Highlights
·
Golar LNG Partners LP
("Golar Partners" or "the Partnership") reports net income
attributable to unit holders of $28.4 million and operating income
of $36.6 million for the second quarter of 2018.
·
Generated distributable
cash flow1 of $23.0 million for the second quarter with a
distribution coverage ratio1 of 0.56.
·
FLNG Hilli Episeyo accepted by
charterers Perenco and SNH.
Subsequent Events
- Completed acquisition of initial equity interest in Golar Hilli
LLC on July 12, 2018 and resume discussions on the potential
acquisition of an additional equity interest.
- Shipping market shows solid signs of improvement. Secured
10-month charter for Golar Maria.
- Selected FSRU Golar Freeze to service 15-year Atlantic
project. Vessel enters Dubai Drydocks.
- Declared an unchanged distribution for the second quarter of
$0.5775 per unit.
Financial Results Overview
Golar Partners reports net income attributable
to unit holders of $28.4 million and operating income of $36.6
million for the second quarter of 2018 ("the second quarter" or
"2Q"), as compared to net income attributable to unit holders of
$14.8 million and operating income of $26.1 million for the first
quarter of 2018 ("the first quarter" or "1Q") and net income
attributable to unit holders of $53.8 million and operating income
of $87.4 million for 2Q 2017.
(USD '000) |
Q2 2018 |
Q1 2018 |
Q2 2017 |
Total Operating Revenues |
84,201 |
|
74,214 |
|
135,969 |
|
Adjusted EBITDA 1 |
61,805 |
|
51,715 |
|
113,539 |
|
Operating Income |
36,640 |
|
26,066 |
|
87,397 |
|
Other Non-operating Income |
236 |
|
- |
|
- |
|
Interest Income |
3,300 |
|
3,482 |
|
1,447 |
|
Interest Expense |
(19,303 |
) |
(20,314 |
) |
(18,856 |
) |
Other Financial Items, net |
12,775 |
|
9,591 |
|
(7,710 |
) |
Tax |
(4,503 |
) |
(3,923 |
) |
(4,652 |
) |
Net Income attributable to Golar LNG Partners LP Owners |
28,440 |
|
14,755 |
|
53,828 |
|
Net Debt 1 |
1,098,771 |
|
1,084,532 |
|
1,139,253 |
|
As anticipated, total operating revenues
increased, from $74.2 million in 1Q to $84.2 million in 2Q. Two
developments contributed to the $10.0 million increase. Firstly,
the contractual seasonal downtime for the FSRU Golar Igloo resulted
in 55 days off hire during 1Q. This FSRU was on hire for all of 2Q.
Secondly, as part of an ongoing claim, a further tranche of
previously overpaid Brazilian withholding tax in respect of the
FSRUs Golar Spirit and Golar Winter was refunded.
At $16.6 million, vessel operating costs were in
line with 1Q. Administrative expenses at $3.9 million were $0.7
million higher than 1Q, partly due to an increase in legal fees
associated with the tax recovery.
Depreciation and amortization at $24.9 million
was $0.7 million lower than 1Q. Having fully amortized during 1Q,
there was no drydock amortization in respect of the FSRU Golar
Spirit in 2Q.
Interest expense at $19.3 million in 2Q was $1.0
million lower than 1Q, the latter having been inflated by deferred
financing costs written off in respect of the refinanced Nusantara
Regas Satu loan. Interest income was in line with 1Q.
Other financial items recorded a gain of $12.8
million for 2Q compared to a 1Q gain of $9.6 million. A $4.5
million non-cash gain has been recognized following a decrease in
the mark-to-market valuation loss of the embedded derivative
liability on the remaining Earn-Out units in connection with the
October 2016 Incentive Distribution Rights reset transaction. There
were also further non-cash interest rate swap gains following an
increase in 2-3 year interest swap rates.
As a result of the foregoing, 2Q distributable
cash flow1 increased $9.6 million to $23.0 million, compared to
$13.3 million in 1Q. The distribution coverage ratio1 increased
accordingly from 0.32 in 1Q to 0.56 in 2Q.
