Highlights
-
Gross contract earnings
backlog1 increased
from $7.3 billion to $10.3 billion.
-
Golar's ("Golar" or "the Company")
total operating revenues decreased from $181.9 million in 4Q 2018
to $114.3 million in 1Q 2019.
-
Adjusted EBITDA1
decreased from $121.2 million in 4Q 2018 to $62.9 million in 1Q
2019.
-
After recognition of $28.4 million of
unrealized Brent oil linked mark-to-market derivative instrument
gains and a $34.3 million impairment charge in relation to the
Golar Viking, Golar reported operating income
of $28.9 million for 1Q 2019.
-
Golar and BP executed contracts
for the provision of an FLNG vessel to service the Greater
Tortue/Ahmeyim project offshore Mauritania and Senegal for 20
years.
-
Golar received a Final Notice to
Proceed with the conversion, sale and subsequent operation of
Golar Viking as a FSRU in Croatia. The sale is
expected to generate net positive cash of approximately $40 million
in 2020.
-
The shipping fleet recorded Time
Charter Equivalent1 ("TCE")
earnings of $39,300 per day ($39,100 for spot TFDE vessels).
-
FSRU Golar Nanook
loaded first Sergipe commissioning cargo from FLNG Hilli Episeyo.
-
Net of financing expenses, equity in
net losses of affiliates, taxes and net income attributable to
non-controlling interests, Golar reported a 1Q 2019 net loss of
$41.7 million.
Subsequent
Events
-
Gimi MS Corporation ("Gimi MS")
received a firm $700 million underwritten financing commitment for
the FLNG Gimi.
-
As intended, First FLNG Holdings Pte.
Ltd, an indirect wholly owned subsidiary of Keppel Corporation
Limited held through Keppel Capital Holdings Pte Ltd. subscribed to
30% of the issued ordinary share capital of Gimi MS.
-
Gimi MS issued Keppel Shipyard with a
Final Notice to Proceed with FLNG Gimi
conversion works.
-
A 2-year extension to the Golar Tundra sale and leaseback facility was agreed and
a 5-year restated and amended facility in respect of the Golar Arctic was credit approved.
-
Dividend of $0.15 cents per share
declared for quarter.
-
At a recent meeting in Bermuda, the
Board decided to proceed with a spin-off of the Company's Trifuel
Diesel Electric ("TFDE") LNG carrier business, subject to
satisfactory market conditions, and to focus the Company's future
activities primarily around FLNG and downstream assets. This will
allow LNG shipping investors more direct exposure to the LNG
shipping market and reposition Golar's core business toward LNG
infrastructure on long-term contracts.
Financial Review
Business Performance
|
2019 |
2018 |
|
Jan-Mar |
Oct-Dec |
(in thousands of $) |
Vessel and other operations |
FLNG |
Total |
Vessel and other operations |
FLNG |
Total |
Total operating revenues |
59,763 |
|
54,524 |
|
114,287 |
|
127,415 |
|
54,524 |
|
181,939 |
|
Vessel operating expenses |
(18,176 |
) |
(13,072 |
) |
(31,248 |
) |
(18,407 |
) |
(10,692 |
) |
(29,099 |
) |
Voyage, charterhire & commission expenses (including
expenses from collaborative arrangement) |
(16,140 |
) |
(360 |
) |
(16,500 |
) |
(40,690 |
) |
605 |
|
(40,085 |
) |
Administrative expenses |
(12,893 |
) |
(652 |
) |
(13,545 |
) |
(12,902 |
) |
227 |
|
(12,675 |
) |
Project development expenses |
(668 |
) |
(922 |
) |
(1,590 |
) |
(928 |
) |
(3,798 |
) |
(4,726 |
) |
Realized gain on oil derivative instrument(2) |
- |
|
2,233 |
|
2,233 |
|
- |
|
12,419 |
|
12,419 |
|
Other operating gains (losses) |
9,260 |
|
- |
|
9,260 |
|
14,740 |
|
(1,296 |
) |
13,444 |
|
Adjusted EBITDA(1) |
21,146 |
|
41,751 |
|
62,897 |
|
69,228 |
|
51,989 |
|
121,217 |
|
|
|
|
|
|
|
|
Reconciliation to operating income
(loss) |
|
|
|
|
|
|
Unrealized gain (loss) on oil derivative
instrument(2) |
- |
|
28,380 |
|
28,380 |
|
- |
|
(195,740 |
) |
(195,740 |
) |
Depreciation and amortization |
(16,112 |
) |
(12,051 |
) |
(28,163 |
) |
(16,244 |
) |
(12,051 |
) |
(28,295 |
) |
Impairment of long-lived assets
|
(34,250 |
) |
- |
|
(34,250 |
) |
- |
|
- |
|
- |
|
Operating income/(loss) |
(29,216 |
) |
58,080 |
|
28,864 |
|
52,984 |
|
(155,802 |
) |
(102,818 |
) |
(2)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 (loss) gain on oil
derivative instrument". The unrealized component represents a
mark-to-market gain of $28.4 million (December 31, 2018: loss of
$195.7 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
$2.2 million (December 31, 2018: $12.4 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.
