Good performance from projects and
operations
Iain Ross, CEO, Golar LNG,
said:
"Golar is pleased to report Q3 operating
revenues of $95.2 million and adjusted EBITDA1 of $57.3 million,
driven by a tenth consecutive quarter of uninterrupted commercial
uptime in FLNG. Q3 TCE1 for the fleet at $39,100/day is above prior
guidance of $35,000/day and driven by a higher year on year
utilization of 80% for the quarter. TCE1 from the TFDE1 vessels
excluding dry-dock days amounted to $43,800 for the quarter.
We concluded the force majeure event with BP on
the Gimi FLNG project, which resulted in an anticipated delay of 11
months to the project. All other terms of the 20 year lease and
operating agreement remained unchanged. The project has ramped up
manning levels to pre-lockdown numbers and remains on track to the
new dates and with no material change to the overall project
budget.
The Viking conversion project is on track for
completion and customer acceptance before the end of the year with
the now re-named vessel LNG Croatia currently preparing for
commissioning activities. Upon acceptance by LNG Hrvatska,
expected in December, the project will release approximately $17
million of cash to Golar, with a further $30 million expected in
January 2021.
The power station in Sergipe including FSRU
Nanook earned full capacity payments during the quarter. Golar’s
50% proportionate share of Hygo Energy Transition Ltd's adjusted
EBITDA1 for the quarter, amounted to $15.6 million."
Financial Summary
(in thousands of $) |
Q3 2020 |
Q3 2019 |
% Change |
YTD 2020 |
YTD 2019 |
% Change |
|
|
|
|
|
|
|
Total
operating revenues |
95,152 |
98,670 |
(4)% |
319,953 |
309,702 |
3% |
Net loss
attributable to Golar LNG Ltd |
(21,802) |
(82,301) |
(74)% |
(281,683) |
(236,724) |
19% |
Adjusted
EBITDA1 |
57,287 |
58,932 |
(3)% |
200,645 |
161,492 |
24% |
Operating income |
30,632 |
(13,666) |
(324)% |
80,148 |
(8,237) |
(1073)% |
Dividend
per share |
— |
— |
—% |
— |
0.150 |
(100)% |
Adjusted net debt1 |
2,649,778 |
2,294,932 |
15% |
2,649,778 |
2,294,932 |
15% |
Q3 highlights and recent
events
Financial:
- Received committed terms for a new $100 million credit facility
backed by Golar’s interest in Hygo Energy Transition Ltd.
("Hygo").
- Term sheet in advanced discussion with a major bank for an
incremental $125 million credit facility, drawable upon IPO of
Hygo.
- A further $75 million drawn down against FLNG Gimi debt
facility concluded in Q4.
- Additional proposals that would improve liquidity by around $70
million currently under consideration. These include a refinancing
of Golar Frost for which terms have been received and an extension
or refinancing of the margin loan secured by our interest in Golar
LNG Partners LP ("Golar Partners"). The financing of Golar Seal has
been extended to January 2022.
- Callum Mitchell-Thomson who joined in April has, for personal
reasons, decided to resign from his position as CFO. The Board
wants to thank Callum for his valuable contribution during the time
he was here. His function will now be assumed by Karl Fredrik
Staubo, who, for the time being, will also remain as CEO of Golar
Partners.
Shipping:
- Shipping results adversely impacted by Golar Tundra's extended
dry-dock due to Singapore lockdown preventing any work for several
months.
- Q3 2020 average daily Time Charter Equivalent (“TCE”)1 earnings
of $39,100 for the fleet, above guidance and higher than the
$35,200 achieved in Q3 2019.
- Utilization at 80%, down on the 93% achieved in Q2 2020 but up
on the 65% realized in Q3 2019 as a result of a stronger contract
portfolio.
- Q3 2020 TFDE1 vessel TCE1 of $43,800, excluding days in dry
dock.
- Conclusion of several term contracts added $123 million of
revenue backlog1 during Q3 to date resulting in $198 million of
revenue backlog1 as at 30 September.
- Downside risk materially reduced through increased utilization
and fixed rate charter coverage.
FLNG:
- FLNG Hilli Episeyo off-loaded 47th cargo, with 100% commercial
uptime maintained. Scheduled maintenance shutdown completed in
October without issue.
- Agreed revised FLNG Gimi project schedule with BP, ending the
force majeure event under the Lease and Operate Agreement ("LOA")
with BP.
- Agreed amendment to FLNG Hilli Episeyo tolling agreement that
removes cap on gas reserves available for future liquefaction and
allows for billing of prior and future over production.
- Constructive discussions on proving up additional reserves and
increasing utilization of Hilli Episeyo ongoing with
charterers.
- Continued to develop pipeline of future FLNG opportunities with
strong counterparties. Five incremental FLNG opportunities added to
the four existing opportunities that continue to be developed.
- Entered into a collaboration agreement with Black & Veatch
Corporation ("B&V") to research and, if appropriate, develop,
solutions for the floating production of blue and green ammonia as
well as carbon reduction in LNG production.