Commercial Review
On January 19, 2018 the Partnership executed a
15-year charter with an energy and logistics company for the
provision of an FSRU in the Atlantic Basin. FSRU service is
currently expected to commence around year end and the FSRU Golar
Freeze, which entered Dubai Drydocks in July, has been selected to
service this project. The vessel's current charterer is obligated
to pay charterhire for the vessel until April 2019.
The charterparty for the FSRU Golar Igloo is due
to conclude before the end of February 2019. Charterers KNPC
will need an FSRU after conclusion of the original agreement. The
Golar Igloo has performed with 100% uptime and KNPC has been very
pleased with operations to date. In line with Kuwait tendering
procedures, the Partnership expects to participate in a KNPC tender
for future services. Although the Partnership hopes to be
successful in this bidding process, the Golar Igloo is also
designed to trade as a conventional 170,000cbm carrier and the
shipping market represents an increasingly compelling alternative
should the contract not be renewed.
Golar Maria secured a 10-month charter during
the quarter. Commencing in August, this charter will
contribute additional distributable cash through to 2Q 2019.
An increasing number of spot inquiries are also being received for
the Golar Mazo. Ahead of winter, the Partnership expects to
remove the vessel from warm layup.
Acquisitions
By late April 2018, stable levels of production
were being achieved on board FLNG Hilli Episeyo. A
commissioning cargo was subsequently offloaded. Official
acceptance testing commenced thereafter and completed on May 31,
2018. The acceptance certificate was signed shortly
afterwards on June 2, 2018. All four trains have been
commissioned and tested to at or above nameplate capacity and the
vessel has been operating with 100% commercial availability.
The vessel is currently on schedule to export its sixth LNG
cargo.
Vessel acceptance was a key trigger for final
drawdown against the $960 million CSSCL sale and leaseback
facility. Final drawdown against this facility was completed
on June 20, 2018. Both vessel acceptance and execution of the final
sale and leaseback facility were conditions precedent to closing
the Hilli Episeyo acquisition. Golar and affiliates of Keppel
Shipyard Limited and Black & Veatch closed the sale of 50% of
the common units in Golar Hilli LLC, the disponent owner of Hilli
Episeyo, to the Partnership on July 12, 2018. Equivalent to 50% of
the two liquefaction trains currently contracted for 8-years to
Perenco Cameroon SA and Société Nationale Des Hydrocarbures, out of
a total of four, this initial interest includes a pro-rated 5%
stake in any future distributions generated by the currently
uncontracted expansion capacity, but does not include exposure to
the oil linked component of the vessel's earnings stream.
Adding approximately $800 million in effective revenue backlog1,
the Partnership estimates that its proportionate share of Hilli
Episeyo's annual contracted revenues less operating expenses under
the Liquefaction Tolling Agreement will be approximately $82
million. Golar Partners will account for its stake in Golar
Hilli LLC as an equity investment and will reflect its share of net
income on its income statement as "equity in net earnings of
affiliates". The actual net earnings reported will be reduced
by the non-cash amortization of the fair value of assets and
liabilities that were valued on dropdown.
With a view to further strengthening the
Partnership's financial position and providing additional support
to the distribution, Golar and the Partnership have also resumed
discussions with respect to the potential dropdown of additional
common units in Golar Hilli LLC.
Operational Review
Once again, the fleet performed well during the
quarter achieving 100% availability for scheduled operations. After
accounting for warm layup of Golar Mazo and idle time in the spot
market for Golar Maria, utilization of 85% was recorded for the
quarter.
Two of the Partnership's vessels have scheduled
drydockings in 3Q. FSRU Golar Freeze entered Dubai Drydocks
on July 19, 2018. As the vessel will be expected to remain in
service for up to 15 years in her new location without drydock,
works undertaken will be extensive. Minor modifications will
also be required to ensure compatibility with the vessel's new
receiving terminal. Works are expected to complete in October
2018. The FSRU will continue to receive the capital
element of its hire rate during drydock from the current charterer.
The LNG carrier Methane Princess is scheduled to drydock at a
European yard in the coming days. Including an upgrade to the
vessel's ballast water treatment system, this vessel drydock is
expected to result in approximately 33 days off hire.
