Highlights
- Exclusive of its interest in FLNG Hilli Episeyo, Golar LNG
Partners LP (“Golar Partners” or “the Partnership”) generated
operating income of $36.2 million for the second quarter of
2019.
- After accounting for $26.5 million of interest rate swap
losses, the Partnership reported a net loss attributable to unit
holders of $5.5 million for the second quarter.
- Generated distributable cash flow1 of $32.0 million for the
second quarter resulting in a distribution coverage ratio1 of
1.12.
- FSRU Golar Freeze initiated operations for its new charterer at
the full FSRU rate.
- Hire rate for LNG carrier Golar Grand increased in May
following charterer exercise of first 1-year option.
Subsequent Events
- Declared a distribution for the second quarter of $0.4042 per
unit.
Financial Results Overview
Golar Partners reports a net loss attributable
to unit holders of $5.5 million and operating income (which
excludes its share of Hilli Episeyo which is accounted for under
the equity method) of $36.2 million for the second quarter of 2019
(“the second quarter” or “2Q”), as compared to a net loss
attributable to unit holders of $15.0 million and operating income
of $25.9 million for the first quarter of 2019 (“the first quarter”
or “1Q”) and net income attributable to unit holders of $28.4
million and operating income of $36.6 million for 2Q 2018.
Consolidated GAAP Financial Information |
(in thousands of $) |
Q2 2019 |
Q1 2019 |
Q2 2018 |
Total Operating Revenue |
77,361 |
|
69,910 |
|
84,201 |
|
Vessel Operating Expenses |
(14,913 |
) |
(16,810 |
) |
(16,646 |
) |
Voyage and Commission Expenses |
(1,621 |
) |
(1,858 |
) |
(2,042 |
) |
Administrative Expenses |
(3,251 |
) |
(3,866 |
) |
(3,944 |
) |
Operating Income |
36,208 |
|
25,936 |
|
36,640 |
|
Interest Expense |
(20,695 |
) |
(20,777 |
) |
(19,303 |
) |
(Losses)/Gains on Derivative Instruments |
(24,502 |
) |
(13,967 |
) |
12,701 |
|
Net (Loss)/Income attributable to Golar LNG Partners LP
Owners |
(5,516 |
) |
(14,998 |
) |
28,440 |
|
Non-GAAP Financial Information1 |
(in thousands of $) |
Q2 2019 |
Q1 2019 |
Q2 2018 |
Adjusted Interest Income |
1,050 |
|
1,075 |
|
3,300 |
|
Adjusted Net Debt |
1,574,079 |
|
1,588,162 |
|
1,098,771 |
|
Segment Information2 |
|
Q2 2019 |
Q1 2019 |
Q2 2018 |
(in
thousands of $) |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
FLNG** |
Total |
FSRU* |
LNG Carrier* |
Total |
Total Operating Revenues |
64,824 |
|
12,537 |
|
26,018 |
|
103,379 |
|
53,405 |
|
16,505 |
|
26,018 |
|
95,928 |
|
72,987 |
|
11,214 |
|
84,201 |
|
Amount invoiced under sales-type lease |
2,300 |
|
— |
|
— |
|
2,300 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Adjusted Operating Revenues1 |
67,124 |
|
12,537 |
|
26,018 |
|
105,679 |
|
53,405 |
|
16,505 |
|
26,018 |
|
95,928 |
|
72,987 |
|
11,214 |
|
84,201 |
|
Voyage and Commission Expenses |
(1,109 |
) |
(512 |
) |
(50 |
) |
(1,671 |
) |
(1,124 |
) |
(734 |
) |
(180 |
) |
(2,038 |
) |
(1,234 |
) |
(808 |
) |
(2,042 |
) |
Vessel Operating Expenses |
(10,070 |
) |
(4,843 |
) |
(6,163 |
) |
(21,076 |
) |
(11,793 |
) |
(5,017 |
) |
(5,953 |
) |
(22,763 |
) |
(11,358 |
) |
(5,288 |
) |
(16,646 |
) |
Administrative Expenses |
(1,947 |
) |
(1,304 |
) |
(198 |
) |
(3,449 |
) |
(2,377 |
) |
(1,489 |
) |
(308 |
) |
(4,174 |
) |
(2,668 |
) |
(1,276 |
) |
(3,944 |
) |
Adjusted EBITDA1 |
53,998 |
|
5,878 |
|
19,607 |
|
79,483 |
|
38,111 |
|
9,265 |
|
19,577 |
|
66,953 |
|
57,727 |
|
3,842 |
|
61,569 |
|
* Indirect administrative expenses are allocated to the FSRU and
LNG carrier segments based on the number of vessels.** Relates to
the attributable earnings of our investment in Golar Hilli LLC
(“Hilli LLC”) had we consolidated its 50% of the Hilli common
units.