Hygo Energy Transition Ltd:
- Paul Hanrahan, former CEO of AES Corporation, appointed as CEO
of Hygo.
- Received Installation License for the construction of the
Barcarena power station and associated LNG Terminal.
- Awarded port concession for the long-term use of existing
facilities in the Vila do Conde Port located in Barcarena.
- Signed MoU with Pará state distribution company for use of the
Barcarena terminal to supply regional demand for cleaner fuels,
replacing MoU with Norsk Hydro.
- Extensive forensic review of Hygo business conduct initiated by
the Hygo Board. The work conducted by external experts has
confirmed no issues of concern and robust corporate governance and
compliance policies.
Outlook
LNG Shipping:
We expect the Q4 2020 fleet TCE1 to be above
$50,000 per day, with utilization above 80% based on fixtures to
date and prevailing spot market conditions. Our shipping strategy
continues to prioritize longer term utilization over short-term
opportunities, but we remain adequately exposed to seasonal and
other potential upside by virtue of some index linked charters
within the portfolio. Golar has fixed around two thirds of
available 2021 revenue days through a combination of fixed and
floating rate charters. Following Golar Tundra's departure from the
shipyard in October, no further dry-docks are scheduled for the
fleet until 2023.
FLNG:
We will continue to focus on Gimi productivity
and to manage re-schedule progress and safe working under COVID-19
restrictions. The project’s 4th dry dock is scheduled to commence
in early December 2020.
The scheduled maintenance shutdown in October
will not result in any reduction in Q4 FLNG earnings from Hilli
Episeyo. We continue to work with our counterparts Perenco and SNH
on potential solutions to increase throughput on the vessel.
Subject to final signature from SNH, expected shortly, removal of
the cap on feed gas available for liquefaction in Cameroon is an
important step that will facilitate this. Additional revenue
amounting to $5.1 million covering overproduction by the vessel in
2019 will be invoiced shortly after signature. Golar's strong
operating track record has created a good relationship with our
charterer which is facilitating constructive discussions with the
target to prove up more reserves and increase utilization of the
vessel. Should these discussions be concluded successfully, there
will likely be a new risk aligned tariff payment for the additional
volumes.
Golar will continue to develop its portfolio of
FLNG opportunities featuring both its 3.5 and 5mtpa Mark III new
build FLNG vessel designs as direct competitors to traditional
large-scale onshore liquefaction facilities, in addition to
marketing the proven Mark I solution. The project portfolio has
grown considerably over the last few months and it is interesting
to observe an increasing number of requests from oil majors seeking
lower cost production solutions. Whilst it is difficult to see a
Final Investment Decision ("FID") in 2021, this volume of enquiries
creates confidence in the competitiveness of our FLNG products and
the long-term future of this business. The lack of FIDs in the LNG
business in recent years combined with strong demand will result in
higher LNG prices that will likely generate additional interest in
Golar's FLNG solutions.
Following the recent signing of the
collaboration agreement with B&V, we will jointly work on
solutions to further reduce the (already competitive) carbon
footprint of our FLNGs and for the potential development of
floating ammonia production.
Hygo Energy Transition Ltd:
The Hygo Board will consider the timing for a
potential re-launch of the IPO which will be driven by market
conditions, ongoing business operations and ongoing business
development activity.
Hygo expects to take a FID on the Barcarena
terminal before the end of the year based on the expressed interest
for off-take volumes from industrial users. FID on the associated
605MW power station is expected to follow approximately 6-months
after FID of the terminal.
Additionally, Hygo remains actively involved in
the development of several other terminal opportunities in Brazil
on a competitive basis, including terminals in Suape and Bahia.
Further clarifications with regards to the final outcome of those
processes are expected in the coming months.
Corporate:
Although postponed by recent events, Golar
remains committed to the separation of Hygo and an IPO remains the
primary route to achieve this, subject to approval of the Hygo
board, ongoing business operations and business development
activity. When concluded, the separation will represent the first
step toward re-organizing and simplifying Golar’s structure.
Based on results achieved to date, Q4 adjusted
EBITDA1 should show a solid improvement versus Q3. Golar group
contract earnings backlog1 currently stands at $10.3 billion, of
which Golar LNG Limited's pro-rata share amounts to $6.0 billion.
The Board is pleased by the way the company has strategically
positioned itself in this high growth market. Supported by the
contract earnings backlog1 above, we anticipate further strong
growth in adjusted EBITDA1. This together with a simplification of
the corporate structure can unlock value and create a solid return
to shareholders going forward.
