Highlights
·
Golar LNG Partners LP
("Golar Partners" or "the Partnership") reports net income
attributable to unit holders of $49.0 million and operating income
of $62.0 million for the third quarter of 2018.
·
Generated distributable
cash flow1 of $29.3
million for the third quarter with a distribution coverage
ratio1 of 1.02.
·
Completed acquisition of
initial equity interest in Golar Hilli LLC ("Hilli").
·
Selected FSRU Golar Freeze to service new 15-year Atlantic (Jamaica)
project.
·
Golar
Maria commences 10-month charter.
·
Methane
Princess enters scheduled dry-dock.
Subsequent
Events
·
Shipping market
continues to improve. Golar Mazo re-enters
spot market and completes multiple voyages.
·
Methane
Princess redelivered to charterers on October 25.
·
Distribution for the
third and subsequent quarters declared at $0.4042 per unit.
Financial Results
Overview
Golar Partners reports net income
attributable to unit holders of $49.0 million and operating income
of $62.0 million for the third quarter of 2018 ("the third quarter"
or "3Q"), as compared to 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") and net income
attributable to unit holders of $26.5 million and operating income
of $53.3 million for 3Q 2017.
(USD '000) |
Q3 2018 |
Q2 2018 |
Q3 2017 |
Total Operating Revenues |
108,232 |
|
84,201 |
|
105,635 |
|
Adjusted EBITDA 1 |
103,573 |
|
61,805 |
|
80,573 |
|
Operating Income |
62,011 |
|
36,640 |
|
53,295 |
|
Other Non-operating Income |
- |
|
236 |
|
922 |
|
Interest Income |
1,177 |
|
3,300 |
|
2,105 |
|
Interest Expense |
(20,062 |
) |
(19,303 |
) |
(19,876 |
) |
Gains/(Losses) on Derivative Instruments* |
11,338 |
|
12,701 |
|
(225 |
) |
Other Financial Items, net* |
(545 |
) |
74 |
|
(1,809 |
) |
Tax |
(4,512 |
) |
(4,503 |
) |
(4,378 |
) |
Equity in Net Losses of Affiliate |
(71 |
) |
- |
|
- |
|
Net Income attributable to Golar LNG Partners LP
Owners |
48,964 |
|
28,440 |
|
26,543 |
|
Adjusted Net Debt 1 |
1,579,441 |
|
1,098,771 |
|
1,171,153 |
|
*With effect from the three months
ended September 30, 2018, we presented a new line item,
"Gains/(losses) on derivative instruments", which relates to the
movement of our derivative instruments. Previously, these items
were presented within "Other financial items, net" on the face of
the statements of operations along with our general finance costs.
This presentation change has been retrospectively adjusted in prior
periods.
Total operating revenues
increased, from $84.2 million in 2Q to $108.2 million in 3Q. Of the
$24.0 million increase, $25.1 million is related to October 2018 -
April 2019 revenues to be received but recognized in full in
respect of a previous Golar Freeze contract.
Golar Freeze entered Dubai Dry-docks in July
for dry-dock and modifications necessary to service its new 15-year
project offshore Jamaica. Cash payments due under the existing
charter will however continue to be paid through to April
2019. An additional $3.7 million was also received in respect
of the Golar Maria which recorded higher
levels of utilization during the quarter. Against this, the
Partnership incurred offhire amounting to $2.6 million as a result
of the scheduled dry-docking of LNG carrier Methane Princess.
At $16.4 million, vessel operating
costs were in line with 2Q. Administrative expenses at $2.9 million
were $1.0 million lower than 2Q, the prior quarter having been
inflated by higher legal and professional fees.
Depreciation and amortization at
$24.6 million was in line with 2Q.
Interest expense at $20.1 million
in 3Q was $0.8 million higher than 2Q, the increase a result of an
increase in LIBOR. Interest income on the $177.0 million
prepayment in respect of Hilli Episeyo ceased
to be receivable after closing of the acquisition on July 12.
As a result, 3Q interest income at $1.2 million is $2.1 million
lower than 2Q.
