Highlights
·
Operating Loss and EBITDA* in the quarter reported a loss of $22.9
million and $5.5 million, respectively, compared to a 2Q 2017 loss
of $24.0 million and $6.6 million, respectively.
· Committed to sell
an interest in the FLNG Hilli Episeyo ("Hilli") to Golar LNG
Partners ("Golar Partners").
· Iain Ross appointed
as CEO.
Subsequent Events
- Golar Partners closes a Series A Preferred Unit offering
raising net proceeds of $134 million.
- Golar Partners issues first 50% of Incentive Distribution Right
reset Earn-Out Units to Golar.
- LNG shipping market shows solid signs of recovery in 4Q.
- FLNG Hilli on site in Cameroon with production expected to
commence shortly.
Financial Review
Business Performance
|
2017 |
2017 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Total operating revenues (including revenue from collaborative
arrangement) |
32,432 |
|
28,408 |
|
Vessel operating expenses |
(13,827 |
) |
(12,099 |
) |
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(13,091 |
) |
(11,808 |
) |
Administrative expenses |
(11,025 |
) |
(11,105 |
) |
EBITDA* |
(5,511 |
) |
(6,604 |
) |
Depreciation and amortization |
(17,385 |
) |
(17,366 |
) |
Operating loss |
(22,896 |
) |
(23,970 |
) |
* EBITDA is defined as operating loss before
interest, tax, depreciation and amortization. EBITDA is a non-GAAP
financial measure. A non-GAAP financial measure is generally
defined by the Securities and Exchange Commission as one that
purports to measure historical or future financial performance,
financial position or cash flows, but excludes or includes amounts
that would not be so adjusted in the most comparable U.S. GAAP
measure. We have presented EBITDA as we believe it provides useful
information to investors because it is a basis upon which we
measure our operations and efficiency. EBITDA is not a measure of
our financial performance under U.S. GAAP and should not be
construed as an alternative to net income (loss) or other financial
measures presented in accordance with U.S. GAAP.
Golar reports today a 3Q 2017 operating loss of
$22.9 million as compared to a 2Q 2017 loss of $24.0 million.
A pick-up in utilization toward the end of the quarter resulted in
a small rise in time charter revenues which increased $1.0 million
to $25.0 million in 3Q 2017. Voyage expenses increased from $11.8
million in 2Q 2017 to $13.1 million in 3Q 2017, with the increase
largely attributable to repositioning and cool-down costs for the
Golar Tundra which departed Ghana in September and prepared for
service as an LNG carrier.
As a result of higher fleet management and
general vessel maintenance costs, vessel operating expenses
increased $1.7 million to $13.8 million in 3Q 2017. Administration
and depreciation and amortization costs at $11.0 million and $17.4
million, respectively, were in line with 2Q 2017.
Net Income Summary
|
2017 |
2017 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Operating loss |
(22,896 |
) |
(23,970 |
) |
Interest income |
1,792 |
|
1,888 |
|
Interest expense |
(13,375 |
) |
(20,453 |
) |
Other financial items, net |
4,433 |
|
(22,384 |
) |
Other non-operating (loss) income |
(98 |
) |
144 |
|
Taxes |
(423 |
) |
(458 |
) |
Equity in net (losses) earnings of affiliates |
(5,907 |
) |
704 |
|
Net income attributable to non-controlling interests |
(7,401 |
) |
(9,279 |
) |
Net loss attributable to Golar LNG Limited |
(43,875 |
) |
(73,808 |
) |
In 3Q 2017 the Company generated a net loss of
$43.9 million. Notable contributors to this are summarized as
follows:
·
The $7.1 million
decrease in interest expense is the result of an adjustment to
reflect capitalization of deemed interest of $7.4 million in
connection with Golar's equity investment in Golar Power. This has
been partly offset by additional interest charges as a result of an
increase in LIBOR.