Financing and Liquidity
As of June 30, 2018, the Partnership had cash
and cash equivalents of $115.9 million, restricted cash of $172.0
million and available and undrawn revolving credit facilities of
$75.0 million. The Partnership's total net debt1 as at June 30,
2018 was $1,098.8 million. Based on the above net debt1 amount and
annualized1 2Q 2018 Adjusted EBITDA1, Golar Partners' net debt1 to
Adjusted EBITDA1 ratio was 4.4. As of June 30, 2018, Golar Partners
had interest rate swaps with a notional outstanding value of
approximately $1,723.6 million (including swaps with a notional
value of $400.0 million in connection with the Partnership's bonds)
representing approximately 139% of total debt and capital lease
obligations net of long-term restricted cash. In anticipation of
closing the Hilli Acquisition and the assumption of a proportionate
share of its associated debt, the Partnership entered into a $480
million 8-year interest rate swap commencing March 31, 2018. Upon
closing on July 12, 2018, the proportion of debt swapped to a fixed
rate reverted to around 100%.
The average fixed interest rate of swaps related
to bank debt is approximately 2.2% with an average remaining period
to maturity of approximately 5 years as of June 30, 2018.
Outstanding bank debt as of June 30, 2018 was
$876.0 million, which had average margins, in addition to LIBOR, of
approximately 2.14%. The Partnership also has a 2020 maturing
$150.0 million Norwegian USD bond with a swapped all-in rate of
6.275% and a 2021 maturing $250 million Norwegian USD bond with a
swapped all-in rate of 8.194%. Excluding a portion of the
revolving component of the $800 million multi vessel facility, the
$150.0 million Norwegian USD bond represents the Partnership's next
scheduled debt maturity.
Corporate and Other Matters
As of June 30, 2018, there were 71,286,849
common and general partner units outstanding in the Partnership.
During the quarter, 96,100 common units were repurchased under the
Partnership's $25.0 million authorized repurchase program and
subsequently cancelled at a cost of $1.5 million.
Of the 71,286,849 common and general partner
units outstanding at June 30, 2018, 22,662,977, including 1,436,391
General Partner units, were owned by Golar, representing a 31.8%
interest in the Partnership.
In July 2018, Golar Partners declared a
distribution for 2Q of $0.5775 per unit for common and general
partner unitholders of record on August 7, 2018. The distribution
was paid in August 2018 on total units of 71,286,850. A cash
distribution of $0.546875 per Series A preferred unit for the
period covering 15 May through to 14 August, 2018 was also
declared. This was also paid in August 2018 to all Series A
preferred unitholders of record on August 8, 2018.
Total outstanding unit options as at June 30,
2018 were 99,000.
The Partnership's Annual General Meeting is
scheduled for September 26, 2018 in Bermuda and the record date for
voting was August 1.
Outlook
Timely closing of the acquisition of the initial
interest in Hilli Episeyo represents a material step toward
addressing the Partnership's re-contracting risk. The encouraging
start to operations also supports the decision to resume
discussions on the potential acquisition of an additional interest
in Hilli Episeyo.
Having entered drydock, the nominated FSRU Golar
Freeze is on track to commence operations for the 15-year Atlantic
FSRU contract starting around year-end. Golar Freeze is
expected to add a further $380 million of effective revenue
backlog1 and generate between $18 and $22 million of annual
contracted revenues less operating expenses.
The shipping market recovery is also developing
as expected. A material step-up in inquiries for long term
vessel charters, the recent ten month fixture for the Golar Maria,
the emerging interest in charters for the Golar Mazo and the lower
than theoretical rate differential between steam turbine and newer
vessels are all reassuring indicators of an underlying
recovery. The recovering shipping market also represents a
solid backstop should the FSRU Golar Igloo contract not be renewed
by her current charterer.
Although distribution coverage is expected to
increase in 3Q and further in 4Q, some uncertainty remains. A steep
amortization profile on some its debt facilities means that EBITDA1
generated by new contracts (or share of earnings under the equity
method for Hilli Episeyo) does not necessarily translate into
similar levels of replacement cashflow generation. Work to
stretch the Partnership's debt amortization profile to better match
the economic life of its assets continues. In view of the
current net debt1 to EBITDA1 ratio of around 4.4 and revenue
backlog1 of $2.5 billion, there should be ample financial
flexibility to re-leverage several assets.
