Highlights
·
Golar LNG Partners LP
("Golar Partners" or "the Partnership") reports net income
attributable to unit holders of $26.5 million and operating income
of $53.3 million for the third quarter of 2017.
·
Generated distributable
cash flow of $41.0 million1 for the third quarter with a
distribution coverage ratio of 1.01.
·
Amendments to FSRU Golar
Freeze time charter agreed with Dubai Supply Authority.
·
Committed to acquire
interest in the FLNG Hilli Episeyo ("Hilli") from Golar LNG Limited
("Golar").
Subsequent Events
·
Closed a Series A
Preferred Unit offering raising net proceeds of $134 million.
·
FLNG Hilli on site in
Cameroon with production expected to commence shortly.
·
Declared an unchanged
distribution for the third quarter of $0.5775 per unit.
Financial Results Overview
Golar LNG Partners LP reports net income
attributable to unit holders of $26.5 million and operating income
of $53.3 million for the third quarter of 2017 ("the third quarter"
or "3Q"), as compared to net income attributable to unit holders of
$53.8 million and operating income of $87.4 million for the second
quarter of 2017 ("the second quarter" or "2Q") and net income
attributable to unit holders of $56.0 million and operating income
of $71.6 million for the third quarter of 2016.
(USD '000) |
Q3 2017 |
Q2 2017 |
Q3 2016 |
Total Operating Revenues |
105,635 |
|
135,969 |
|
113,839 |
|
Adjusted EBITDA 2 |
80,573 |
|
113,539 |
96,885 |
|
Operating Income |
53,295 |
|
87,397 |
71,611 |
|
Non-operating Income |
922 |
|
- |
|
- |
|
Interest Income |
2,105 |
|
1,447 |
1,199 |
|
Interest Expense |
(19,876 |
) |
(18,856) |
(16,344 |
) |
Other Financial Items |
(2,034 |
) |
(7,710) |
7,641 |
|
Taxes |
(4,378 |
) |
(4,652) |
(4,573 |
) |
Net Income attributable to Golar Partners Owners |
26,543 |
|
53,828 |
55,996 |
|
Net Debt 3 |
1,171,153 |
|
1,139,253 |
|
1,305,005 |
|
As anticipated, total operating revenues
decreased, from $136.0 million in the second quarter to $105.6
million in the third quarter. Two key events contribute to the
$30.4 million decrease. Firstly, on June 23, ahead of its
original contract date, the FSRU Golar Spirit concluded its charter
with Petrobras resulting in the recognition of a substantial
one-off termination fee. Having subsequently entered
temporary layup, the FSRU was non-revenue earning in 3Q.
Secondly, on September 19 the FSRU Golar Winter departed Brazil for
scheduled dry-docking resulting in 12 days off-hire in 3Q
2017. Partially mitigating this loss of revenue was
additional hire in respect of the Golar Grand, on hire for a full
quarter having spent 13 days of the second quarter in scheduled
dry-dock, and the receipt of a withholding tax refund in respect of
the FSRU's Golar Spirit and Golar Winter. Interest income in
respect of the tax refund is recorded as non-operating income.
Operating expenses at $17.2 million were $1.4
million lower than the prior quarter. Costs in respect of the Golar
Grand and Nusantara Regas Satu normalised during the quarter having
been inflated in 2Q as a result of their respective dry-dock and
five-yearly maintenance program. Additional savings in repairs and
maintenance costs were recorded by the FSRU Golar Eskimo and
carrier Golar Maria.
Administration costs at $4.9 million were $2.7
million higher than 2Q as a result of higher than normal legal,
accountancy, share option and consultancy related costs.
Approximately $1.5 million of this increased cost should be
considered as non-recurring.
Depreciation and amortization at $26.4 million
is in line with 2Q.
Interest expense at $19.9 million for the third
quarter was higher than the second quarter at $18.9 million.
The increase reflects a full quarters charge in respect of the draw
down of the $125.0 million revolving facility in May 2017 and an
11bps increase in LIBOR. The $70.0 million deposit paid
during August in respect of the investment in FLNG Hilli Episeyo
accrues interest at a rate of 5% and contributed to the $0.7
million increase in interest income for the quarter. Other
financial items recorded a loss of $2.0 million for 3Q compared to
a 2Q loss of $7.7 million. Non-cash interest rate swap gains
of $4.3 million, compared to a $4.1 million loss in 2Q were partly
offset by a non-cash $2.5 million loss following an increase in the
mark-to-market valuation loss of the embedded derivative liability
on the earn out units in connection with the Incentive Distribution
Right ("IDR") reset transaction in October 2016.