·
Other financial items
reported 3Q 2017 income of $4.4 million. This non-cash income was
derived from a mark-to-market gain on the three million Total
Return Swap ("TRS") shares following a $0.36 quarter-on-quarter
increase in the Company's share price, an increase in swap rates
resulting in mark-to-market interest rate swap gains and a $2.5
million mark-to-market gain on the IDR Earn-Out Units
derivative.
·
The $5.9 million 3Q 2017
equity in net losses of affiliates is primarily comprised of the
following:
-
a $5.0 million loss in respect of
Golar's 50% share in Golar Power;
-
a $2.1 million loss in respect of
Golar's 51% share in OneLNG; and
-
income of $1.1 million in respect of
Golar's stake in Golar Partners.
Golar Partners reported a substantial drop in 3Q
2017 net income, primarily due to recognition of the Golar Spirit
termination fee in 2Q 2017 and the loss of earnings from this FSRU
post June 23, 2017. Golar's $8.4 million 3Q 2017 share of net
earnings in the Partnership is offset by amortization, principally
of the fair value gain on deconsolidation of Golar Partners,
currently equivalent to $7.3 million. At $12.9 million, the
quarterly cash distribution received from the Partnership is in
line with prior quarters.
Commercial Review
LNG Shipping
The shipping market recovery is underway.
Shipping demand has exceeded supply growth for the first time since
2013. Demand growth has been supported by a combination of
additional liquefaction volumes and rising ton miles. Eight
liquefaction trains with nameplate capacity of 34 million tons that
commenced operations in 2016 continue to ramp up. A further six
trains including Sabine Pass T4 and Wheatstone and Yamal T1 with a
collective nameplate capacity of 28 million tons have commenced
operations during 2017 to date. Start-up of the 5 million ton Cove
Point facility is anticipated around year-end. After four years of
declining ton miles, the advent of US volumes and the commencement
of contracts with their Far Eastern off-takers are also
contributing to rising sailing distances. Year to September 2017
ton miles increased 10% relative to 2016. This upward trajectory
should continue given that new 2018-2021 liquefaction will be
dominated by US volumes.
During September vessels began to pull out of
the spot market to service dedicated volumes. Rising LNG prices in
the East in response to significant demand from China and Korea
also resulted in additional arbitrage opportunities and ton miles
as more US volumes headed further eastward. Approximately 1.9
vessels are required to carry US volumes to Asia, more than twice
the number required to deliver Australian volumes. Spot rates have
steadily increased from 2-year highs in early October to 3-year
highs today with sentiment continuing to improve as we move into
peak winter gas demand. LNG prices have also surprised to the
upside. Current JKM prices at around $9.80 per mmbtu compare to
$7.10 this time last year. Similarly, European prices of $7.70
compare to $5.90 last year. The increase in Asia has, to a large
extent, been driven by very strong Chinese demand where year to
October imports are up approximately 48%, to 29 million tons.
Looking to 2018, around 45 vessels are scheduled
for delivery, equivalent to 10% of the current fleet. This compares
to more than 12% expected production growth for the year. Growth in
ton miles is expected to further tighten the market and this
sentiment is translating into a notable increase in enquiries for
term charters.
Golar Partners
On August 15, 2017, Golar entered into a
Purchase and Sale Agreement ("PSA") with Golar Partners for the
sale of equity interests in the Hilli. The sold interests represent
the equivalent of 50% of the two liquefaction trains, out of four,
that have been contracted to Perenco Cameroon SA ("Perenco") and
Societe Nationale Des Hydrocarbures ("SNH") for an eight-year term.
The sold interest includes a 5% stake in any future incremental
earnings generated by the currently uncontracted expansion
capacity, but does not include exposure to the oil linked component
of Hilli's current revenue stream. The agreed sale price was $658
million less net lease obligations under the vessel financing
facility that are expected to be between $468 and $480 million,
which represents 50% of the Hilli post-delivery facility.
Concurrent with execution of the PSA, the Partnership paid a $70
million deposit to Golar, on which the Partnership receives
interest at a rate of 5% per annum. Closing of the sale is expected
to take place on or before April 30, 2018.
On October 24, 2017, the Partnership priced a
4.8 million $25.0 per unit 8.75% Series A Preferred Unit offering.