Financial Review
Business Performance:
|
2020 |
|
Jul-Sep |
Apr-Jun |
(in thousands of $) |
Vessel and other operations |
FLNG |
Total |
Vessel and other operations |
FLNG |
Total |
Total operating revenues |
40,628 |
|
54,524 |
|
95,152 |
|
47,718 |
|
54,524 |
|
102,242 |
|
Vessel operating expenses |
(14,951) |
|
(13,282) |
|
(28,233) |
|
(11,336) |
|
(12,907) |
|
(24,243) |
|
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(476) |
|
— |
|
(476) |
|
(1,539) |
|
— |
|
(1,539) |
|
Administrative expenses |
(7,816) |
|
(173) |
|
(7,989) |
|
(8,348) |
|
(246) |
|
(8,594) |
|
Project development expenses |
(1,136) |
|
(31) |
|
(1,167) |
|
(982) |
|
(266) |
|
(1,248) |
|
Other operating gains |
— |
|
— |
|
— |
|
532 |
|
— |
|
532 |
|
Adjusted EBITDA(1) |
16,249 |
|
41,038 |
|
57,287 |
|
26,045 |
|
41,105 |
|
67,150 |
|
|
|
|
|
|
|
|
Reconciliation to operating income |
|
|
|
|
|
|
Unrealized gain (loss) on oil derivative instrument(2) |
— |
|
220 |
|
220 |
|
— |
|
(11,810) |
|
(11,810) |
|
Depreciation and amortization |
(14,890) |
|
(11,985) |
|
(26,875) |
|
(14,997) |
|
(11,985) |
|
(26,982) |
|
Operating income |
1,359 |
|
29,273 |
|
30,632 |
|
11,048 |
|
17,310 |
|
28,358 |
|
(2) The line item "Realized and unrealized gain
/ (loss) on oil derivative instrument" relating to income from the
FLNG Hilli Episeyo Liquefaction Tolling Agreement is split into,
"Realized gain on oil derivative instrument" and "Unrealized loss
on oil derivative instrument". The unrealized component represents
a mark-to-market gain of $0.2 million (June 30, 2020: $11.8 million
loss) on the oil embedded derivative, which represents the estimate
of expected receipts under the remainder of the Brent oil linked
clause of the Hilli Episeyo Liquefaction Tolling Agreement. The
realized component amounts to $nil (June 30, 2020: $nil) and
represents the income in relation to the Hilli Episeyo Liquefaction
Tolling Agreement receivable in cash.
Golar reports today Q3 operating income of $30.6
million compared to operating income of $28.4 million in Q2.
Total operating revenues decreased 7% from
$102.2 million in Q2 to $95.2 million in Q3, partially mitigated by
a decrease in voyage, charter hire and commission expenses, from
$1.5 million in Q2 to $0.5 million in Q3. A COVID-19 induced
closure of the shipyard where Golar Tundra was being dry-docked
resulted in significant unscheduled off hire during the quarter and
contributed to the reduction in fleet utilization, from 93% in Q2
to 80% in Q3. Low LNG prices also contributed to a large number of
cargo cancellations, predominantly out of the US, that suppressed
both shipping demand and spot rates, and reduced the daily rate
achieved in respect of Golar's spot and index linked charters.
Revenue from vessel and other operations,
including management fee income, net of voyage, charterhire and
commission expenses, was $40.2 million and decreased by $6.0
million from $46.2 million in Q2. Further US cargo cancellations
over summer, higher than normal European storage levels and weather
related supply interruptions resulted in a slower than normal
seasonal recovery in shipping rates. From early August, supply
outages in Australia and demand recovery in Asia boosted spot LNG
prices that subsequently supported inter-basin trading. Sufficient
available tonnage to meet near term demand meant that increased
chartering activity for US loadings did not result in a meaningful
increase in charter rates until later in the month. Hurricane
related interruptions again constrained US supply in September,
temporarily halting further increases in carrier rates whilst
further boosting LNG prices. As production resumed, a widening
west-east arbitrage quickly absorbed available vessels and freight
rates resumed their upward seasonal trajectory toward the end of
the quarter. The quarter began with quoted TFDE1 carrier headline
spot rates at around $30k/day and ended with rates at around
$59k/day. Delays to the seasonal recovery and a prolonged dry-dock
of the Golar Tundra, offset by improved coverage as a result of a
utilization focused strategy meant that full fleet TCE1 earnings
decreased from $45,100 in Q2 2020 to $39,100 in Q3 2020, but
increased relative to the $35,200 achieved in Q3 2019.
Operating revenues from FLNG Hilli Episeyo
remained stable at $54.5 million, including base tolling fees and
amortization of pre-acceptance amounts recognized.
As expected, vessel operating expenses at $28.2
million were higher than those of Q2 at $24.2 million.Of the $4.0
million increase, $2.5 million is due to a non-recurring insurance
recovery received in Q2 with the remainder largely attributable to
catch-up repairs and maintenance carried out following the lifting
of COVID restrictions over the northern hemisphere summer
months.
Administrative expenses decreased by 8% from
$8.6 million in Q2 to $8.0 million in Q3. This was driven by
ongoing cost reduction measures. Project development expenses at
$1.2 million for the quarter were in line with Q2. Depreciation and
amortization, at $26.9 million was also in line with the prior
quarter.