Reduced taxes following the Golar Spirit's
departure from Brazil resulted in a small decrease in the quarterly
tax charge from $4.7 million in 2Q to $4.4 million in 3Q.
As a result of the foregoing, 3Q distributable
cash flow1 was lower at $41.0 million compared to $72.1 million in
the second quarter. The distribution coverage ratio1 decreased
accordingly from 1.77 to 1.0 in 3Q.
Commercial Review
On July 12, the Partnership agreed with the
Dubai Supply Authority ("DUSUP") to amend the FSRU Golar Freeze
charter. In return for agreeing to shorten the charter by one
year, DUSUP have forgone their termination for convenience rights
as well as their extension option rights which were at a
significantly lower daily rate. In the event that the FSRU is
re-deployed on new business ahead of April 2019, the new charter
end date, Golar Partners has the right to terminate its obligations
under the DUSUP charter whilst continuing to receive the capital
element of the charter until April 2019. The operating cost
component of the charter hire will be significantly reduced from
November 11, 2017.
The FSRU market has shown clear signs of
weakness with additional competition leading to declining margins
in recent years. However, there has been an increasing level
of interest in an emerging market for mid-sized 1-2mtpa FSRUs where
the cost of unutilized capacity on larger and more expensive FSRUs
undermines the economics of a switch to gas. Golar Partners
with its existing fleet is a dominant player in this market. The
Partnership has continued active discussions and negotiations with
potential customers and remains confident of a new FSRU contract
award in the near future.
On October 31, LNG carrier Golar Grand completed
its charter with Golar LNG Limited ("Golar"). Between May 5,
2017 when the vessel commenced a new 2-year charter with an oil and
gas major, and October 31, 2017, the vessel had been sub-chartered
back from Golar at the same rate as its new charter. From
November 1, 2017 Golar Partners will receive revenue direct from
the vessels' new charterer and cease to receive charter hire from
Golar. The new charter rate is significantly lower than the charter
back rate was to Golar.
Golar Partners continues to pursue
re-contracting opportunities for the LNG carriers Golar Mazo and
Golar Maria. The LNG shipping market continues to tighten and
spot rates for TFDE tonnage have recently exceeded three year
highs. As prompt vessel availability falls to low single
digits, rate increases and a corresponding increase in spot and
short-term opportunities for steam turbine tonnage have also been
noted. Golar Partners is currently working on specific
opportunities for the Golar Maria and Golar Mazo. The target
is to place these vessels into medium to long-term charters.
Until such opportunities are concluded the vessels will trade in
the improving spot market.
Acquisitions
On August 15, 2017, Golar Partners announced
that it had entered into a purchase and sale agreement (the "PSA")
for the acquisition (the "Acquisition") from Golar and affiliates
of Keppel Shipyard Limited and Black and Veatch of equity interests
in Golar Hilli LLC, which will, on the closing date of the
Acquisition, indirectly own the FLNG Hilli Episeyo ("Hilli").
The acquired interests represent the equivalent of 50% of the two
liquefaction trains, out of a total of four, that have been
contracted to customers Perenco Cameroon SA and Societe Nationale
Des Hydrocarbures ("Perenco and SNH") for an eight-year term.
The acquired 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 revenue stream. The purchase price for the acquired
interests is $658 million less 50% of the net lease obligations
under the financing facility for the Hilli that are expected
to be between $468 and $480 million. Concurrent with the
execution of the PSA, the Partnership paid a $70 million deposit to
Golar.
Subject to the satisfaction of certain
conditions, including the acceptance of the Hilli under its
contract with Perenco and SNH, the closing of the Acquisition is
expected to take place on or before April 30, 2018. Upon
closing, the Partnership will apply the $107 million deferred
purchase price receivable from Golar in connection with the Tundra
Put Sale and the $70 million deposit referred to above against the
net purchase price and will pay the balance with cash on
hand. The Partnership estimates that its proportionate share
of the Hilli's annual contracted revenues less operating expenses
will be approximately $82 million. In accordance with US GAAP the
Partnership does not expect to initially consolidate Golar Hilli
LLC and so will reflect its share of net income on its income
statement as "equity in net earnings of affiliates."
The Acquisition is expected to be an accretive
transaction that will substantially increase the Partnership's
effective revenue backlog5. As distributable cash from the
Acquisition will be used to offset the expected reduction in
earnings related to vessels with expiring contracts, the
Partnership's management does not intend to recommend to the Board
an increase in the Partnership's quarterly cash distribution as a
result of this transaction.