After exercise of the Underwriters Option for a further 0.72
million units, net proceeds received at closing on October 31, 2017
amounted to approximately $134 million. This capital raising
positions the Partnership to acquire additional assets from
Golar.
On October 31, 2017, Golar's obligation to
sub-charter the Golar Grand from the Partnership expired. From
November 1, 2017, all daily hire from the vessel's oil major
charterer accrues to the Partnership.
Having paid the minimum quarterly distribution
in respect of each of the four preceding quarters ended September
30, 2017, the Incentive Distribution Right ("IDR") Exchange
Agreement required that the Partnership issue to Golar 50% of the
Earn-Out Units withheld at the time of the IDR reset in October
2016. Accordingly, on November 16, 2017, Golar Partners
issued to Golar 374,295 common units and 7,639 General Partner
units. The agreement also required the Partnership to pay Golar the
distributions that it would have been entitled to receive on these
units in respect of each of those four preceding quarters.
Therefore, concurrent with the issuance of the above Earn-Out
Units, Golar also received $0.9 million in cash. The Partnership
will issue the remaining 50% of the Earn-Out Units in 4Q 2018,
provided that it has paid a distribution equivalent to $0.5775 for
each of the four quarters up to September 30, 2018. As of today,
Golar owns 21,226,586 common units and 1,420,870 General Partner
units in the Partnership which in total have a current market value
of approximately $470 million.
FLNG
The Hilli conversion and pre-commissioning is
now complete. The vessel departed Keppel Shipyard on October
1, 2017 and left Singapore for Cameroon with 108 crew on board on
October 12, 2017. The Hilli arrived in Cameroon on November 20,
2017 and hook-up and connection to risers and umbilicals is now
underway. The next period will see tendering of a Notice of
Readiness, which triggers commissioning rate toll fees. A
ship-to-ship transfer of LNG for commissioning purposes will be
undertaken followed by commencement of the full commissioning
process. As part of this process, Golar anticipates production of
first commercial LNG to take place around year end. Final
commissioning is expected to complete during the second half of 1Q
2018 and the project remains well within budget.
The Mark II FEED study, a key pre-requisite to
reaching a Final Investment Decision ("FID") on the four 3.2mtpa
FLNG unit US Gulf Coast Delfin LNG project is continuing on
schedule and is on track to complete at the end of 1Q 2018.
OneLNG (51/49 Golar/Schlumberger upstream joint
venture)
On August 21, 2017, the Fortuna project
participants agreed the LNG sales structure and selected Gunvor
Group Ltd. ("Gunvor") as preferred off-taker. Principal
commercial terms have been agreed with Gunvor for a sale and
purchase agreement covering 1.1mtpa of LNG over a 10-year term. The
LNG will be sold on a Brent-linked FOB basis. For two years
immediately following FID the LNG offtake structure also permits
the Fortuna project participants to market the remaining 1.1mtpa to
higher priced gas markets. The sellers also have the option to
put up to 1.1mtpa to Gunvor at a price lower than the firm price,
exercisable during the two year period following FID.
On October 2, 2017, Fortuna project partner
Ophir awarded an upstream construction contract to Subsea
Integration Alliance, a partnership between OneSubsea, a
Schlumberger company, and Subsea 7. The award is structured as an
engineering, procurement, construction, installation and
commissioning ("EPCIC") contract for the sub-sea umbilicals, risers
and flowlines and for the sub-sea production systems scope of work.
The EPCIC schedule is consistent with the planned delivery of first
gas in 2021, and work will commence after FID.
With the Umbrella Agreement approved, a
preferred off-taker and offtake structure agreed, and EPC and EPCIC
contracts for midstream and upstream infrastructure now in place,
the critical outstanding requirement for full FID remains
financing. Progress has been made on bank and alternative financing
approaches over the last month. Based on the solid economics of
this project, the Board expects to approve a FID in the first part
of 2018.
OneLNG is making very good progress with its
remaining portfolio of FLNG projects and expects further projects
to be concluded during 2018.