On May 15, 2019, a modification of the FSRU
Golar Freeze charter agreement led to a reassessment of the
contract under lease accounting rules. This modification resulted
in the contract changing from an operating lease to a sales-type
lease ("Golar Freeze Finance Lease"). The accounting for a
sales-type lease is different to the Partnership’s other charter
agreements, which are accounted for as operating leases. Some key
differences include: replacement of the carrying value of the
vessel with a “net investment in a finance lease” (for the Golar
Freeze this led to a gain on disposal of $4.2m), subsequent
cessation of depreciation due to the de-recognition of the vessel
on the Balance Sheet, and recognition of the capital hire revenue
as “Interest Income” based on a rate implicit in the contract.
Service revenue is recognized straight line over the life of the
contract and operational costs continue to be recognized as
incurred. In order to compare the performance of the Golar Freeze
with our wider business, management has determined that it will
measure the performance of the Golar Freeze Finance Lease based on
Adjusted EBITDA (EBITDA as adjusted for the amount invoiced under
sales-type lease in the period). This approach allows the
Partnership to compare the Golar Freeze charter agreement with its
wider business.
Adjusted Operating Revenues1, including amounts
invoiced under the Golar Freeze Finance Lease and the Partnership's
effective share of operating revenues from FLNG Hilli Episeyo,
increased from $95.9 million in 1Q to $105.7 million in 2Q. Of the
$9.8 million increase, $8.2 million is attributable to the FSRU
Golar Igloo which was on hire for an additional 57 days,
utilization in 1Q being lower as a result of its scheduled winter
downtime. For the entire quarter, revenue at the full FSRU Golar
Freeze rate inclusive of the capital and operating components, was
recognized. Collectively this generated an additional $4.5 million
of earnings relative to 1Q when the FSRU was earning at a lower
commissioning rate. Partly offsetting this was $3.3 million less
revenue from the LNG carrier Golar Mazo which remained idle
throughout the quarter.
Most of the $0.4 million reduction in voyage and
commission costs is attributable to the FSRU Golar Igloo and the
LNG carrier Golar Mazo. Costs of positioning the FSRU Golar Igloo
from drydock in Dubai to its regas location in Kuwait during 1Q
were not incurred in 2Q. In response to low utilization in
1Q, Golar Mazo’s boilers were also shut down further reducing
voyage costs.
Vessel operating costs decreased by $1.7 million
from $22.8 million in 1Q to $21.1 million in 2Q. Reduced FSRU
and LNG carrier operating costs were partly offset by higher FLNG
maintenance costs. Costs in respect of the Golar Igloo, which
accounts for most of the quarterly decrease, normalized in 2Q
having been inflated in 1Q by post dry-dock storing up. Reduced
crew costs as a result of the warm layup of Golar Mazo during the
quarter also contributed to operating cost savings.
A reduction in professional fees contributed to
a $0.7 million reduction in administrative expenses from $4.2
million in 1Q to $3.5 million in 2Q.
Adjusted Interest Income1 at $1.1 million was in
line with 1Q. Interest Expense at $20.7 million was also in
line with the prior quarter.
Interest rate swap losses following a further
decrease in 2-5 year interest swap rates contributed to a $24.5
million 2Q loss on derivative instruments, compared to a 1Q loss of
$14.0 million. As of June 30, 2019, the average fixed interest rate
of swaps related to bank debt, including the Partnership's
effective share in respect of Hilli Episeyo was approximately
2.2%.
As a result of the foregoing, 2Q
distributable cash flow1 increased $3.2 million to $32.0 million
compared to $28.8 million in 1Q. The distribution coverage ratio1
increased, from 1.01 in 1Q to 1.12 in 2Q.