Golar reports today 1Q 2019 ("1Q")
operating income of $28.9 million compared to a $102.8 million loss
in 4Q 2018 ("4Q").
Total operating revenues net of
voyage, charterhire and commission expenses decreased from $141.9
million in 4Q to $97.8 million in 1Q. Of the 1Q total, $43.6
million is derived from vessel and other operations and $54.2
million is from FLNG operations.
Revenues from vessel and other
operations, including management fee income, net of voyage,
charterhire and commission expenses decreased by $43.1 million to
$43.6 million in 1Q. China's decision to pull LNG purchases forward
into 4Q18 to avoid gas shortages together with a mild winter in
Asia resulted in elevated LNG inventory levels into 1Q19.
Asian LNG prices dropped, Inter-basin trading opportunities
disappeared and ton-miles, utilization and rates fell as a result.
Fleet utilization decreased from 93% in 4Q to 51% in 1Q. Full fleet
TCE1 earnings
decreased from $77,600 in 4Q to $39,300 in 1Q.
In line with prior quarters, FLNG
Hilli Episeyo generated operating revenues of
$54.5 million including base tolling fees and amortization of
pre-acceptance amounts recognized.
Vessel operating expenses at $31.2
million in 1Q were $2.1 million higher than 4Q. Most of the
increase is attributable to FLNG Hilli Episeyo
due to increased crew tax costs as well as additional repairs and
maintenance.
At $13.5 million for the quarter,
total administrative expenses were $0.9 million higher than 4Q.
Capitalization of costs incurred
in relation to the BP-Kosmos FLNG project from the point of FID in
December 2018 resulted in a $3.1 million reduction in project
expenses from $4.7 million in 4Q to $1.6 million in 1Q.
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
$2.2 million in 1Q, the realized gain on the oil derivative
instrument was down $10.2 million on 4Q. The decrease in this hire
component is the result of lower oil prices, particularly during
December and January.
The mark-to-market fair value of
the derivative asset increased by $28.4 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 expected future market price for Brent Oil.
The spot price for Brent Oil increased from $50.57 per barrel on
December 31 to $68.39 on March 31 and has recovered further, to
$71.97 per barrel on May 20.
Other operating gains and losses
within vessel and other operations reported a 1Q gain of $9.3
million, representing a final settlement from the terminated
contract for the Golar Tundra.
Depreciation and amortization at
$28.2 million in 1Q was in line with the prior quarter.
On the 29th March, Golar signed
contracts with LNG Hrvtska d.o.o. relating to the conversion and
subsequent sale of the converted carrier Golar
Viking. Although the sale is not expected to close until 4Q
2020, the transaction triggered an immediate impairment test. As
the current carrying value of the vessel exceeds the price a market
participant would pay for it as a carrier today, a non-cash
impairment charge of $34.3 million has been recognized. The sale is
expected to generate net positive cash of approximately $40
million.
Net Income
Summary
|
2019 |
2018 |
(in thousands of $) |
Jan-Mar |
Oct-Dec |
Operating income (loss) |
28,864 |
|
(102,818 |
) |
Interest
income |
3,214 |
|
2,983 |
|
Interest
expense |
(29,352 |
) |
(31,251 |
) |
Losses on
derivative instruments |
(5,699 |
) |
(23,605 |
) |
Other
financial items, net |
(1,407 |
) |
(780 |
) |
Income
taxes |
(205 |
) |
(627 |
) |
Equity in
net losses of affiliates |
(12,899 |
) |
(154,089 |
) |
Net
income attributable to non-controlling interests |
(24,257 |
) |
(2,770 |
) |
Net loss attributable to Golar LNG Limited |
(41,741 |
) |
(312,957 |
) |
In 1Q, the Company generated a net
loss of $41.7 million. Key items contributing to this are
summarized as follows:
-
A small reduction in LIBOR, 2 fewer
days in the period and a $0.4m increase in capitalized interest in
respect of FLNG Gimi resulted in a $1.9
million reduction in 1Q interest expense.
-
1Q recorded a $5.7 million loss on
derivative instruments compared to a 4Q loss of $23.6
million. Most of the $17.9 million reduction in 1Q relative
to 4Q is attributable to a smaller loss on the Golar shares Total
Return Swap ("TRS").