Golar Power (50/50 Golar/Stonepeak
Infrastructure Partners downstream joint venture)
Development of the power project in Sergipe is
progressing according to plan. A full financing package for the
project is on track to close in 1Q 2018. There are now more than
1,200 workers on the ground with civil and earthworks nearing
completion. Turbine, transformer and heat recovery steam generation
modules are scheduled for delivery to site during 1Q 2018. Sapura
Energy have been engaged in an EPCI contract for offshore
works.
Golar Power's agreement to provide the Sergipe
project with an FSRU for 25-years has also been formalized in the
form of a Time Charter Party and Operating Services Agreement for
the Golar Nanook, the effectiveness of each being subject to
financial close. The vessel remains on track for a September 2018
yard delivery ahead of commencement of commissioning activities
offshore Sergipe in early-mid 2019.
Several projects have been targeted for the FSRU
conversion candidate Golar Celsius and yards are being shortlisted
for the conversion project. The standalone FSRU market remains
highly competitive and challenging. Golar is therefore focusing on
more profitable integrated gas to power projects where barriers to
entry are higher.
Financing Review
FLNG Hilli Episeyo financing
The Hilli remains well within budget. As at
September 30, 2017, $912.1 million has been incurred ($1,032.1
million including the original vessel and capitalised interest). As
of today, $525 million has been drawn against the CSSCL debt
facility. A further $175 million is available to draw to meet
remaining pre-acceptance costs and up to a further $260 million can
be used for remaining bills and to augment liquidity after
acceptance. Drawdown of this facility is likely to significantly
improve Golar's liquidity and investment capacity. An agreement has
also been reached with Perenco and SNH to reduce the LC from $400
million to $300 million and this too is expected to release
additional liquidity.
Liquidity
Golar's unrestricted cash position as at
September 30, 2017 was $286.6 million. Discussions have been
initiated with Golar Partners with respect to the possible dropdown
of the second 50% of Hilli's contracted capacity. The Partnership
is financially well positioned for this following completion of its
Series A Preferred Unit offering.
Included within the $1,102.6 million current
portion of long-term debt is $702.1 million relating to
lessor-owned subsidiaries that Golar is required to consolidate in
connection with seven sale and leaseback financed vessels. The
Company's underlying exposure is therefore $400.5 million. Of this,
the majority relates to the Hilli CSSCL facility, which will be
replaced by the pre-arranged $960 million sale and leaseback
facility after vessel acceptance.
Corporate and Other Matters
On September 21, 2017, Iain Ross was appointed
to replace interim CEO Oscar Spieler, who remains available in an
advisory capacity to support the Hilli project. Iain joins Golar
from project delivery firm WorleyParsons where he has held a wide
range of Executive positions, most notable amongst them,
responsibility for their global hydrocarbons, power, infrastructure
and mining sectors.
At Golar's Annual General Meeting on September
27, 2017, Tor Olav Trøim was appointed Chairman, replacing Dan
Rabun. Dan remains a Director of Golar. Michael Ashford, Golar's
Company Secretary, was also appointed as a Director, replacing
Andrew Whalley.
As at September 30, 2017, there were 101 million
shares outstanding, including 3.0 million TRS shares that had an
average price of $42.94 per share. There were also 4.2 million
outstanding stock options in issue. The dividend will remain
unchanged at $0.05 per share for the quarter.
Outlook
The Board is pleased with the transformation the
company has undertaken since ordering FLNG Hilli in June 2014.
Golar is currently going through a process that will see it
transition from a mid-stream shipping company into a fully
integrated gas to wire energy company.
Key building blocks to this transformation are
as follows:
- The delivery and start-up of FLNG Hilli, a vessel that will
generate base operating cashflows under its tolling agreement of
approximately $164 million per year over the coming 8 years. Trains
3 and 4, yet to be contracted, represent further potential upside.