The Board is pleased by the improvement in order
backlog and new coverage which the Partnership has secured over the
last six months. Although uncertainty around the level of
sustainable distributions remains, initial forecasts provided by
Management indicate that any potential reduction in distributions
will be lower than the market appears to be expecting based on the
current yield for Golar Partners units. These forecasts
together with preliminary 3Q results and commercial developments
over the next two months will guide the Boards decision in October
with respect to the 3Q distribution. Thereafter, a firm financial
footing, solid coverage ratios and strong growth in the LNG
industry should create attractive new business opportunities for
the Partnership.
Non-GAAP measures
Adjusted EBITDA: Adjusted EBITDA is
defined as earnings before interest, other financial items, taxes,
depreciation and amortization and non-controlling interest.
Adjusted 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 Adjusted
EBITDA as we believe it provides useful information to investors
because it is a basis upon which we measure our operations and
efficiency. Adjusted 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. Refer to our most
recent quarterly investor presentation on our investor relations
section on our website (www.golarlngpartners.com) for a
reconciliation to the most directly comparable financial measure
under US GAAP.
Annualized: Annualized means the
figure for the quarter multiplied by 4.
Distributable cash flow:
Distributable cash flow (DCF) is a non-GAAP financial measure used
by investors to measure the performance of master limited
partnerships. Refer to our most recent quarterly investor
presentation on our investor relations section on our website
(www.golarlngpartners.com) for a reconciliation to the most
directly comparable financial measure under US GAAP.
Distribution coverage ratio:
Distribution coverage ratio represents the ratio of distributable
cash flow to total cash distributions paid. Refer to our most
recent quarterly investor presentation on our investor relations
section on our website (www.golarlngpartners.com) for a
reconciliation to the most directly comparable financial measure
under US GAAP.
EBITDA: EBITDA is defined as
operating income 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.
Effective revenue backlog:
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, which includes our
pro-rata share of Hilli Episeyo contractual billings which will be
recorded as "Equity in net earnings of affiliates".
Net debt: Net Debt is a non-GAAP
financial measure and is defined as short-term debt and long-term
debt, plus obligations under capital leases, less cash and cash
equivalents, less restricted cash and short-term
deposits. Net Debt is used by investors to measure our
performance and should not be considered as an alternative to any
other indicator of our performance calculated in accordance with
U.S. GAAP. We believe that net debt assists our management
and investors by increasing the comparability of our combined
indebtedness and cash position against other companies in our
industry. Net Debt is not a measure of our financial
performance under U.S. GAAP and should not be construed as an
alternative to other financial measures presented in accordance
with U.S. GAAP. Refer to our most recent quarterly investor
presentation on our investor relations section on our website
(www.golarlngpartners.com) for a reconciliation to the most
directly comparable financial measure under US GAAP.
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:
· our ability to maintain
cash distributions and the amount of any such distributions;
· 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
consummate the acquisition of additional common units in
Golar Hilli LLC, the disponent owner of the Hilli Episeyo on a
timely basis or at all;
· our ability to integrate
and realize the expected benefits from acquisitions and potential
acquisitions, including the Hilli Episeyo;
· the future share of
earnings relating to the Hilli Episeyo, which will be accounted for
under the equity method;
· our ability to realize
the expected benefits from the Atlantic Project;
· 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;
· changes in
commodity prices;
· the liquidity and
creditworthiness of our charterers;
· changes in our
operating expenses, including drydocking, 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;
· our ability to
maintain long-term relationships with major LNG traders;
· our ability to
leverage the relationships and reputation of Golar and Golar Power
Limited (or Golar Power) in the LNG industry;
· our ability to purchase
vessels from Golar and Golar Power in the future;
· our
continued ability to enter into long-term time charters, including
our ability to re-charter FSRUs and carriers following the
termination or expiration of their time charters;
· 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.
August 23, 2018
Golar LNG Partners L.P.
Hamilton, Bermuda
Questions should be directed to:
c/o Golar Management Ltd - +44 207 063 7900
Brian Tienzo - Chief Executive and Chief
Financial 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.
- Interim results for the period ended 30 June 2018.pdf
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