-
The $12.9 million 1Q equity in net
losses of affiliates is primarily comprised of the following:
-
a $4.0 million loss in respect of
Golar's 50% share in Golar Power;
-
a $7.7 million loss in respect of
Golar's 32% stake in Golar Partners; and
-
a $0.4 million loss in respect of
Golar's 22.5% stake in Avenir.
The 4Q loss in respect of Golar's
stake in Golar Partners was substantially higher at $157.9 million
following a $149.4 million impairment of the carrying value of
Golar's interest in the Partnership. Further losses on interest
rate swaps, which are a part of the Partnership's interest hedging
program, were a major contributor to the Partnership's 1Q net
loss.
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
Golar recorded a 1Q TCE1
of $39,300 per day, up 9% on the $35,900 per day achieved in 1Q
2018 but down 49% on the $77,600 achieved in 4Q. This is comprised
of a TCE1 of $39,100 in
respect of its total TFDE fleet, and $40,100 for its two steam
("ST") vessels.
The 1Q LNG shipping market
declined from strong 4Q levels in line with historic
seasonality. LNG demand growth in China and other SE Asian
countries was largely offset by declines in Japan and Korea due to
a combination of a milder than expected winter and the re-start of
several nuclear facilities. Chinese 1Q demand was up 20% up
on 1Q 2018. During the quarter LNG prices reached 3-year lows,
which eliminated inter-basin trading opportunities. At
quarter end, LNG was trading at around 6% of Brent, well below
energy parity. Atlantic basin cargoes from the US and Russia
into Europe doubled by volume compared to 1Q 2018. With these
additional volumes remaining in Europe, ton-miles and shipping
rates continued to fall throughout the quarter, with spot TFDE and
ST rates reaching $40,000 and $24,000 respectively by the end of
March. The recently introduced tariffs for US LNG into China have
also limited US export volumes into China.
Shipping rates achieved so far in
2Q 2019 have been weaker than 1Q but rates and activity have now
commenced their seasonal recovery. The strong contango in the gas
market with forward prices of $9mmbtu being quoted for December
2019 give solid support to an improved shipping market. The 2019
vessel demand growth of 15% is expected against supply growth of
9%. Further vessel demand growth of 14% is expected in 2020
with supply growth again lagging at 9%. This reinforces our
belief that LNG shipping will enter a period of structural shortage
for the next few years.
Leading brokers continue to
forecast a 10+ vessel shortfall at the end of 2019, increasing to
more than 20 at the end of 2020. Rates are expected to reflect this
from 2H 2019 and remain strong for the next two years. This has
resulted in an increase in requests for medium to long-term
charterers. Golar has recently concluded several charters with oil
and gas majors and large LNG charterers. These charters are based
on index-linked rates and secure full utilization of the chartered
vessels.
At its recent meeting in Bermuda,
the Board made a decision to proceed with a spin-off of the
Company's TFDE LNG carrier business, subject to satisfactory market
conditions, and to focus the Company's future activities primarily
around FLNG and downstream assets. This will allow LNG shipping
investors more direct exposure to the LNG shipping market and
reposition Golar's core business toward LNG infrastructure on
long-term contracts. Golar are in talks with other owners of
similar tonnage to join the new shipping company and have discussed
with Golar Power exchanging one of their LNG carriers for the FSRU
Golar Tundra. Management of Golar's
vessels will remain with Golar Management Norway AS. Assuming the
joint structure proceeds as planned, Golar's direct exposure to the
carrier market will then be limited to one modern steam turbine
vessel, Golar Arctic, with Golar Viking contracted to be sold in 2020 post FSRU
conversion.
Golar Partners (a
non-consolidated affiliate of Golar LNG)
The Partnership reported a 1Q net
loss of $15.0 million as a result of further mark-to-market
interest rate swap losses, scheduled winter downtime for the FSRU
Igloo and additional idle time for the spot
traded LNG carrier Golar Mazo, partly offset
by commissioning hire billed in respect of the FSRU Golar Freeze from 11 January.
The FSRU Golar
Igloo completed its scheduled 5-year drydock during the Kuwait
winter downtime period ahead of commencing its 6th annual regas
season on February 25. The vessel will remain in service until
December 31 with potential for a further contract extension later
in the year via a tendering process.
With respect to the Partnership's
ships, charterers of the carrier Golar Grand
exercised the first of their one-year extension options. The option
rate between May 2019 and May 2020 will represent a material
improvement on the initial 2-year rate. This will be partly
offset by reduced utilization of the Golar
Maria and Golar Mazo in the spot
market.