Net Income Summary:
|
2020 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Operating income |
30,632 |
|
28,358 |
|
Interest
income |
29 |
|
243 |
|
Interest
expense |
(16,093) |
|
(17,003) |
|
Gains(losses) on derivative instruments |
(4,686) |
|
4,864 |
|
Other
financial items, net |
1,997 |
|
(337) |
|
Income
taxes |
(216) |
|
(185) |
|
Equity
in net losses of affiliates |
(3,559) |
|
(139,365) |
|
Net income attributable to non-controlling interests |
(29,906) |
|
(32,209) |
|
Net loss attributable to Golar LNG Limited |
(21,802) |
|
(155,634) |
|
In Q3, the group generated a $21.8 million net
loss, compared to a Q2 net loss of $155.6 million. Key items
contributing to this are:
- A $4.7 million Q3 loss on derivative instruments due to a
further decline in LIBOR rates in the quarter, and foreign exchange
rate movements.
- The $3.6 million loss in Q3 for equity in net losses of
affiliates primarily comprises the following:
-
- A $8.0 million net loss in respect of Golar's 50% share in
Hygo; and
- A $4.6 million net gain in respect of Golar's 32% share in
Golar Partners. Q2 was negatively impacted by a $135.9 million
impairment of our investment in the Partnership.
Net losses attributable to non-controlling
interests relate to the Hilli Episeyo, the Gimi and the finance
lease VIEs.
Financing and Liquidity:
Our cash position as at September 30, 2020 was
$238.9 million. This was made up of $76.7 million of unrestricted
cash and $162.2 million of restricted cash. Restricted cash
includes $61.7 million relating to lessor-owned VIEs and $75.9
million relating to the Hilli Episeyo Letter of Credit, of which
$15.2 million has been classified as short-term and is expected to
be released to free cash in Q2 2021 when the next Hilli Episeyo
production milestone is forecast to be met.
After repayment of the vessel debt facility,
Golar expects to release a further $17 million of cash in December
2020 and $30 million in January 2021 following the sale of the
converted FSRU LNG Croatia (formerly Golar Viking) to LNG
Hrvatska.
Golar has received committed terms for a new
$100 million credit facility secured by our shareholding in Hygo,
to replace the current $150 million facility currently secured by
our interest in Hygo. Golar is also in advanced discussions on a
term sheet with a major bank for an additional $125 million credit
facility, drawable upon the IPO of Hygo.
At the vessel level, the current providers of
the Golar Seal facility have extended the financing to January
2022. The company has also received two financing proposals from
financial institutions for an opportunistic refinancing of the
Golar Frost. The proposed terms could potentially release up to $40
million of liquidity in Q1 2021, subject to approval and final
documentation.
At the FLNG level, a gradual re-opening of
Keppel Shipyard following the Singapore "circuit breaker" continued
to limit construction progress during the quarter with milestones
and payments impacted accordingly. Inclusive of $7.4 million of
capitalized interest, $45.7 million was invested in FLNG Gimi
during the quarter, taking the total invested as at September 30 to
$598.7 million. Of this, $225.0 million had been drawn against the
$700 million debt facility. Both the investment and debt drawn to
date are shown on a 100% basis. Progress at the yard has since
accelerated and there are now in excess of 2,400 yard workers
allocated to the project. Following the step up in construction
activity, Golar has drawn down a further $75 million against this
facility in Q4 to date.
Included within the $1,215.4 million current
portion of long-term debt and short-term debt as at September 30 is
$1,017.8 million relating to lessor-owned VIE subsidiaries that
Golar is required to consolidate in connection with ten sale and
leaseback financed vessels, including the Hilli Episeyo.
Corporate and Other Matters:
As at September 30, 2020, there were 97.8
million shares outstanding. There were also 2.2 million outstanding
stock options with an average price of $28.87 and 1.0 million
unvested restricted stock units awarded.
Golar’s Annual General Meeting was held on
September 24, 2020.
On September 24, 2020, a single purported Golar
shareholder filed a putative class action lawsuit against us, our
CEO and the former CEO of Hygo. The complaint generally alleges a
violation of the Securities Exchange Act of 1934, as amended,
through the use of false and/or misleading statements regarding,
among other matters, Golar’s business operations and prospects in
relation to the implication of Hygo’s former chief executive
officer in certain allegations by the Brazilian government. The
complaint seeks unspecified damages, attorneys’ fees and other
costs. We believe that the allegations in the lawsuit are without
merit and intend to vigorously contest the class action
lawsuit.
Commercial Review
LNG Shipping:
The quarter commenced with JKM at around
$2.15/mmbtu and quoted TFDE headline spot rates of around $30k/day.
Further US cargo cancellations over the summer months and higher
than normal European storage levels resulted in a slower seasonal
recovery in shipping rates. Hurricane related interruptions also
cut US supply in early September and contributed to a buildup of
tonnage in the Atlantic. This temporarily halted carrier rate
increases being seen from late August and further boosted LNG
prices that were increasing as a result of earlier supply
re-balancing. As production resumed, a widening of the west-east
arbitrage quickly absorbed available vessels and freight rates
resumed their upward seasonal trajectory. The quarter ended with
JKM at around $5.15/mmbtu and quoted TFDE headline spot rates of
around $59k/day.