The Hilli conversion and pre-commissioning is
now complete. The vessel departed Keppel Shipyard on October 1
and left Singapore for Cameroon with 108 crew on board on October
12. Hilli arrived in Cameroon on November 20 and hook-up and
connection to risers and umbilicals is now underway. The next
period will see tendering of a Notice of Readiness. 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.
Discussions have been initiated with Golar with
respect to the possible acquisition of the second 50% of Hilli's
contracted capacity. The Partnership is well positioned for
this following completion of its Series A Preferred Unit
offering.
Operational Review
The fleet performed well during the quarter
achieving 100% availability for scheduled operations. After
accounting for layup of the Golar Spirit and the scheduled
dry-docking of the Golar Winter, utilization of 95% was recorded
for the quarter.
On July 24, the FSRU Golar Spirit arrived in
Greece where it subsequently entered temporary layup on August
4. One-off demobilization costs incurred during the quarter
mean that layup savings will not be fully realised until 4Q.
Normalised daily operating costs for a vessel in layup are expected
to be less than $3,000 per day.
Golar Mazo entered Keppel yard on July 24 for
its scheduled dry-dock which completed on August 12. Having
completed within the window allowed under the terms of its charter,
no off-hire was incurred. The FSRU Nusantara Regas Satu also
completed its main class renewal and extensive five-yearly
maintenance program early in 3Q without dry-docking and without
interruptions to production.
Having departed Brazil on September 19 for its
scheduled dry-docking, the FSRU Golar Winter entered the shipyard
in Ferrol, Spain, on September 30. On October 5 the
shipyard's workforce initiated a general strike which continued
through to October 27. Third party suppliers were able to
undertake some jobs in their absence, reducing the impact of the
strike. Total off-hire in 4Q is now expected to be approximately 52
days, 10 more than previously anticipated.
Financing and Liquidity
As of September 30, 2017, the Partnership had
cash and cash equivalents of $206.8 million and restricted cash of
$180.3 million. The Partnership's total net debt3 as at 30
September was $1,171.2 million.
The Nordic bond listing of the USD 250 million
non-amortising bond issued in February 2017 and maturing in 2021
became effective on July 17, 2017. Having made no further
repurchases during the quarter, the outstanding balance of the
October maturing NOK 1,300 million bond, that the above bond
replaces, remained unchanged at NOK 304 million on 30 September.
This balance of NOK 304 million was repaid on October 12,
2017.
Based on the above net debt3 amount and
annualized4 third quarter 2017 Adjusted EBITDA2, Golar Partners'
net debt3 to Adjusted EBITDA2 ratio was 3.6. As of September
30, 2017, Golar Partners had interest rate swaps with a notional
outstanding value of approximately $1,400.0 million (including
swaps with a notional value of $453.1 million in connection with
the Partnership's bonds) representing approximately 100% of total
debt and capital lease obligations net of long-term restricted
cash.
The average fixed interest rate of swaps related
to bank debt is approximately 1.69% with an average maturity of
approximately 3.6 years as of September 30, 2017.
Outstanding bank debt as of September 30, 2017
was $1,010.9 million, which had average margins, in addition to
LIBOR, of approximately 2.53%. The Partnership also has a 2020
maturing $150.0 million Norwegian USD bond with a swapped all-in
rate of 6.275%, the 2021 maturing $250 million Norwegian USD bond
with a swapped all-in rate of 8.194% and the balance of an October
2017 maturing Norwegian Krone (NOK) bond with a fixed rate of
6.485%. With respect to the October maturing NOK bond, NOK 996
million had been repaid as at September 30, 2017. The Partnership
had a currency swap to hedge the NOK exposure for the remaining NOK
304 million and the total swap liability as at September 30, 2017,
which also included an interest rate swap element, was $15.2
million. The restricted cash securing this swap liability was
$1.7 million. At maturity, on October 12, the NOK 304 million
balance and associated swap liabilities and accrued interest,
collectively amounting to $54.0 million, were settled.
On October 24, 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
amounted to $133.7 million. Although marginally more
expensive than the most recent bond, the units are perpetual equity
and therefore do not have a refinancing requirement. The Preferred
Units are expected to be treated as equity under US GAAP. Golar
Partners has the option to redeem these units at any time after
five years.