Commercial Review
A mild spring together with the anticipated
start up and ramp up of significant new LNG supply meant that Far
East LNG continued to trade at around $4 - $5/mmbtu throughout this
traditionally weak quarter, eliminating inter-basin trading
opportunities. Lower LNG prices that left limited scope to pay for
freight meant that US volumes were pushed into Europe. Increased
Chinese demand offset weaker demand from Japan and Korea however
the ongoing trade war between the US and China meant that China
continued to source its spot LNG requirements from more proximate
markets. Although average sailing distances increased as US volumes
continued to find markets in South Korea and Japan, ton-mile growth
remained subdued. A steady supply of newbuild deliveries, together
with shorter than anticipated voyages that increased the number of
available sublet vessels originally destined to service certain
projects, meant that demand was matched by vessel availability
throughout the quarter. As a result, owners keen to position
themselves for the H2 upturn aggressively bid for single voyages to
secure near-term utilization. The LNG carrier Golar Maria
achieved close to full utilization but at a substantially
discounted rate relative to 1Q whilst the Golar Mazo remained idle
throughout the quarter. Despite an increase in the rate receivable
by the Golar Grand from May 2019, the Average Daily TCE1 achieved
by these three vessels at $20,100 was approximately 40% down
relative to 1Q.
During June, commissioning cargoes were exported
from both Cameron T1 and Prelude. Both have since commenced
commercial operations. Cheniere’s Corpus Christi T2 also commenced
LNG production, recently followed by Freeport LNG. The imminent
arrival of substantial new, predominantly US, volumes also
coincides with a reduction in newbuild vessel deliveries. 2019
vessel demand growth of 15% is expected against supply growth of
8%. Further vessel demand growth of 14% is expected in 2020
with supply growth again lagging at 9%. This structural imbalance
together with a contango in the gas market with forward prices of
$6.4mmbtu being quoted for December sets the stage for a strong
shipping market over the next two years. A number of charterers
have approached the market to cover their requirements for this
period leaving a handful of owners including Golar Partners with
flexible tonnage going forward. The level of interest in
longer-term charters continues to increase and the Partnership has
noted particular interest in term charters for the Golar Maria in
recent weeks. At present, the Golar Mazo remains in warm layup in
readiness for a quick deployment should a firm opportunity
arise.
Although October 2018 - April 2019 revenues from
former charterers of the Golar Freeze were recognized in 3Q 2018,
cash payments due under the existing charter continued to be paid
in monthly installments. The last monthly cash receipt in respect
of April 2019 was received in March. Charterers of the FSRU Golar
Igloo have recently issued tender documents for a two year
extension to the current contract together with a one year option
period. The Partnership looks forward to bidding for this in
the coming months. Although confident that it will succeed
with its bid, the carrier market is expected to provide solid
alternative employment options in the event that the Partnership is
unsuccessful.
Operational Review
No vessels were drydocked and there was no
unscheduled off-hire during the quarter. Despite a full
quarter of commercial waiting time in respect of the Golar Mazo,
fleet utilization of 89% was achieved for 2Q, up 3% on the 86%
recorded in 1Q.
Prior to year-end the FSRU Golar Eskimo is
scheduled to complete an in-water class renewal, akin to a drydock.
The plan is to conduct this during a scheduled maintenance window
and no off-hire is expected as a result. Golar Mazo is scheduled to
be drydocked in early 2020. In addition to routine drydock
works, certain modifications that would make the vessel compatible
with a wider range of terminals are being considered.
Initiation of the drydock and additional works will be subject to
securing a sufficiently attractive charter opportunity that
justifies the cost of these works.
Financing and Liquidity
As of June 30, 2019 Golar Partners had cash and
cash equivalents of $62.1 million. Net of prepaid hire, a
further $14.2 million was due to the Partnership in respect of 2Q
hire, all of which has since been received. Including the
Partnership's $438.8 million share of debt in respect of FLNG Hilli
Episeyo, Adjusted Net Debt1 as at June 30, 2019 was $1,574.1
million. 2Q 2019 Adjusted EBITDA1 amounts to $79.5 million. Based
on the above, the 2Q Adjusted Net Debt1 to Annualized Adjusted
EBITDA1 ratio was 5.0. As of June 30, 2019, exclusive of a $100
million forward start swap, Golar Partners had interest rate swaps
with a notional outstanding value of approximately $1,643 million
(including swaps with a notional value of $400.0 million in
connection with the Partnership’s bonds and $438.8 million in
respect of Hilli Episeyo), representing approximately 98% 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, including the Partnership's effective share in
respect of Hilli Episeyo is approximately 2.2% with an average
remaining period to maturity of approximately 4.1 years as of June
30, 2019.