Full utilization of available US export capacity
and increasingly long haul trades are currently supported by strong
winter demand in key Asian markets and further supply outages
elsewhere, leading to higher LNG prices and widening regional price
differentials into Q4. By late October there were limited prompt
available vessels and TFDE spot rates for some voyages exceeded
$100,000 per day. Golar has taken advantage of the opportunity to
fix some of its available vessels on term charters. Based on
fixtures to date and accounting for remaining off-hire in respect
of the now completed Golar Tundra dry-dock and some unscheduled
maintenance of another carrier, Golar currently expects Q4 fleet
utilization in excess of 80% and a TCE1 of above $50,000 per day.
Revenue backlog1 from shipping fixtures to date amounts to $198
million as at September 30, with around two thirds of available
2021 trading days now covered.
Up to 20-25 million tons of un-utilized
liquefaction capacity may return to the market in 2021. Growing
underlying demand and limited new nameplate capacity additions
through to 2023 are expected to result in comparatively high LNG
prices and a forecast 13% growth in 2021 ton-mile demand for
shipping. This will help absorb the 49 vessels expected to deliver
in 2021. From 2024, projects with a combined nameplate capacity of
around 100mtpa are then scheduled to start-up in phases. Deferral
of 2020 scheduled FID decisions for new liquefaction capacity,
particularly in North America, continues to discourage new build
orders. Of the limited number of vessels ordered in 2020 to date,
most are from oil majors seeking to upgrade their fleets.
FLNG:
Golar is pleased to have resolved the FLNG Gimi
force majeure event under the LOA with BP. A new construction
schedule that includes revised milestone payment dates has also
been agreed with the yard. The 11-month delay to the start date is
expected to result in a $36 million increase in the conversion
budget, up from $1.330 billion to $1.366 billion. All other
conditions of the 20-year Lease and Operate Agreement remain
unchanged.
FLNG Hilli Episeyo, which completed its 2-week
scheduled maintenance shutdown in October, continues to maintain
100% commercial uptime. It recently offloaded its 47th cargo and
continues to reliably deliver quarterly LNG tolling revenues, less
operating costs, of around $40 million; 50% of which is for GLNG's
account. Agreement has been reached with all parties to remove the
500bcf cap on feed gas available for liquefaction by Hilli Episeyo.
Final signature from SNH is expected shortly. This is a key step
toward a potential increase in utilization. Under the agreement,
Perenco will pay for excess LNG produced to date. This equates to
$5.1 million in additional revenue from COD through to the end of
2019, and any overproduction will continue to be billed going
forward in Q1 each year.
Between July 2020 and the present date the
number of potential new projects being actively discussed with
charterers has materially increased. In most cases it is the
potential counterparty who has approached Golar. The nine
opportunities currently being discussed with financially strong
counterparties are geographically spread and include potential
deployments in West Africa, Asia, the Mediterranean and the
Americas.
On November 18, 2020, Golar and B&V agreed
to expand on their long-standing FLNG relationship and enter into a
collaboration agreement in the field of floating ammonia
production, carbon capture, and green LNG. Golar brings to the
relationship its deep experience of delivering and operating
paradigm shifting low cost floating LNG infrastructure that works,
and B&V, as a leading provider of LNG technology also bring a
deep expertise in green technologies. Within 2021, Golar and
B&V will initially focus on floating ammonia production with
carbon capture and storage (“Floating Blue Ammonia”) and will seek
to establish the technical feasibility and commerciality of this
methodology of developing hydrogen as a fuel. Any project
development and implementation that follows the initial research
and investigation stages above will be subject to a separate
commercial agreement between the two companies.
Hygo Energy Transition Ltd (50/50
Golar/Stonepeak Infrastructure Partners non-consolidated downstream
JV):
Although delayed by unforeseen events on
September 24, Golar believes an IPO represents the best means of
capturing the value of its downstream investment, depending on
market conditions, ongoing business operations and ongoing business
development activity. The allegations made against Hygo's former
CEO Eduardo Antonello pre-date and do not, in any way, implicate
his work at Hygo or indeed any other Golar group company. Conscious
both of his need to address the allegations and of the escalating
harm to the business by association, Mr. Antonello stepped away
from his role as Hygo CEO on September 29 and was replaced by Paul
Hanrahan on October 19. Mr. Hanrahan brings to Hygo extensive
international experience from substantial power producing
businesses, including more than 10 years as CEO of AES
Corporation.
In response to the allegations, Hygo’s board
initiated an internal review on September 25. The law firm Simpson
Thacher & Bartlett LLP was retained by Hygo’s board to conduct
the review with assistance from forensic accountants at FTI
Consulting and the Brazilian law firm Demarest Advogados. The
review included forensic accounting work and review of certain
contracts, interviews with certain company personnel and
representatives, and review of internal audit material, certain
corporate card expenses and Hygo’s anti-corruption policies. The
procedures undertaken by these advisors as part of the review did
not identify evidence establishing bribery or other corrupt conduct
involving Hygo.