Corporate and Other Matters
As of September 30, 2017, there were 70,661,522
units outstanding in the Partnership, of which 22,265,522,
exclusive of earn-out units but including 1,413,231 General Partner
units, were owned by Golar, representing a 31.5% interest in the
Partnership.
On October 19, 2017, Golar Partners declared an
unchanged distribution for the third quarter of $0.5775 per unit.
This distribution was paid on November 14, 2017 on total units of
70,661,522.
Having paid the minimum quarterly distribution
in respect of each of the four preceding quarters ending September
30, 2017, the 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
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.
After issuance of the first 50% of earn-out units there were
71,043,456 units outstanding in the Partnership, of which
22,647,456, exclusive of remaining earn-out units but including
1,420,870 General Partner units, are owned by Golar, representing a
31.9% interest in Golar Partners. The Partnership will issue
the remaining 50% of the Earn-Out Units provided that it has paid a
distribution equivalent to $0.5775 for each of the four quarters up
to September 30, 2018.
Total outstanding options as at 30 September
were 99,000. The issued options have an initial exercise price of
$20.55 per unit and vest over a three year period.
At the Partnership's Annual Meeting of Limited
Partners on September 27, Carl Steen was elected as a Class II
Director and the General Partner appointed the Partnership's
secretary, Michael Ashford, to replace Andrew Whalley as one of its
three appointed directors.
Outlook
Operating earnings for 4Q 2017 will be
negatively impacted by the 52 day dry-dock related off-hire of the
Golar Winter, conclusion of the Golar Maria time charter on
December 1, and a reduced daily rate receivable from the Golar
Grand post October 31. The Partnership however is
anticipating some spot charter earnings from Golar Maria, and KNPC,
charterers of the FSRU Golar Igloo, have elected to extend the
vessel's annual regas season to December 31.
Agreeing the initial equity interest acquisition
in the FLNG Hilli is expected to add approximately $0.8 billion of
effective revenue backlog5 and place the current quarterly
distribution on an increasingly firm footing. The
developing small-mid size FSRU market and a recovering shipping
market also provide an increasingly supportive backdrop for
re-contracting the Partnership's available assets. The Partnership
has continued active discussions and negotiations with potential
customers and remains confident of a new FSRU contract award in the
near future.
Proceeds from the recent perpetual preferred
offering will add to a strong existing liquidity position, improve
Golar Partners' capital structure and provide the Partnership with
flexibility to optimise re-contracting options for existing assets
as well as to pursue further accretive acquisitions.
Additional common units in the FLNG Hilli Episeyo represent an
obvious near-term acquisition target that the Partnership is now
discussing with Golar.
The Board is satisfied that high coverage levels
achieved over the prior three years, a strong balance sheet and the
anticipated consummation of the initial acquired interest in Hilli
Episeyo positions the Partnership to maintain its distribution
through the current transition phase. In the context of firming
demand for LNG in infrastructure hungry markets, the arrival of
significant new volumes should result in a step-up in demand for
LNG midstream assets and growth opportunities for Golar
Partners.
1Distributable cash flow is a non-GAAP financial
measure used by investors to measure the performance of master
limited partnerships. Distribution coverage ratio represents the
ratio of distributable cash flow to total cash distributions paid.
Please see Appendix A for a reconciliation to the most directly
comparable GAAP financial measure.
2Adjusted EBITDA: Earnings before interest,
other financial items, taxes, depreciation and amortization and
non-controlling interest. Adjusted EBITDA is a non-GAAP financial
measure used by investors to measure our performance. Please see
Appendix A for a reconciliation to the most directly comparable
GAAP financial measure.
3 Net Debt is a non-GAAP financial measure and
is defined as short-term debt and current portion of long-term debt
plus long-term debt plus obligations under capital leases less cash
and cash equivalents less restricted cash. Please see Appendix A
for a reconciliation to the most directly comparable GAAP financial
measure.
4Annualized means the figure for the quarter
multiplied by 4.
5 Revenue backlog and effective revenue backlog
is defined as the contracted daily charter rate for each vessel
multiplied by the number of scheduled hire days for the remaining
contract term. This is not a measure prepared in accordance
with GAAP. Effective revenue backlog includes the
Partnership's pro-rata share of Hilli Episeyo revenues which are
expected to be recorded as "Equity in net earnings of
affiliates"
FORWARD LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning future events and Golar
Partners' operations, performance and financial condition.
Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words
"believe," "anticipate," "expect," "estimate," "project," "will
be," "will continue," "will likely result," "plan," "intend" or
words or phrases of similar meanings. These statements involve
known and unknown risks and are based upon a number of assumptions
and estimates that are inherently subject to significant
uncertainties and contingencies, many of which are beyond Golar
Partners' control. Actual results may differ materially from those
expressed or implied by such forward-looking statements. Important
factors that could cause actual results to differ materially
include, but are not limited to:
- market trends in the floating storage and regasification unit
(or FSRU), liquefied natural gas (or LNG) carrier and floating
liquefied natural gas vessel (or FLNG) industries, including
charter rates, factors affecting supply and demand, and
opportunities for the profitable operations of FSRUs, LNG carriers
and FLNGs;
- the ability of Golar LNG Partners LP ("Golar Partners," "we,"
"us" and "our") and Golar LNG Limited ("Golar") to retrofit vessels
as FSRUs or FLNGs and the timing of the delivery and acceptance of
any such retrofitted vessels by their respective charterers;
- our ability to maintain cash distributions and the amount of
any such distributions;
- our ability to consummate the Acquisition of Hilli Episeyo on a
timely basis or at all;
- the timeliness of the Golar Hilli Episeyo delivery,
commissioning and acceptance by the charterer;
- our ability to integrate and realize the expected benefits from
acquisitions and potential acquisitions, including the FLNG, the
Hilli Episeyo;
- the future share of annual contracted revenues, net of
operating expenses relating to the Hilli Episeyo, which are
expected to be accounted for under the equity method;
- our anticipated growth strategies;
- the effect of a worldwide economic slowdown;
- turmoil in the global financial markets;
- fluctuations in currencies and interest rates;
- general market conditions, including fluctuations in charter
hire rates and vessel values;
- the liquidity and creditworthiness of our charterers;
- changes in our operating expenses, including drydocking and
insurance costs and bunker prices;
- our future financial condition or results of operations and
future revenues and expenses;
- the repayment of debt and settling of interest rate swaps;
- our and Golar's ability to make additional borrowings and to
access debt and equity markets;
- planned capital expenditures and availability of capital
resources to fund capital expenditures;
- the exercise of purchase options by our charterers;
- our ability to maintain long-term relationships with major LNG
traders;
- our ability to leverage the relationships and reputation of
Golar, Golar Power Limited (or Golar Power) and OneLNG S.A. (or
OneLNGSA) in the LNG industry;
- our ability to purchase vessels from Golar, Golar Power and
OneLNGSA in the future;
- our continued ability to enter into long-term time charters,
including our ability to re-charter the Golar Spirit,
the Golar Mazo and the Golar Maria following
the termination or expiration of their respective time charters in
2017;
- our ability to maximize the use of our vessels, including the
re-deployment or disposition of vessels no longer under long-term
time charter;
- timely purchases and deliveries of newbuilding vessels;
- future purchase prices of newbuildings and secondhand
vessels;
- our ability to compete successfully for future chartering and
newbuilding opportunities;
- acceptance of a vessel by its charterer;
- termination dates and extensions of charters;
- the expected cost of, and our ability to comply with,
governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by its
charterers applicable to our business;
- availability of skilled labor, vessel crews and
management;
- our general and administrative expenses and its fees and
expenses payable under the fleet management agreements and the
management and administrative services agreement;
- the anticipated taxation of our partnership and distributions
to our unitholders;
- challenges by authorities to the tax benefits we previously
obtained;
- estimated future maintenance and replacement capital
expenditures;
- our and Golar's ability to retain key employees;
- customers' increasing emphasis on environmental and safety
concerns;
- potential liability from any pending or future litigation;
- potential disruption of shipping routes due to accidents,
political events, piracy or acts by terrorists;
- our business strategy and other plans and objectives for future
operations; and
- other factors listed from time to time in the reports and other
documents that we file with the U.S. Securities and Exchange
Commission (the "SEC").
Factors may cause actual results to be
materially different from those contained in any forward-looking
statement. Golar Partners does not intend to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in Golar Partners' expectations with
respect thereto or any change in events, conditions or
circumstances on which any such statement is based.
November 30, 2017
Golar LNG Partners L.P.
Hamilton, Bermuda
Questions should be directed to:
c/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo - Chief Finance Officer
Graham Robjohns - Chief Executive Officer
Stuart Buchanan - Head of Investor Relations
This information is subject of the disclosure requirements
pursuant to section 5-12 of the Norwegian Securities Trading
Act.
Attachments:
http://www.globenewswire.com/NewsRoom/AttachmentNg/26493cb9-98b5-42b1-b9e2-f61be24bbf7a
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