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. The Partnership
received a dividend in 1Q amounted to $3.0 million.
Distribution coverage1
for 1Q each year is typically low as a result of the scheduled
Golar Igloo winter downtime. This remains the
case for 2019 where distribution coverage1 fell from 1.2
in 4Q to 1.01 in 1Q. A full quarter's contribution to
adjusted EBITDA1 from both
FSRU Golar Igloo and FSRU Golar Freeze partly offset by more volatile near-term
earnings in respect of carriers Golar Maria
and Golar Mazo is expected to result in a
solid improvement to 2Q 2019 distribution coverage.
FLNG
FLNG Hilli
Episeyo continues to achieve 100% commercial uptime. By early
May Hilli Episeyo had satisfied its first 1.2
million tons of production, which is expected to result in the
release of approximately $29.0 million of letter of credit ("LC")
cash to 2Q 2019 liquidity. Detailed discussions continue with field
operator Perenco with respect to the logistics and timing of
increasing both the vessel's utilization and potentially materially
increasing the overall duration of the contract term. These
discussions remain on track to conclude before the end of this
year.
On February 26, a 100% owned Golar
subsidiary, Gimi MS entered into an agreement with BP for the
charter of an FLNG unit, Gimi, for a 20-year
period expected to commence in 2022. On April 16, Keppel subscribed
to 30% of the ordinary share capital of Gimi MS. Total conversion
works for FLNG Gimi are expected to cost
approximately $1.3 billion, excluding financing costs. Annual
contracted revenues less forecasted operating costs of
approximately $215 million are expected, equivalent to a total
forecasted Contract Earnings Backlog1 of $4.3
billion, of which Golar's 70% share is expected to be $3.0
billion.
The Gimi
chartering contract with BP has been signed and the conversion
contract with Keppel Shipyard is now effective. Financing has been
secured, the first yard installment has been paid and the project
is proceeding according to schedule.
A term sheet expected to form the
basis of a shareholders agreement has also been agreed with respect
to the US Gulf of Mexico "Delfin LNG" project. Discussions
with potential off-takers continue.
The successful commencement of
Hilli Episeyo has led to a significant
pipeline of new FLNG opportunities. Investors should however be
cognizant of the time it takes to execute FLNG opportunities. In
most cases FLNG projects include large upstream development
processes and material governmental interaction linked to permits,
taxation and government participation. The strong cashflows from
these projects makes them attractive financing prospects after
commencement of operations however pre-delivery construction
financing remains capital intensive.
Golar is working actively with
yards, equipment providers and financial institutions to develop a
design, reduce the capital requirements and to identify a
commercial model where our FLNG business becomes more scalable.
These developments are all based on the successful technical
experience we have gained from the Hilli and
Gimi projects.
Golar Power
(50/50 Golar/Stonepeak Infrastructure Partners non-consolidated
downstream joint venture)
Construction of the Sergipe power
plant remains on track for commencement of operations on January 1,
2020. The power station is now nearing mechanical completion and
pre-commissioning of selected systems has commenced in anticipation
of first firing of the gas turbines in early July. Transmission
lines from the substation to the grid were connected on May 3 and
the FSRU Nanook with its commissioning cargo
is ready for hook-up to the mooring.
Golar's share of expected annual
contracted revenues less forecasted operating expenses from the
fully financed Sergipe power project and Golar
Nanook FSRU is around $99 million assuming a BRL/USD exchange
rate of 3.7, regardless of whether power is dispatched or not.
As indicated in February, Golar
Power commenced a strategic review during the quarter.
Following the initial phase of this review, the Board of Golar
Power has deferred any decision on a potential IPO until 2020.
Golar Power will now capitalize on its local presence by focusing
on the downstream small-scale LNG market in Brazil.
Successful development of these opportunities can generate a
material contribution to Golar Power's earnings in 2020 and 2021.
The main focus of the small-scale distribution model is to replace
diesel, LPG and fuel-oil with LNG. The market in Brazil is large
with diesel consumption equivalent to approximately 40mtpa of LNG
demand.
The excess capacity of Golar Nanook is key to developing these opportunities.
Nanook has excess throughput capacity of up to
approximately 200 million mmbtu per annum over and above what must
be reserved for full dispatch at the power station. This
represents approximately two thirds of the vessels capacity.
Assuming a spread of USD $1.00
p/mmbtu can be captured for this open capacity, this would lead to
approximately USD $100 million in additional adjusted EBITDA per
annum1 for Golar
Power. By integrating further downstream this margin can be
materially increased. Golar Power has received a number of
expressions of interest from potential customers and the level of
interest has provided the confidence to move ahead. In the event
that not all the capacity is used by small-scale development, there
is still the potential for Sergipe expansion. The downstream
distribution model created by virtue of Golar Power's interest in
FSRU Nanook is characterized by capital
expenditure/adjusted EBITDA1 multiples of
around 2-3 times, and also by a short period between investment and
commencement of cashflow.