Gains/(losses) on derivative
instruments recorded a gain of $11.3 million for 3Q compared to a
2Q gain of $12.7 million. The recent distribution cut meant
that the contingent Earn Out units arising out of the October 2016
Incentive Distribution Rights reset did not crystallize. The
remaining balance of the related derivative has therefore been
written off resulting in a $2.9 million non-cash gain. There were
also further non-cash interest rate swap gains following an
increase in 2-3 year interest swap rates.
By virtue of its 50% interest in
Hilli common units, the Partnership is entitled to 50% of the net
earnings of Hilli attributable to common unit holders after July 12
when the acquisition closed. The Partnership's reported share of
net earnings in 3Q amounted to a loss of $0.1 million which
includes non-cash charges of $7.3 million related to the
depreciation and amortization of fair value adjustments made upon
acquisition of the common units (see Appendix A).
Excluding $25.1 million additional
revenues recognised during 3Q in respect of Golar
Freezes' prior contract, 3Q distributable cash flow1
increased $6.3 million to $29.3 million, compared to $23.0 million
in 2Q. Together with a reduction in distributions paid, effective
3Q 2018, this resulted in an improvement in the distribution
coverage ratio1 from 0.56 in
2Q to 1.02 in 3Q.
Commercial
Review
Golar Maria's
10-month charter commenced in early August. Spot voyages
prior to this resulted in the vessel achieving a utilization rate
of 89% for the quarter. As a result of the charter the vessel
will improve utilization and TCE1 rates over
the next year.
FSRU Golar
Freeze will shortly arrive offshore Jamaica where she will
service a 15-year charter for an energy and logistics
company. From commencement of commercial operations, expected
during January, 2019, hire will be receivable at the full daily
base rate, initially expected to deliver approximately $18 million
in annual Adjusted EBITDA1.
Golar Mazo
was reactivated from warm layup during September and commenced a
voyage charter in early October. This was subsequently
extended at an attractive rate.
Kuwait National Petroleum Company,
charterers of the FSRU Golar Igloo have
extended the 2018 regas season to include December. A
decision on the exercise of their option to extend the charter by a
further year is expected by the end of November.
Acquisitions
Golar LNG Limited ("Golar") and
affiliates of Keppel Shipyard Limited and Black & Veatch closed
the sale of 50% of the common units in Hilli, the indirect owner of
Hilli Episeyo, to the Partnership on July 12.
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. Golar Partners equity accounts for its
interest in Hilli with its share of results included in "Equity in
net losses of affiliate". The first cash dividend in respect
of this investment was declared and approved in 3Q and will be
received in 4Q.
Operational
Review
Two of the Partnership's vessels
undertook scheduled dry-dockings in 3Q. FSRU Golar Freeze entered dry-dock on July 19. Works
undertaken will allow the vessel to remain in service for up to 15
years in Jamaica without dry-dock. Minor modifications required to
ensure compatibility with the vessel's new receiving terminal were
also completed. Golar Freeze departed
dry-dock on October 20. Dry-dock of the LNG carrier Methane Princess was initiated on August
24. Total off-hire in 3Q amounted to 37 days. The
vessel departed the yard on October 3 and was returned to its
charterer on October 25. This will result in 25 days off hire in
4Q.
After accounting for warm layup of
Golar Mazo and dry docking of Golar Freeze and Methane Princess,
utilization of 74% was recorded for 3Q. This compares to 85%
in 2Q.
Financing and
Liquidity
As of September 30, 2018, Golar
Partners had cash and cash equivalents of $75.8 million. The
Partnership also has a $75.0 million undrawn credit facility, now
available until 2Q 2021. Including $463.5 million of
proportionate share of debt in respect of FLNG Hilli Episeyo, total Adjusted Net Debt1
as at September 30, 2018 was $1,579.4 million. 3Q 2018 Adjusted
EBITDA1, including
$17.0 million in respect of FLNG Hilli
Episeyo, amounts to $103.6 million. Also included in the
$103.6 million is $19.0 million of October 2018 - April 2019
Adjusted EBITDA1 related to
the previous Golar Freeze contract.