Trains 1 and 2 also have Brent-linked upside which can generate
additional annual operating cash flows of approximately $3 million
for every dollar increase in Brent prices between $60 and
$102;
- The project development of the Fortuna field, organized through
the OneLNG joint venture with Schlumberger and Ophir, is expected
to reach FID in the first part of 2018. With its particularly
robust field economics, this project will give Golar direct access
to reserves in the ground;
- The development of the power project in Sergipe is progressing
according to plan. Commencing in January 2020, this project is
expected to generate annual operating cash flows of approximately
$330 million based on current exchange rates. Of this, 50% is
controlled by Golar Power, in which Golar has a 50% interest. The
project infrastructure attractively positions Golar Power for
further expansion opportunities at a low incremental cost;
- The FSRU Golar Nanook is committed to the Sergipe project for
25 years with annual operating cash flows of approximately $39
million accruing to Golar Power. Further FSRU opportunities in the
final stages of negotiation are expected to yield additional
business for Golar Power and Golar Partners;
- The shipping market is showing strong signs of improving. As of
today, the effective time charter rates being achieved in 4Q are
more than twice that recorded in 3Q. An improving trend is expected
to continue into 2018-2019 when shipping supply should lag demand
created by increased production. At full utilization, every $10,000
increase in shipping rates equates to approximately $40 million
additional annual operating cash flows across the entire
fleet;
- The outlook for Golar Partners has improved having taken steps
to secure its current distribution by way of its initial acquired
interest in FLNG Hilli. Improving spot rates for its ships also
provide a more supportive backdrop for their re-contracting;
and
- Supported by the successful execution of existing projects and
contributions from key joint venture partners OneLNG and Golar
Power, the project portfolio for the Golar group of companies
continues to grow. This unique combination provides a
differentiated and competitive value proposition in the gas to wire
energy sector.
As a result of the above, Golar is a company
likely to increase its earnings significantly over the coming three
years. These results will be underpinned by secured contracts
currently in execution, further augmented by a strengthening
shipping market and a solid portfolio of projects that are expected
to translate into new contracts. The company looks forward to
providing confirmation of the above over the forthcoming
quarters.
The Board recognizes the hard work invested in
transforming Golar LNG into a fully integrated and uniquely
positioned energy company, driven by a strong focus on technology
and execution. The Board expects that this effort will translate
into significant shareholder value as the various projects commence
over the years ahead.
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:
- changes in liquefied natural gas, or LNG, carrier, floating
storage and regasification unit, or FSRU, or floating liquefaction
natural gas vessel, or FLNG, market trends, including charter
rates, vessel values or technological advancements;
- 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 the timeliness of the Hilli Episeyo (the "Hilli")
commissioning;
- changes in the supply of or demand for LNG carriers, FSRUs or
FLNGs;
- a material decline or prolonged weakness in rates for LNG
carriers, FSRUs or FLNGs;
- 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 or FLNGs;
- changes in the supply of or demand for LNG or LNG carried by
sea;
- 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 close the sale of the equity
interests in Hilli on a timely basis or at all;
- changes in our ability to sell vessels to Golar Partners, or
our joint venture Golar Power Limited ("Golar Power");
- changes in our relationship with Golar Partners, Golar Power or
our joint venture OneLNG S.A;
- 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
provisions of FSRUs particularly through our innovative FLNG
strategy and our JVs;
- actions taken by regulatory authorities that may prohibit the
access of LNG carriers, FSRUs or FLNGs to various ports;
- our inability to achieve successful utilization of our expanded
fleet or inability to expand beyond the carriage of LNG and
provision of FSRUs, particularly through our innovative FLNG
strategy, or FLNG, and our joint ventures;
- changes in our ability to obtain additional financing on
acceptable terms or at all;
- our ability to make additional equity funding payments to Golar
Power and OneLNG to meet our obligations under each of the
respective shareholders' agreements;
- increases in costs, including, among other things, crew 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 30, 2017
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
Brian Tienzo - Chief Financial Officer
Stuart Buchanan - Head of Investor Relations
Attachments:
http://www.globenewswire.com/NewsRoom/AttachmentNg/88190dc0-e2e8-4b45-ba9d-197bbb5ed1e9
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