The Government of Brazil has made
a clear strategic commitment to use LNG as a cheaper and cleaner
energy source. The diesel riots of 2018 and a consequent desire to
reduce dependence on diesel are a key driver behind this.
This model can be repeated at
other locations in Brazil including Barcarena and Santa Catarina
where Golar Power has already received initial licenses for the
establishment of terminals and FSRUs. The fact that Golar has
prompt FSRUs available increases its ability to capitalize on these
opportunities in the short term. Noteworthy is the fact that
neither of these initiatives are dependent on Golar Power securing
further power provision capacity.
Avenir (22.5%
interest in LNG small-scale venture, a non-consolidated
affiliate)
Good progress is being made with
Avenir's HIGAS terminal in Sardinia. Tank bases are complete, tank
construction is underway and commissioning is scheduled for August
2020. Evidence of physical progress is generating interest from
potential local customers. Avenir is also working on a significant
demand for a new industrial plant in the south of the island
starting up at the end of 2020. Further afield, active customer
interest in bunkering and small-scale power has also been
noted.
As a result of better
functionality and cost, two 7,500cbm shipbuilding contracts with
Sinopacific were recently signed to replace Avenir's contract for
two similar vessels at Keppel. Although there have been several
requests to charter Avenir's vessels at attractive rates these
assets are viewed more as strategic tools that allow it to become
an integrated LNG distributer. Opportunities to this end are
preferred.
The value of Golar's Avenir shares
has, since the offering last year, increased by 75%.
Financing
Review
Golar's total current cash
position as at March 31 was $690.3 million (including long-term
restricted cash), of which $212.7 million was unrestricted.
Included within restricted cash is $174.8 million relating to
lessor-owned VIEs and $175.0 million relating to the Hilli Episeyo LC. Of the $175.0 million restricted cash
securing the Hilli Episeyo LC, approximately
$29.0 million is expected to be released to free cash in 2Q 2019.
Sale of the converted Golar Viking is expected
to add a further $40 million to liquidity in 2020. A further $85
million is expected to be released from the Hilli LC in 2021.
On April 16, Gimi MS, a 70% owned
subsidiary of Golar, received a firm $700 million underwritten
financing commitment for the FLNG Gimi.
Available during construction, the financing has a tenor of 7-years
post commercial operation date ("COD") and a 12-year amortization
profile. Interest payable on the facility will be the aggregate of
LIBOR plus a margin of 400bps during construction, reducing to
LIBOR plus 300bps post COD.
A 2-year extension to the
Golar Tundra sale and leaseback facility has
been agreed and a 5-year restated and amended facility in respect
of the Golar Arctic has been credit
approved.
Golar's contractual
debt1 including
100% of Hilli Episeyo as at March 31 was $2.6
billion. Golar's adjusted net debt1 was $2.2
billion.
Included within the $924.5 million
current portion of long-term debt and short-term debt on the
Balance Sheet is $745.3 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.
Corporate and
Other Matters
As at March 31, 2019, there were
101.3 million shares outstanding, including 3.0 million TRS shares
that had an average price of $45.49 per share. The TRS, which is
fully collateralized, was marked-to-market as of March 31, 2019
when the closing price was $21.09 per share. The cash collateral
posted against the swap is included within the restricted cash
balance on the Balance Sheet. There were also 3.8 million
outstanding stock options in issue with an average price of
$36.03.
The Board has approved a dividend
of $0.15 for the quarter.
Profitable growth
through delivery of Cleaner and Cheaper Energy
Golar believes that natural gas
has a critical role to play in providing cleaner energy for many
years to come. Our pioneering infrastructure assets provide
safe, competitive and sustainable ways of liquefying, transporting
and turning gas into energy around the world. Illustrating the
business potential, the consumption of diesel and heavy fuel in the
transportation, power and shipping markets today amounts to
approximately 30 million barrels per day, while the total LNG
market by comparison is equivalent to only 7.4 million barrels per
day.
LNG prices have historically been
linked to oil prices. Long-term prices were supported by an energy
content equilibrium of around 16% of Brent. The lower
production cost of gas relative to oil combined with increased LNG
volumes from Qatar, Australia and the US has reduced long-term LNG
prices by approximately 30%. Long-term LNG contracts today trade at
around 10-11% of Brent. The spot Brent price is currently
around USD $70 per barrel, while spot LNG prices in Europe and Asia
are currently trading between USD $4-5 per mmbtu, equivalent to
6-7% of Brent.