Based on the above Adjusted Net Debt1 amount and
annualized1 3Q 2018
Adjusted EBITDA1, Golar
Partners' Adjusted Net Debt1 to Adjusted
EBITDA1 ratio was
3.8. As of September 30, 2018, Golar Partners had interest
rate swaps with a notional outstanding value of approximately
$1,803 million (including swaps with a notional value of $400.0
million in connection with the Partnership's bonds and $463.5
million in respect of Hilli Episeyo)
representing approximately 107% of total debt and capital lease
obligations, including assumed debt in respect of Hilli Episeyo, net of long-term restricted cash.
The average fixed interest rate of
swaps related to bank debt is approximately 2.2% with an average
remaining period to maturity of approximately 4.9 years as of
September 30, 2018.
Exclusive of Hilli Episeyo related debt, outstanding bank debt as of
September 30, 2018 was $854.4 million, which had average margins,
in addition to LIBOR, of approximately 2.13%. 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%. The 2020
maturing $150.0 million Norwegian USD bond represents the
Partnership's next scheduled debt maturity.
Corporate and
Other Matters
As of September 30, 2018, there
were 71,286,849 common and general partner units outstanding in the
Partnership. Of these, 22,662,977, including 1,436,391 General
Partner units, were owned by Golar, representing a 31.8% interest
in the Partnership.
In line with what was communicated
in 2Q, Management completed its review of the Partnership's
distribution capacity on October 23. The Board approved a
quarterly distribution going forward of $0.4042 per unit, effective
3Q, 2018. Representing a 30% cut, distributions at this level
are sustainable based on cash balances available for investment and
forecast future cash flows. The distribution for 3Q of
$0.4042 per unit will be paid on November 14, 2018 to common and
general partner unitholders of record on November 7, 2018. The
distribution will be paid on total units of 71,286,849. A cash
distribution of $0.546875 per Series A preferred unit for the
period covering 15 August through to 14 November was also declared.
This will be paid on November 15, 2018 to all Series A preferred
unitholders of record on November 8, 2018.
Total outstanding options as at
September 30, 2018 were 99,000.
At the Partnership's Annual
General Meeting on September 26, Paul Leand and Jeremy Kramer were
elected as Class III Directors.
Outlook
The roll-off of historic charters
for four of the Partnership's vessels over the last 18-months has
reduced revenues and forced the Board to reconsider the
distribution policy. It has been a target for the Board to
set a distribution based on existing assets that is sustainable for
the long-term. After a thorough review, the Board has set an
annual distribution level of $1.6168.
Dry-dock of the Methane Princess negatively impacted 3Q distribution
coverage1. The
next scheduled dry-dock with offhire implications is the FSRU
Golar Eskimo at the end of 2019. With
the exception of FSRU Golar Spirit, the
remaining fleet is expected to be cash flow generative.
Distribution coverage1 is therefore
expected to continue to improve over the coming quarters.
The reduced distribution level was
reached after applying conservative earnings assumptions for
vessels without long term contracts. Although the FSRU is
being tendered into various employment opportunities, no earnings
have been assumed for the Golar Spirit. The
Partnership is therefore well positioned financially with an
existing effective revenue backlog1 of $2.4
billion and a sustainable level of distribution that has the
potential to increase over the coming years. Golar also
remains firmly committed to the Partnership which it views as an
important component of its capital structure. Acquisition
opportunities exist including additional units in Hilli and the
25-year contracted FSRU Golar
Nanook and associated Sergipe cash flows. The long
duration of the Sergipe contracts minimizes residual risk and
improves the stability of cash flows making them particularly
attractive targets for the Partnership. These opportunities will
however, to a large extent, be dependent on more effectively priced
equity or debt, or realization of a flatter debt amortization
profile that better reflects the economic life of the Partnership's
assets.
Together, a strong balance sheet,
solid order backlog and robust growth in the LNG market are
expected to present a number of interesting opportunities for Golar
Partners going forward.
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;
·
Golar Power's ability to
successfully complete and start up the Sergipe power station
project and related FSRU contract.
·
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 potential 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 is accounted for under the equity method;
· our
ability to realize the expected benefits from the Jamaica FSRU
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 dry-docking 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;
· 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.
November 5, 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