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
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 September 2018.pdf
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