and contracts.
These expenses decreased from $7.9 million in 2Q to $5.7million in
3Q. Reduced engineering fees incurred in respect of the BP-Kosmos
Tortue FLNG conversion and Mark II FLNG Front End Engineering and
Design ("FEED") studies account for the decrease.
The Brent oil linked component of Hilli
Episeyo's fees generates additional annual operating cash flows of
approximately $3 million for every dollar increase in Brent Crude
prices between $60.00 per barrel and the contractual ceiling.
Billing of this component is based on a three month look-back at
average Brent Crude prices. Amounting to $11.3 million in 3Q, the
realized gain on the oil derivative instrument was up $8.2 million
on 2Q. The increase in this hire component is predominantly a
function of the vessel's first full quarter in service, but also a
result of higher oil prices.
The fair value of the derivative asset (i.e. the
value at September 30 of the potential future cash flow from the
oil linked hire component) increased by $77.5 million during the
quarter, with a corresponding unrealized gain of the same amount
recognized in the income statement. The fair value increase was
driven by an upward movement in the future market for Brent
Oil.
Other operating gains and losses reported a 3Q
gain of $23.3 million for the quarter. A cash recovery of $26.0
million was made during the quarter as a result of proceedings in
respect of a former contract for the Golar Tundra. Proceedings are
expected to end shortly. Mitigating the 3Q cash recovery in respect
of Golar Tundra were FLNG related costs of $2.7 million in
connection with the dissolution of OneLNG. Future costs in
connection with this dissolution are expected to be minimal.
Depreciation and amortization increased by $8.1
million to $28.5 million in 3Q. The increase is once again due to
the FLNG Hilli Episeyo, which was a depreciating asset for three
months in 3Q versus one month in 2Q.
Net Income Summary
|
2018 |
2018 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Operating income |
132,470 |
|
78,405 |
|
Interest income |
3,106 |
|
2,100 |
|
Interest expense |
(32,645 |
) |
(24,014 |
) |
Losses on derivative instruments(4) |
(10,730 |
) |
(85 |
) |
Other financial items, net(4) |
2,499 |
|
1,916 |
|
Income taxes |
(156 |
) |
(490 |
) |
Equity in net earnings (losses) of affiliates |
2,668 |
|
(4,674 |
) |
Net income attributable to non-controlling interests |
(31,000 |
) |
(16,839 |
) |
Net income attributable to Golar LNG Limited |
66,212 |
|
36,319 |
|
(4) With effect from the quarter ended September
30, 2018, we presented a new line item, "(Losses) gains on
derivative instruments", which relates to the movement of our
derivative instruments. Previously, these items were presented
within "Other financial items, net" along with our general finance
costs. This presentation change has been retrospectively adjusted
in prior periods.
In 3Q, the Company generated net income of $66.2
million. In addition to the increase in Operating Income, other
items contributing to the $29.9 million increase in 3Q are
summarized as follows:
- Interest expense increased by $8.6 million to $32.6 million
mainly due to a full quarter's interest expense in respect of Hilli
Episeyo. These costs had been capitalized up until the vessel's
acceptance on May 31.
- 3Q recorded a $10.7 million loss on derivative instruments
compared to a 2Q loss of $0.1 million. This includes
mark-to-market valuations on the Total Return Swap ("TRS"),
interest rate swaps ("IRS") and the Golar Partners Earn-Out Units
derivative.
- Other financial items reported a 3Q gain of $2.5 million
compared to a 2Q gain of $1.7 million. This includes cash settled
undesignated swap receipts together with foreign exchange gains and
losses.
- The $2.7 million 3Q equity in net earnings of affiliates is
primarily comprised of the following:
- a $4.1 million loss in respect of Golar's 50% share in Golar
Power; and
- income of $6.9 million in respect of Golar's stake in Golar
Partners.
- Net income attributable to non-controlling interests represents
external interests in the Hilli Episeyo and the finance lease
variable interest entities ("VIEs").