The significant cost advantages of
current LNG prices creates new opportunities. A 14,000 TEU
container ship fueled by LNG, will, based on today's spot prices,
have a pre-tax operating bunker benefit of approximately $40,000
per day compared to an oil-fueled vessel. An LNG truck in
Brazil could reduce its annual pre-tax fuel cost by approximately
USD $19,000 relative to a diesel truck.
Current diesel prices along the
main trucking routes in Brazil are in excess of USD $25.0 mmbtu
equivalent gas cost. There are two million heavy vehicles in
Brazil. The potential market for a diesel to LNG conversion is
therefore substantial.
Additional to the financial
savings as a result of converting to LNG are the equally important
environmental benefits. A conversion from diesel to LNG reduces C02
emissions by approximately 30%, SOX by close to 100%, NOX by 33%
and particle PM10 pollution by a little over 66%.
Outlook
Golar has been transformed since
2013. Significant investment has been injected into FLNG projects,
the power project in Sergipe and the development and permitting of
further downstream assets. The company has been transformed from an
LNG shipping company into an integrated LNG energy company.
The initial focus in 2019 has been
to take FID on the Gimi (BP FLNG) and
Viking (LNG Hrvatska FSRU) projects, secure
project finance and award contracts for these projects. With
those tasks completed, the main focus will be to streamline the
company and increase the utilization of existing assets. The
intention is to significantly increase the return on investment
("ROI") without committing major capital. As noted above, the Board
has, as a part of the new strategy, concluded that it would be
right to spin off the TFDE shipping fleet into a separate entity,
subject to market conditions. This will materially reduce the
company's net debt and highlight the strength of the strong
long-term cash flow coming from the remaining assets.
Shipping: With the LNG carrier
market showing signs of seasonal recovery and edging into a
time-frame where a structural shortage of ships appears inevitable,
Golar expects that the new LNG shipping company will be an
attractive pure play vehicle for investors to participate in the
strong growth and cyclical recovery of the LNG shipping market.
This will allow us to reposition
Golar LNG and focus primarily on two business lines:
FLNG: Our project teams will work
diligently to safely deliver the Gimi project
on time and on budget. Golar will also work with Perenco to
conclude an agreement to increase utilization and provide a
meaningful potential extension to the charter duration for FLNG
Hilli Episeyo by the end of 2019. For
future FLNG projects, Golar will continue to drive home its
competitive advantage and unique FLNG operating experience.
Development of the robust FLNG pipeline, finance permitting, will
add further long-term contract earnings backlog1 to the
$3.7 billion (Golar share) already secured.
Golar Power: We expect
commissioning of the Sergipe power station to complete in 2H19
ahead of the January 1, 2020 COD. At COD, the combination of
Sergipe and Nanook will initiate the
realization of approximately $2.5 billion of contract earnings
backlog1 attributable
to Golar. Golar Power will now develop the downstream small-scale
market in Brazil, which can create significant earnings as early as
2020/21.
The Board of Directors is pleased
with the work done to date in underpinning the business with key
projects. The Board is however humble to the fact that these
achievements have not yet been positively reflected in the
Company's share price. We believe that separation of the company's
assets into two entities will better position both companies.
A stock price that reflects the true strategic and contracted value
of the underlying assets is a key condition to be able to grow a
company. After a period of rapid expansion and significant
capital investment to build the foundation, it is time to reap the
$10.3 billion gross contract earnings backlog1 and
implement stronger capital discipline with full focus on ROI.
We see substantial potential for cash flow improvement through
increased utilization of existing assets.
In repositioning Golar as a solid
long-term cashflow business from projects that create large cost
and environmental benefits for our customers the Company expects to
materially broaden investor interest. With an LNG growth rate of
approximately 10% pa, a gross contract earnings backlog1
of $10.3 billion, strong growth in contracted earnings, a
well-financed balance sheet, a unique market leading position in
FLNG, integrated power projects and a solid pipeline of
opportunities, the Board is increasingly optimistic about the
future.