Inclusive of Hilli Episeyo related debt,
outstanding bank debt as of June 30, 2019 was $1,304.3 million,
which had average margins, in addition to LIBOR, of approximately
2.19%. 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 May 2020 maturing $150.0 million Norwegian USD bond
represents the Partnership's next scheduled debt maturity.
Extensive discussions with current holders of the bond indicate a
strong desire to roll their holdings into a new bond.
Corporate and Other Matters
As of June 30, 2019, there were 70,891,755
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 32% interest in the Partnership.
On July 23, 2019, Golar Partners declared a
distribution for the first quarter of $0.4042 per unit. This
distribution was paid on August 14, 2019 to common and general
partner unitholders of record on August 7, 2019. Since the last
quarterly earnings release date, 153,728 common units were
purchased in the open market at an average price of $10.19 per unit
under the Partnership’s $50 million authorized common unit
repurchase program. These units have since been cancelled.
A cash distribution of $0.546875 per Series A
preferred unit for the period covering 15 May through to 14 August
was also declared. This was paid on August 15, 2019 to all Series A
preferred unitholders of record on August 8, 2019.
Total outstanding options as at June 30, 2019
were 99,000.
Outlook
The full quarter's contribution to Adjusted
EBITDA1 from both Golar Igloo and Golar Freeze contributed to an
anticipated improvement in both 2Q distribution coverage ratio1 and
the Adjusted Net Debt1 to Annualized Adjusted EBITDA1 ratio. The
distribution coverage ratio1 has however been negatively impacted
by the disappointing Average Daily TCE1 achieved for the spot
traded vessels Golar Maria and Golar Mazo. While the Golar Maria is
currently on hire and well positioned for more attractive charters
over the winter period, Golar Mazo is currently idle. The current
shipping market is however showing strong signs of recovery with
significant interest being shown in all vessels including modern
steam turbines. Based on current forecasts a further improved
distribution coverage ratio1 level is expected for 3Q.
Golar Power continues to make good progress on
its Brazilian project portfolio, including an opportunity that
could utilize the Golar Spirit. Market dynamics are also changing
in the Middle East as new pipelines connect markets to fields
offshore Egypt and Israel. It is currently unclear how this
will manifest itself in terms of FSRU requirements however security
of supply remains particularly important in this region.
Should an extension be secured for the FSRU
Golar Igloo, remaining modification works necessary for the vessel
to meet increasing peak demand in Kuwait will be completed in 1Q
2020 during its scheduled winter downtime. Current low LNG prices
have also stimulated the number of requests for FSRUs which may
create further employment opportunities. Development times
for these projects are however typically slow. With the
Partnership's Revenue Backlog1 of $2.16 billion, a distribution
coverage ratio1 in excess of 1 and a falling Adjusted Net Debt1 to
Annualized Adjusted EBITDA1 ratio, Golar Partners is on a solid
financial footing. The size of future distributions will
however be influenced by successful re-contracting of existing
FSRUs as well as an expected increased utilization of the
Partnership's idle assets.
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:
- the ability of Golar LNG Partners LP (“Golar Partners,” “we,”
“us” and “our”) to enter into long-term time charters, including
our ability to re-charter floating storage and regasification units
(“FSRUs”) and liquefied natural gas (“LNG”) 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;
- our ability to maintain cash distributions on our units and the
amount of any such distributions;
- market trends in the FSRU, LNG carrier and floating liquefied
natural gas vessel (“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 Limited (“Golar”) and us 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 integrate and realize the expected benefits from
acquisitions and potential acquisitions:
- the future share of earnings relating to the Hilli, which is
accounted for under the equity method;
- the ability of Golar to increase the utilization under, and
term of, the liquefaction tolling agreement for the Hilli Episeyo
and the benefits that may accrue to us as the result of any such
modifications;
- 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;
- the exercise of purchase options by our charters;
- 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 (“Golar Power”) in the LNG
industry;
- the ability of Golar Power and us to work together to develop
projects requiring our FSRUs;
- our ability to purchase vessels from Golar and Golar Power in
the future;
- 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 our 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 29, 2019Golar LNG Partners L.P.Hamilton,
BermudaQuestions should be directed to:c/o Golar Management Ltd -
+44 207 063 7900Brian Tienzo - Chief Executive and Chief Financial
OfficerStuart Buchanan - Head of Investor Relations
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
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