Commercial Review
LNG Shipping
Increasing US LNG production and start-up of
Yamal T2 together with strong Asian demand and rising ton miles
prompted a number of multi-month and multi-year charters ahead of
the summer cooling season. Vessel availability declined and rates
increased, briefly surpassing their 2017 winter highs. Activity
then eased over the summer months before regaining its positive
momentum in September as strong end-user demand and rising oil
prices fed through to increasing LNG prices, vessel fixtures, and
spot rates approaching $100,000 per day. Newbuild deliveries also
began to decline and commercial terms for Pacific basin fixtures
exceeded those in the Atlantic for the first time since 3Q 2014.
JKM and European gas prices ended the quarter up 86% and 43%
respectively year-on-year, once again driven by strong demand from
China and Korea. Comprised of a TCE1 of $48,100 in respect of
its TFDE fleet (taking into account the dry-docking of one vessel
during the quarter) and $11,000 for its two steam vessels, Golar
recorded a 3Q 2018 TCE1 of $41,200 per day, up 210% on the $13,300
per day achieved in 3Q 2017 and 110% on the $19,600 achieved in 2Q
2018.
Dominated by new US volumes, LNG trade is
expected to increase by 10% per annum from 290 million tons in 2017
to around 388 million tons in 2020. According to industry analysts,
ton mile demand is expected to increase by 40+% over the same time
frame. Annual fleet growth of 5% through to 2020, will, according
to industry analysts, not be sufficient to meet this demand.
Leading brokers continue to expect a 30-40 vessel shortfall. As of
today there are minimal prompt available vessels worldwide and it
is no longer possible to order a vessel for delivery before 2021.
Multi-month and multi-year contracts continue to present themselves
adding upward pressure on rates. The reactivated steam vessel Golar
Viking is in the process of concluding an 11-month charter at a
rate that is expected to improve the Adjusted EBITDA1 of the
company by $17 million relative to the vessel's layup position.
Spot rates in excess of $100,000 are now routinely being achieved
for TFDE vessels with some vessels being fixed on short-duration
voyages at substantially higher rates.
As previously indicated, Golar is working with
other ship owners to establish a consolidated structure that will
allow LNG shipping investors more direct exposure to the LNG
shipping market. Some progress with these discussions has been made
in the last quarter.
Golar Partners (a non-consolidated affiliate of
Golar LNG)
Triggered by the dry-docking of Golar Freeze on
July 19, all remaining revenues receivable in respect of a prior
contract for the FSRU were recognized during the quarter
contributing to a significant improvement in the Partnership's 3Q
results. Dry-dock and modifications necessary to service Golar
Freeze's new 15-year contract were completed on October 20. By
virtue of its 50% interest in Hilli Episeyo's common units, the
Partnership is entitled to 50% of the net earnings of Hilli Episeyo
attributable to common unit holders after July 12 when the
acquisition closed. The Partnership's reported share of net
earnings in 3Q amounted to a loss of $0.1 million which includes
non-cash charges of $7.3 million related to the depreciation and
amortization of fair value adjustments made upon acquisition of the
common units.
In line with what was communicated in 2Q,
management completed its review of the Partnership's distribution
capacity on October 23. After a thorough review, the Partnership's
Board approved a quarterly distribution going forward of $0.4042
per unit, effective 3Q 2018. Based on the conservative assumptions
used for recontracting the Partnership believes that this level of
distribution, which represents a 30% cut, is sustainable for the
foreseeable future. Reflective of a vessel dry-dock during the
quarter and less than a full quarter's contribution from Hilli
Episeyo, but excluding the additional revenues recognized during 3Q
in respect of Golar Freeze's prior contract, 3Q distribution
coverage1 increased to 1.02, from 0.56 in 2Q.
As a result of the cut, annual cash
distributions to Golar in respect of its 31.8% interest in the
Partnership will be reduced by approximately $15.7 million. Scope
for improvement exists should the shipping market outperform
moderate positive expectations or should the FSRU Golar Spirit find
employment. There are also acquisition opportunities for the
Partnership including Hilli Episeyo Train 2, the FSRU Golar Nanook,
cash flows from the Sergipe project and a pipeline of potential
carriers and FSRUs available for long-term fixtures. These
opportunities are, however, to a large extent dependent on more
effectively priced Golar Partners equity or realization of a
flatter debt amortization profile that better reflects the economic
life of the Partnership's assets.