Non-GAAP measures
Adjusted
EBITDA: Adjusted EBITDA is calculated by taking net income
before interest, tax, unrealized mark-to-market movements on the
oil derivative instrument, depreciation and amortization. We
believe that the exclusion of these items enables investors and
other users of our financial information to assess our sequential
and year over year performance and operating trends on a more
comparable basis and is consistent with management's own evaluation
of business performance. Adjusted EBITDA is a non-GAAP financial
measure and should not be considered as an alternative to net
(loss) income or any other indicator of Golar's performance
calculated in accordance with US GAAP. The table below reconciles
net (loss) income, the most directly comparable US GAAP measure, to
adjusted EBITDA.
|
2019 |
2018 |
2018 |
2018 |
(in thousands of $) |
Jan-Mar |
Oct-Dec |
Jan-Mar |
Jan-Dec |
Net (loss) attributable to Golar LNG Limited |
(41,741 |
) |
(312,957 |
) |
(21,002 |
) |
(231,428 |
) |
Adjusted for: |
|
|
|
|
Interest income |
(3,214 |
) |
(2,983 |
) |
(1,944 |
) |
(10,133 |
) |
Interest expense |
29,352 |
|
31,251 |
|
13,998 |
|
101,908 |
|
Losses on derivative instruments |
5,699 |
|
23,605 |
|
874 |
|
30,541 |
|
Other financial items, net |
1,407 |
|
780 |
|
363 |
|
1,481 |
|
Income taxes |
205 |
|
627 |
|
(6 |
) |
1,267 |
|
Equity in net losses of affiliates |
12,899 |
|
154,089 |
|
1,541 |
|
157,636 |
|
Net
income attributable to non-controlling interests |
24,257 |
|
2,770 |
|
12,605 |
|
63,214 |
|
Operating income/(loss) |
28,864 |
|
(102,818 |
) |
6,429 |
|
114,486 |
|
Adjusted
for: |
|
|
|
|
Unrealized (gain)/loss on oil derivative instrument |
(28,380 |
) |
195,740 |
|
(13,600 |
) |
9,970 |
|
Depreciation and amortization |
28,163 |
|
28,295 |
|
16,409 |
|
93,689 |
|
Impairment of long-lived assets |
34,250 |
|
- |
|
- |
|
- |
|
Adjusted EBITDA |
62,897 |
|
121,217 |
|
9,238 |
|
218,145 |
|
In the Golar Power section of the
commercial review, we refer to an additional adjusted EBITDA of
$100 million. Nameplate capacity of the FSRU Nanook is 5.8 MTPA,
approximately 1.7 MTPA will be tied up to Sergipe at 100% dispatch,
hence 4.1 MTPA of the Nanook's capacity is spare capacity
available. 4.1 MTPA is equivalent to 205 million MMBTU. Assuming
$1.00 p/MMBTU would amount to $102.5m EBITDA ($1 x 205 million
MMBTU x 50%). This is a forecasted number. Management has not
forecasted net income as information to do so is not available
without unreasonable effort. Additional adjusted EBITDA is not
intended to represent future cashflows.
Adjusted net
debt: The Company consolidates a number of lessor VIEs, which
means that on consolidation, Golar's contractual debt under various
sale and leaseback facilities are eliminated and replaced with the
lessor VIE's debt. Adjusted net debt is calculated by taking net
debt defined by GAAP line items and reversing out the lessor VIE
debt and restricted cash balances and replacing it with Golar's
contractual debt under the sale and leaseback facilities. We
believe that the exclusion of the lessor VIE's debt enables
investors and users of our financial information to assess our
liquidity based on our underlying debt obligations and aids
comparability with our competitors. This presentation is consistent
with management's view of the business. Adjusted net debt is a
non-GAAP financial measure and should not be considered as an
alternative to net debt or any other indicator of Golar's
performance calculated in accordance with US GAAP. The table below
reconciles net debt based to adjusted net debt:
(in thousands of $) |
March 31, 2019 |
December 31, 2018 |
Net debt as calculated by GAAP |
|
|
Total debt (current and non-current) net of deferred
finance charges |
2,513,190 |
|
2,565,359 |
|
Less |
|
|
Cash and cash equivalents |
(212,673 |
) |
(217,835 |
) |
Restricted cash and short-term deposits - current and
non-current portion |
(477,598 |
) |
(486,426 |
) |
Net debt as calculated by GAAP |
1,822,919 |
|
1,861,098 |
|
VIE Consolidation Adjustment |
98,543 |
|
87,045 |
|
VIE Restricted Cash |
174,816 |
|
176,428 |
|
Deferred Finance Charges |
15,056 |
|
21,546 |
|
TRS Restricted Cash (1) |
86,050 |
|
82,863 |
|
Adjusted Net Debt |
2,197,384 |
|
2,228,980 |
|
(1) Restricted cash relating to
the share repurchase forward swap refers to the collateral required
by the bank with whom we entered into a total return equity
swap.