Operational assets
Golar’s 50% proportionate share of Hygo's
adjusted EBITDA1 for the quarter, amounted to $15.6 million. In
September, 2020, the Sergipe Power Plant incurred damage to one of
its four step-up transformers, which will temporarily reduce the
plant’s capacity from 1.5 Gw to 1.0 Gw until a replacement
transformer is installed, expected to happen in Q2 2021. CELSE
maintains insurance to cover the cost of purchasing electricity
from third parties to supply its customers for up to 8.25 months in
the event that CELSE is unable to supply the electricity itself due
to property damage at the Sergipe Power Plant. Such insurance is
subject to customary terms and conditions, including retention and
standard policy exceptions, which are expected to cover the cost of
any electricity that CELSE may need to purchase while the
transformer is unable to generate electricity.
Reduced levels of economic activity as a result
of the COVID outbreak muted Brazilian demand for electricity which
therefore suppressed power prices. As a result, the Sergipe power
plant was not called upon to dispatch electricity and it was not
profitable to sell merchant power during Q3. The plant has not been
called upon to dispatch during Q4, however consideration is being
given to potential opportunities to dispatch the plant on a
short-term basis for up to 1.0GW of merchant power in the coming
weeks.
Small-scale LNG distribution using smaller
vessels and LNG isotainers:
Hygo continues the roll-out of its small scale
LNG distribution business. The appetite to gain access to cleaner
cheaper LNG has not been impacted by recent events or higher LNG
prices. Initial volumes are expected to be satisfied with LNG
liquified by mini liquefaction solutions in the states of Bahia and
Sao Paulo, which include the production of bio LNG. Additional
supply points will be added from 2021 following the anticipated FID
of the Barcarena and Suape terminals together with commencement of
the Avenir small scale vessel charter that will link these new
terminals and the FSRU Nanook to other potential markets. This
small-scale vessel can carry offloaded LNG along coasts/up rivers
and connect to onshore truck loading facilities where LNG can be
transferred to ISO containers. These will then be distributed to
industrial, commercial and residential off-takers which are
underserved by traditional pipeline networks. In February 2020,
Hygo entered into a strategic partnership to supply LNG volumes to
BR Distribuidora (“BR”) for up to 15 years. BR and Hygo are
progressing well with the formation of a joint venture to jointly
facilitate the inland rollout of LNG supply to Brazil's
transportation and industrial sectors across BR’s 7,600 fuel
stations and 95 supply bases.
Growth projects
1) Barcarena Terminal and Power Plant: Hygo
remains committed to supply gas to the State of Para in Northern
Brazil, and, subsequent to the mutual termination of the MoU with
Norsk Hydro, entered into a MoU with the regulated Local
Distribution Company that has the exclusive rights to distribute
natural gas in the state of Pará. Operations are expected to
commence in 2022, and an associated 605 MW thermal power plant
(previously contracted under a 25 year PPA) from 2025. Plans
to commence construction of the terminal before year end and
commence operations in 1H 2022 remain on track. Competitive quotes
for the EPC contract have been received together with interest in
providing attractive long term financing for the power station. A
FID on the power plant component of the project is expected in
first half of 2021.
2) Global Terminal Projects: In addition to
several other Brazilian terminal projects, Hygo is pursuing more
than fifteen terminal opportunities worldwide. Paul Hanrahan’s
extensive experience and global network of contacts is expected to
be particularly helpful for the prioritization of these
opportunities and selection of the right business partners to work
with for each.
Golar Partners (a non-consolidated affiliate of
Golar LNG):
Golar Partners' Q3 total adjusted EBITDA1was in
line with Q2. A smaller decrease in swap rates during the quarter
reduced the $4.5 million Q2 mark-to-market loss on the
Partnerships' interest rate swaps to a loss of $1.1 million in Q3.
As a result, the Partnership reported an improved Q3 net income of
$17.4 million compared to Q2 net income of $14.3 million.
Improved collection of outstanding accounts
receivable combined with the reduction in distributions paid to
common unitholders has also allowed the Partnership to accumulate
cash, despite an increase in debt repayments. After amortization of
the first $10.0 million in respect of the partnerships high yield
bonds, cash and cash equivalents increased from $32.8 million at
the end of Q2 to $42.3 million at the end of Q3. Subsequent to the
quarter end, the Partnership has obtained credit approval from the
lead banks in connection with the refinancing of the 7-vessel $800
million facility. As at September 30, 2020, $529 million was
outstanding. This could be increased after a syndication
exercise.
Golar Partners agreed with Hygo on August 31 to
terminate the existing omnibus agreement between the two parties
and enter into a new cooperation agreement. The intention of the
co-operation agreement is that both parties will work together to
develop hub-spoke LNG terminal solutions utilizing Golar Partners’
available asset portfolio, where those assets are technically
suitable. The terms and structure of the commercial cooperation
will be worked on a project by project basis given the customized
nature of each potential terminal. As well as leverage the
expertise of the Hygo team to develop FSRU terminals and parcel
regasification demand, this agreement will, alongside normal FSRU
tendering activity, increase the Partnership’s re-contracting
options, and provide an opportunity to potentially earn higher
returns than standard FSRU contracts in the current market. It will
also allow Hygo to more quickly diversify its markets without
needing to incur significant upfront CAPEX in the process.