FLNG
FLNG Hilli Episeyo continues to operate with
100% commercial availability. Currently in the process of exporting
its 10th LNG cargo, the vessel's proof of concept continues to add
momentum to both existing and new opportunities under discussion.
Discussions also continue with field operator Perenco as to the
timing of utilization of Hilli Episeyo's excess capacity.
On July 12, Golar and affiliates of Keppel
Shipyard Limited and Black and Veatch closed the sale of 50% of the
common units in Golar Hilli LLC to the Partnership. Although Golar
continues to consolidate Golar Hilli LLC, after this transaction,
net of non-controlling interests, Golar is entitled to 44.6% of
cash flows from the initially contracted toll fee under the
liquefaction tolling agreement, 89.1% of the Brent oil linked cash
flows and 86.9% of any future cash flows from the vessel's
expansion capacity. Annual cash generation to Golar based on
current Brent Crude prices of $73bbl is expected to amount to
approximately $40 million.
FEED work for the provision of a FLNG vessel to
service the BP operated Greater Tortue/Ahmeyim project offshore
Mauritania and Senegal has made significant progress and is in its
final stages. BP has previously communicated to their shareholders
that they expect to take FID on the project before the end of 2018.
Golar remains ready to support this.
Golar has also spent considerable time
developing the Mark II FLNG vessel design. This work has been done
in conjunction with other Asian yards. Significant progress has
been made on the 3mtpa design and indications are that this will be
cost competitive with the Mark I (Hilli Episeyo) design. These
yards, in combination with export credit agencies and domestic
banks, are likely to offer more attractive financing packages. The
Mark II concept has applications that include the US Gulf Coast
Delfin LNG ("Delfin") project and Fortuna.
Recent changes in leadership and sponsorship put
the Delfin project on a clear path to FID and see the project take
on an increased level of activity for Golar. When connected to
Delfin's existing pipeline infrastructure, the Mark II FLNG
solution is expected to deliver the lowest cost liquefaction
solution in North America giving Delfin and Golar an early mover
advantage marketing a relatively small parcel of LNG into a demand
driven market. Further to the Joint Development Agreement signed in
June 2017, Golar and Delfin are now working to finalize terms for
the establishment of a joint venture company to own and develop the
first floating liquefaction vessel.
Golar Power (50/50 Golar/Stonepeak
Infrastructure Partners non-consolidated downstream joint
venture)
Construction of the Sergipe power plant and
associated FSRU mooring, pipeline and transmission line
infrastructure continues to plan and remains on track for
commencement of operations on January 1, 2020. Over 2,000 workers
are currently on site.
Assuming no dispatch under the Power Purchase
Agreements ("PPA"), forecast annual Adjusted EBITDA1 including
inflation uplifts to date from the power project (of which Golar is
entitled to a 25% interest which will be included within "equity in
net earnings of affiliates" in the consolidated statements of
income) is BRL 1.16 billion, equivalent to approximately US$313
million at a USD/BRL rate of 3.7. Payments under the executed PPA
are inflation indexed over the 25-year term and provide for
pass-through of fuel costs when the power plant is called upon to
dispatch. Around 94% of the project finance facility is also BRL
denominated. Net debt1 equates to approximately $1.24 billion at
the same USD/BRL rate, thus creating a natural hedge for currency
movements.
Additional to the forecast annual Adjusted
EBITDA1 from the power project, the FSRU is expected to generate
annual US CPI Adjusted EBITDA1 of approximately US$41.0 million (of
which Golar is entitled to a 50% interest which will be included
within "equity in net earnings of affiliates" in the consolidated
statements of income). The modified FSRU Golar Nanook was delivered
from the shipyard on September 27. Upon delivery a $235.5 million
China Construction Bank Financial Leasing sale and leaseback
facility was drawn down and used to settle the final yard
installment of $174.6 million. Of the remaining $60.9 million
liquidity released to Golar Power, $21.6 million was paid to
project developer Genpower in October as part consideration for the
acquisition of Genpower's initial 25% share in the power station. A
final payment of approximately $10.0 million will be payable to
Genpower upon commencement of commercial operations in January
2020. Remaining liquidity will be used to fund Golar Power working
capital requirements through to commencement of operations at
Sergipe.