(in thousands of $) |
March 31, 2019 |
December 31, 2018 |
Total debt (current and non-current) net of deferred
finance charges
|
2,513,190 |
|
2,565,359 |
|
VIE Consolidation Adjustments |
98,543 |
|
87,045 |
|
Deferred Finance Charges |
15,056 |
|
21,546 |
|
Golar's Contractual Debt |
2,626,789 |
|
2,673,950 |
|
Please see Appendix A for a
capital repayment profile for Golar's contractual debt.
TCE: The
average daily 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 US 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 average daily TCE may not be comparable to that
reported by other entities. The following table reconciles our
total operating revenues, the most directly comparable US GAAP
measure, to the average daily TCE rate.
|
2019 |
|
Jan-Mar |
(in thousands of $) |
ST |
TFDE |
Total operating revenues |
8,074 |
|
46,235 |
|
Less: Voyage and commission expenses |
(1,612 |
) |
(14,527 |
) |
|
(1,612 |
) |
(14,527 |
) |
Calendar days less scheduled off-hire days |
161 |
|
810 |
|
Average daily TCE rate (to the closest $100) |
40,100 |
|
39,100 |
|
|
2019 |
2018 |
(in thousands of $) |
Jan-Mar |
Oct-Dec |
Total operating revenues |
114,287 |
|
181,939 |
|
Less: Liquefaction services revenue |
(54,524 |
) |
(54,524 |
) |
Less: Vessel and other management fees |
(5,453 |
) |
(8,241 |
) |
Time and voyage charter revenues |
54,310 |
|
119,174 |
|
Less: Voyage and commission expenses |
(16,140 |
) |
(40,690 |
) |
|
38,170 |
|
78,484 |
|
Calendar days less scheduled off-hire days |
971 |
|
1,012 |
|
Average daily TCE rate (to the closest $100) |
39,300 |
|
77,600 |
|
Contract Earnings
Backlog: Contract earnings backlog represents Golar's share of
contracted fee income for executed contracts less forecasted
operating expenses for these contracts. In calculating forecasted
operating expenditure, management has assumed that where there is
an Operating Services Agreement the amount receivable under the
services agreement will cover the associated operating costs. For
contracts which do not have a separate Operating Services
Agreement, management has made an assumption about operating costs
based on the current run rate. The only material application of
this methodology was to the Hilli Episeyo
Earnings backlog where we assumed operating costs of approximately
$120,000 per day.
For consolidated subsidiaries
where we do not own 100% of the share capital, management has only
included our proportionate share of contract earnings. The
material application of this assumption was to Gimi (70% ownership) and Hilli
Episeyo (44.5% of the Common Unit entitlement). No contracted
fee income was included for Hilli T3 or the
oil derivative.
For equity accounted
investments (the Partnership and Golar Power) we have included our
proportionate share of their contract earnings backlog under the
same assumptions that we have applied to our consolidated
subsidiaries. In the future when our contract earnings backlog
actualizes, we will show our share of their earnings net of
interest and tax in one line in the Income Statement "Equity in net
earnings/(losses) of affiliates". The Golar Power numbers are
calculated based on an exchange rate of 3.7BRL:1USD.
Management has not forecasted net
income for these initiatives as information to provide such a
forward-looking estimate is not available without unreasonable
effort. Contract earnings backlog is not intended to represent
EBITDA or future cashflows that will be generated from these
projects nor is it intended to represent the dividend income that
will be payable to Golar from our equity investments. This measure
should be seen as a supplement and not a substitute for our US GAAP
measures of performance.
Gross Contract
Earnings Backlog: Gross contract earnings backlog represents
each Golar entity's share of contracted fee income for executed
contracts less forecasted operating expenses for these contracts.
In calculating the forecasted operating expenditure, management has
applied the same methodology in preparing the "Contract Earnings
Backlog" measure above. Management has not forecasted net income
for these initiatives as information to provide such a
forward-looking estimate is not available without unreasonable
effort. Contract earnings backlog is not intended to
represent EBITDA or future cash flows that will be generated from
these projects nor is it intended to represent the dividend income
that will be payable to Golar from our equity investments. This
measure should be seen as a supplement and not a substitute for our
US GAAP measures of performance.
Distribution
coverage: As defined in Golar LNG Partners LP form 6-K, section
"Appendix A - Non-GAAP Financial Measures and Definitions".
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," "will," "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 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;
-
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;
-
the ability of Golar to increase the
utilization under, and term of, the liquefaction tolling agreement
for the Hilli Episeyo and the benefits that
may to accrue to us as the result of any such modifications;
-
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;
-
challenges by authorities to the tax
benefits we previously obtained under certain of our leasing
agreements;
-
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;
-
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 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; 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.
May 21, 2019
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 31 March 2019
This
announcement is distributed by West Corporation on behalf of West
Corporation clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Golar LNG via Globenewswire
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