Non-GAAP measures
In addition to disclosing financial results in
accordance with U.S. generally accepted accounting principles (US
GAAP), this earnings release and the associated investor
presentation contains references to the non-GAAP financial measures
which are included in the table below. We believe these non-GAAP
financial measures provide investors with useful supplemental
information about the financial performance of our business, enable
comparison of financial results between periods where certain items
may vary independent of business performance, and allow for greater
transparency with respect to key metrics used by management in
operating our business and measuring our performance.
These non-GAAP financial measures should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP. Non-GAAP measures are not
uniformly defined by all companies, and may not be comparable with
similarly titled measures and disclosures used by other companies.
The reconciliations from these results should be carefully
evaluated.
Non-GAAP measure |
Closest equivalent US GAAP measure |
Adjustments to reconcile to primary financial statements
prepared under US GAAP |
Rationale for adjustments |
Performance measures |
Adjusted EBITDA |
Net
(loss)/income attributable to Golar LNG Limited |
+/- Net
financial expense + Other non-operating expenses +/- Income taxes
+/- Equity in net (losses)/ income of affiliates +/- Net income
attributable to non-controlling interests +/- Unrealized
loss/(gain) on oil derivative instrument + Depreciation and
amortization + Impairment of long-term assets + Amount invoiced
under sales-type lease +/- Share of affiliates' EBITDA (only
applicable in calculating Hygo's consolidated adjusted EBITDA) |
Increases the comparability of total business performance from
period to period and against the performance of other companies by
excluding the results of our equity investments, removing the
impact of unrealized movements on embedded derivatives and removing
the impact of depreciation, financing and tax items. |
Average daily TCE |
Total Operating revenues |
-Liquefaction services revenue -Vessel and other management fees
-Voyage and commission expenses The above total is then divided by
calendar days less scheduled off-hire days. |
Measure of the average daily net revenue performance of a vessel.
Standard shipping industry performance measure used primarily
to compare period-to-period changes in the vessel’s net revenue
performance despite changes in the mix of charter types (i.e. spot
charters, time charters and bareboat charters) under which the
vessel may be employed between the periods. Assists
management in making decisions regarding the deployment and
utilization of its fleet and in evaluating financial
performance. |
Liquidity measures |
Adjusted net debt |
Net debt based on GAAP measures: Total debt (current and
non-current), net of deferred finance charges - Cash and cash
equivalents - Restricted cash and short-term deposits (current and
non-current) |
Net debt based on GAAP measures + VIE Restricted cash + VIE
consolidation adjustment + Deferred finance charges + TRS
Restricted Cash |
In consolidating the lessor VIEs, we also consolidate their cash
position. We reflect the lessor VIEs’ cash as “restricted cash” on
our Consolidated Balance Sheet as we have no control or ability to
access this cash. In calculating our adjusted net debt based on our
contractual obligation, we remove the lessor VIEs’ restricted cash.
We have elected an accounting policy to show margin cash posted
against our derivative positions separately to the associated MTM
liability. Management believe that these adjustments enable
investors and users of our financial statements to assess our
liquidity based on our underlying contractual obligations and aids
comparability with our competitors. |
Contractual debt |
Total debt (current and non-current), net of deferred finance
charges |
+ VIE Consolidation Adjustment + Deferred Finance Charges |
We consolidate a number of lessor VIEs for our sale and leaseback
facilities. This means that on consolidation, our contractual debt
is eliminated and replaced with the lessor VIEs’ debt. Contractual
debt represents our debt obligations under our various financing
arrangements before consolidating the lessor VIEs. The measure
enables investors and users of our financial statements to assess
our liquidity and the split of our debt (current and non-current)
based on our underlying contractual obligations. Furthermore, it
aids comparability with competitors. |
Reconciliations - Performance Measures
(Adjusted EBITDA)
|
2020 |
2020 |
2020 |
2019 |
2019 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Jan-Sep |
Jul-Sep |
Jan-Sep |
Net loss attributable to Golar LNG Limited |
(21,802) |
|
(155,634) |
|
(281,683) |
|
(82,301) |
|
(236,724) |
|
Net financial expense |