Commencing in approximately 14 months, Golar's
share of annual run rate Adjusted EBITDA1 less debt service from
the fully financed Sergipe Power project and FSRU is expected to
amount to approximately $45 million in 2020 assuming no dispatch.
Golar Power is examining several alternate projects that could
utilize the FSRU's 65% spare capacity and further augment cash
generation.
Although the generic FSRU market remains over
supplied and very competitive, Golar Power has invested heavily in
securing licenses that allow it to bid at future Brazilian power
auctions, of which there are usually 2-4 per annum. In addition to
creating attractive new markets for LNG, these potential projects
are expected to create more appealing opportunities to deploy Golar
FSRUs.
Avenir (25% interest in LNG small-scale venture,
a non-consolidated affiliate)
Building on a teaming agreement previously
signed with Stolt-Nielsen, Golar announced on October 1, 2018 an
investment of $24.8 million in small-scale LNG services provider
Avenir. This investment represents part of a combined commitment of
up to $182.0 million from initial shareholders Stolt-Nielsen (50%),
Höegh (25%) and Golar (25%). Golar's overall commitment to Avenir,
which plans to list on the Oslo OTC market, is therefore $45.5
million. Small-scale opportunities to be pursued by Avenir include
delivery of LNG to areas of stranded demand, development of LNG
bunkering services and supply of LNG to the transportation sector.
Savings as a result of high-margin oil-to-gas switching, policy
changes including IMO2020, and the environmental merits of LNG
relative to other fossil fuels are all expected to generate
significant growth in this sector.
Avenir has taken FID and has started to build a
LNG receiving terminal in Sardinia and is targeting distribution of
LNG locally. Avenir may also be able to support future FSRU
projects being pursued by two of its sponsors. Spare capacity on
board FSRUs could be utilized to develop small-scale LNG
distribution opportunities. Markets developed by Avenir together
with demand for regasified LNG from an anchor tenant could then
collectively support an otherwise marginal FSRU project. The
company believes that early access to small-scale ship capacity
might be critical to a tailor made solution for an oil-to-gas
switch for potential customers. Avenir has ordered four 7,500cbm
vessels and is in the process of committing to significantly more
shipping capacity. Logistics and shipping services provided by
Avenir may also be utilized in the event that Golar Power elects to
use some of the spare capacity on board the FSRU Golar Nanook to
break-bulk LNG in Sergipe.
Golar will equity account for its interest in
Avenir. A shorter capex cycle relative to traditional LNG
infrastructure means that this business has the potential to be
generating cash flows as early as 2020.
Financing Review
Golar's total current cash position as at
September 30 was $764.2 million (including long-term restricted
cash), of which $306.4 million was unrestricted and $175.5 million
relates to the Hilli Episeyo letter of credit. This is after having
settled amounts due to non-controlling (10.89%) shareholders Keppel
and Black and Veatch following the final debt draw down and
subsequent drop down of 50% of the common units of Golar Hilli LLC
to Golar Partners. Of the $175.5 million restricted cash securing
the Hilli Episeyo letter of credit, approximately $126.2 million is
expected to be released to free cash1 between 2019 and 2021.
During the quarter amendments to the existing
margin loan facility, secured by units in Golar Partners, were
agreed. Subject to the satisfaction of certain covenants, no
further principal repayments will be required ahead of loan
maturity in March 2020. As at September 30, $100 million was
outstanding against this facility.
During 4Q 2018 to date, $24.8 million has been
paid to Avenir in respect of Golar's 25% investment and an expected
$38.0 million representing final sums due in respect of the Hilli
Episeyo conversion will be settled. Against this, a further $14.0
million has been received from former charterers of the FSRU Golar
Tundra.
Included within the $830.9 million current
portion of long-term debt and short-term debt is $799.0 million
relating to lessor-owned VIE subsidiaries that Golar is required to
consolidate in connection with 8 sale and leaseback financed
vessels, including the Hilli Episeyo. Of the balance associated
with VIE financings, one facility amounting to $134.8 million is
due for refinancing by the end of 2018. Refinancing discussions are
progressing.
Corporate and Other Matters
As at September 30, 2018, there were 101.3
million shares outstanding, including 3.0 million TRS shares that
had an average price of $44.55 per share. The TRS was
marked-to-market as of September 30, 2018 when the closing price
was $27.80 per share. There were also 4.0 million outstanding stock
options in issue with an average price of $36.37.
Over recent quarters Golar has focused on
strengthening its balance sheet. As of today a solid cash and cash
flow position have created a strong financial platform to equity
finance a new FLNG project.
In light of the successful start-up of Hilli
Episeyo and strong improvement in the shipping market the Board has
approved an increase in the quarterly dividend from $0.125 to
$0.15. It is the Board's intention to continue to grow the
distribution. The size of this growth will be dependent on the
development of the LNG shipping market as well as the equity
required to finance further FLNG projects.
At Golar's Annual General Meeting on September
26, 2018, Thorleif Egeli was appointed as a Director, replacing
Fredrik Halvorsen. Thorleif brings to Golar a wealth of upstream
experience gained predominantly from a long career at
Schlumberger.
Outlook
FLNG Hilli Episeyo, operational for its first
full quarter, delivered consolidated Adjusted EBITDA1 exclusive of
unrealized oil derivative related income of $52.3 million.
Charterers Perenco and SNH are pleased with the vessel's
performance and discussions have commenced with Perenco on the
utilization of the vessel's spare capacity. Golar anticipates being
able to have some clarity of when the additional capacity will be
taken up around the end of 4Q 2018. The Company also remains
focused on being able to support BP on their Tortue project, and
developing its pipeline of other FLNG opportunities.
Illustrative economics of shipping rate
scenarios that only a few months ago may have appeared ambitious
are beginning to materialize. Third quarter Adjusted EBITDA1 from
vessel and other operations amounted to $38.7 million. For every
$10,000 increase in TCE, Adjusted EBITDA1 from ships trading in the
spot market will increase by approximately $40 million on an annual
basis. 4Q TCE1 in the range of $70,000 - $80,000 is expected based
on current fixtures which includes TFDE vessels in the range of
$85,000 - $95,000. A strengthening market together with the
resumption of trading by the Golar Viking during December are
expected to result in further improvements to Adjusted EBITDA1 and
net cash generation in 1Q 2019.
Golar Power is now less than 14 months away from
commencing regas and power generation operations at its Sergipe
power plant. Upon commencement in January 2020 and assuming no
dispatch, this is expected to generate approximately $99 million in
annual run rate Adjusted EBITDA1 based on a BRL/USD rate of 3.7,
and approximately $45 million after the deduction of debt
service.
The Board is particularly pleased with the way
management is executing complex projects using new technology in a
cost effective and efficient manner. The strong operational track
record from these projects gives Golar unique credibility and a
market leading position in the fast growing integrated LNG
market.
A prolonged period of investment of around $4
billion worth of LNG infrastructure, including carriers, FSRUs,
Hilli Episeyo and the Sergipe project is drawing to a close.
Although it has been a challenge in the low oil price environment
to carry this through without dilution to equity holders, concepts
and investments are finally being transformed into operations and
cash flows. Commencement of Hilli Episeyo, a resurgent shipping
market and the pending start-up of Sergipe have transformed Golar
into a fully financed cash generative company. It is the Board's
intention to use part of the cash flow to grow the Company further,
and to increase the distribution to the Company's shareholders.
Non-GAAP measures
Adjusted EBITDA: Adjusted EBITDA is
defined as operating income before interest, tax, unrealized
mark-to-market movements on the oil derivative instrument,
depreciation and amortization. We believe Adjusted EBITDA is widely
used by investors to measure a company's operating performance
without regard to items such as interest expense, taxes,
depreciation and amortization which vary substantially from company
to company depending on capital structure, the method by which
assets were acquired and depreciation policies. The exclusion of
the unrealized mark-to-market movements on the oil derivative
instrument enables comparability to prior period performance and
trend analysis. Management's definition of Adjusted EBITDA provides
relevant and useful information to management, investors and other
users of our financial information in evaluating the effectiveness
of our operating performance in a manner that is consistent with
management's evaluation of business performance.
Distribution coverage ratio: The
Partnership presents distributable cash flow which represents
Adjusted EBITDA adjusted for the cash components of interest,
derivatives, tax and earnings from affiliates. The Partnership also
includes an adjustment for maintenance and replacement expenditures
(including dry docking). Maintenance and replacement capital
expenditures, including expenditure on dry-docking, represent
capital expenditures required to maintain over the long-term the
operating capacity of, or the revenue generated by, the
Partnership's capital assets. The Partnership's share of equity
accounted affiliate's distributable cash flow net of estimated
capital expenditures represents the Partnership's proportionate
share of Adjusted EBITDA adjusted for the cash components of
interest, tax and replacement expenditure. Distributable cash flow
is a quantitative standard used by investors in publicly-traded
partnerships to assist in evaluating a partnership's ability to
make quarterly cash distributions to common unitholders, general
partners and incentive distribution rights. Distributable cash flow
is a non-GAAP financial measure and should not be considered as an
alternative to net income or any other indicator of the
Partnership's performance calculated in accordance with US GAAP.
Refer to the Partnership's most recent quarterly earnings release
on its investor relations section on the Partnership's website
(www.golarlngpartners.com) for a reconciliation to the most
directly comparable financial measure under US GAAP.
Free cash: Free cash is defined as "cash
and cash equivalents" as presented on the consolidated balance
sheets.
Net debt: Net debt is defined as the sum
of "Current portion of long-term debt and short-term debt" plus
"Long-term debt" less "Cash and cash equivalents" less "Restricted
cash and short-term deposits" less "Restricted cash".
TCE: 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. For time
charters, TCE is calculated by dividing total operating revenues
(including revenue from the Cool Pool, but excluding vessel and
other management fees and liquefaction services 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
dry-docking. 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. Refer to our most recent quarterly
earnings release on our investor relations section on our website
(www.golar.com) for a reconciliation to the most directly
comparable financial measure under US GAAP.
Forward Looking Statements
This press release contains forward-looking
statements (as defined in Section 21E of the Securities Exchange
Act of 1934, as amended) which reflects management's current
expectations, estimates and projections about its operations. All
statements, other than statements of historical facts, that address
activities and events that will, should, could or may occur in the
future are forward-looking statements. Words such as "may,"
"could," "should," "would," "expect," "plan," "anticipate,"
"intend," "forecast," "believe," "estimate," "predict," "propose,"
"potential," "continue," or the negative of these terms and similar
expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
other factors, some of which are beyond our control and are
difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such
forward-looking statements. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. Unless legally required, Golar undertakes no
obligation to update publicly any forward-looking statements
whether as a result of new information, future events or
otherwise.
Among the important factors that could cause
actual results to differ materially from those in the
forward-looking statements are:
- our inability to meet our obligations under the Heads of Terms
agreement entered into in connection with the BP Greater Tortue /
Ahmeyim Project, prior to FID, which will result in extensive
termination fees;
- 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;
- Golar Power's ability to successfully complete and start up the
Sergipe power station project and related FSRU contract.
- 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;
- our ability to close potential future sales of additional
equity interests in Golar Hilli LLC on a timely basis or at
all;
- 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;
- failure of our contract counterparties, including our joint
venture co-owners, to comply with their agreements with us;
- changes in our relationships with our counterparties, including
our major chartering parties;
- changes in the availability of vessels to purchase and in the
time it takes to construct new vessels;
- 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 our
joint venture, Golar Power;
- changes in our relationship with Golar Partners, Golar Power or
Avenir and the sustainability of any distributions they pay to
us;
- 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;
- changes in our ability to obtain additional financing on
acceptable terms or at all;
- increases in costs, including, among other things, wages,
insurance, provisions, repairs and maintenance;
- changes in general domestic and international political
conditions, particularly where we operate;
- a decline or continuing weakness in the global financial
markets;
- challenges by authorities to the tax benefits we previously
obtained under certain of our leasing agreements; 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.
As a result, you are cautioned not to rely on
any forward-looking statements. Actual results may differ
materially from those expressed or implied by such forward-looking
statements. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise unless required by
law.
November 5, 2018
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed to:
Golar Management Limited +44 207 063 7900
Iain Ross - Chief Executive Officer
Graham Robjohns - Chief Financial Officer and
Deputy Chief Executive Officer
Stuart Buchanan - Head of Investor Relations
- Interim results for the period ended 30 September 2018.pdf
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