18,753 |
|
12,233 |
|
105,262 |
|
39,256 |
|
110,304 |
|
Income taxes |
216 |
|
185 |
|
598 |
|
274 |
|
655 |
|
Equity in net losses of affiliates |
3,559 |
|
139,365 |
|
180,860 |
|
7,761 |
|
47,630 |
|
Net income attributable to non-controlling interests |
29,906 |
|
32,209 |
|
75,111 |
|
21,344 |
|
69,898 |
|
Operating income/ (loss) |
30,632 |
|
28,358 |
|
80,148 |
|
(13,666) |
|
(8,237) |
|
Adjusted for: |
|
|
|
|
|
Unrealized loss/(gain) on oil derivative instrument |
(220) |
|
11,810 |
|
39,400 |
|
44,170 |
|
43,420 |
|
Depreciation and amortization |
26,875 |
|
26,982 |
|
81,097 |
|
28,428 |
|
84,712 |
|
Impairment of long-term assets |
— |
|
— |
|
— |
|
— |
|
41,597 |
|
Adjusted EBITDA |
57,287 |
|
67,150 |
|
200,645 |
|
58,932 |
|
161,492 |
|
Reconciliations - Performance Measures
(Average Daily TCE Rate)
|
2020 |
2020 |
2019 |
(in thousands of $) |
Jul-Sep |
Apr-Jun |
Jul-Sep |
|
TFDEs excluding dry dock |
|
Total operating revenues |
95,152 |
|
95,152 |
|
102,242 |
|
98,670 |
|
Less: Liquefaction services revenue |
(54,524) |
|
(54,524) |
|
(54,524) |
|
(54,524) |
|
Less: Vessel and other management fees |
(5,046) |
|
(5,046) |
|
(5,131) |
|
(5,345) |
|
Time and voyage charter revenues |
35,582 |
|
35,582 |
|
42,587 |
|
38,801 |
|
Less: Steam LNG carrier time and voyage charter revenues |
(2,855) |
|
— |
|
— |
|
— |
|
Less: Voyage and commission expenses |
(476) |
|
(476) |
|
(1,539) |
|
(5,603) |
|
|
32,251 |
|
35,106 |
|
41,048 |
|
33,198 |
|
Calendar days less scheduled off-hire days |
899 |
|
899 |
|
910 |
|
943 |
|
Less:
Steam LNG carrier and Tundra calendar days less scheduled off-hire
days |
(163) |
|
— |
|
— |
|
— |
|
Net calendar days less scheduled off-hire |
736 |
|
— |
|
— |
|
— |
|
Average daily TCE rate (to the closest $100) |
43,800 |
|
39,100 |
|
45,100 |
|
35,200 |
|
Reconciliations - Liquidity Measures
(Adjusted Net Debt)
(in thousands of $) |
September 30, 2020 |
June 30, 2020 |
September 30, 2019 |
Net debt as calculated by GAAP |
|
|
|
Total debt (current and non-current) net of deferred finance
charges |
2,541,773 |
|
2,544,865 |
|
2,554,392 |
|
Less |
|
|
|
Cash and cash equivalents |
(76,696) |
|
(128,661) |
|
(250,153) |
|
Restricted cash and short-term deposits - current and non-current
portion |
(162,199) |
|
(136,535) |
|
(375,276) |
|
Net debt as calculated by GAAP |
2,302,878 |
|
2,279,669 |
|
1,928,963 |
|
VIE consolidation adjustment |
255,936 |
|
255,129 |
|
139,841 |
|
VIE restricted cash |
61,738 |
|
39,987 |
|
104,461 |
|
Deferred finance charges |
29,227 |
|
31,063 |
|
12,747 |
|
TRS restricted cash (1) |
— |
|
— |
|
108,920 |
|
Total Adjusted Net Debt |
2,649,779 |
|
2,605,848 |
|
2,294,932 |
|
Less: Golar Partners' share of the Hilli contractual debt |
(397,500) |
|
(405,750) |
|
(430,500) |
|
Less: Keppel's share of the Gimi debt |
(67,500) |
|
(67,500) |
|
— |
|
GLNG's share of Adjusted Net Debt |
2,184,779 |
|
2,132,598 |
|
1,864,432 |
|
(1) Restricted cash relating to the share
repurchase forward swap refers to the collateral required by the
bank with whom we entered into a total return equity swap.
Reconciliations - Liquidity Measures
(Contractual Net Debt)
(in thousands of $) |
September 30, 2020 |
June 30, 2020 |
September 30, 2019 |
Total debt (current and non-current) net of deferred finance
charges |
2,541,773 |
|
2,544,865 |
|
2,554,392 |
|
VIE consolidation adjustments |
255,936 |
|
255,129 |
|
139,841 |
|
Deferred finance charges |
29,227 |
|
31,063 |
|
12,747 |
|
Total Contractual Debt |
2,826,936 |
|
2,831,057 |
|
2,706,980 |
|
Less: Golar Partners' share of the Hilli contractual debt |
(397,500) |
|
(405,750) |
|
(430,500) |
|
Less: Keppel's share of the Gimi debt |
(67,500) |
|
(67,500) |
|
— |
|
GLNG's share of Contractual Debt |
2,361,936 |
|
2,357,807 |
|
2,276,480 |
|
Please see Appendix A for a capital repayment
profile for Golar’s contractual debt.Non-US GAAP Measures
Used in Forecasting Distribution coverage
ratio: As defined in Golar LNG Partners LP most recent
quarterly earnings release (Form 6-K), section "Appendix A -
Non-GAAP Financial Measures and Definitions".
Revenue Backlog: Revenue
backlog is defined as the minimum contracted daily charter rate for
each vessel multiplied by the number of scheduled hire days for the
remaining contract term. Revenue backlog is not intended to
represent EBITDA or future cashflows that will be generated from
these contracts. This measure should be seen as a supplement and
not a substitute for our US GAAP measures of performance.
Golar Group Contract Earnings Backlog: Golar Group
Contract earnings backlog represents the Golar family’s share of
contracted fee income for executed contracts less forecasted
operating expenses for these contracts. In calculating forecasted
operating expenditure, management has assumed that where there is
an Operating Services Agreement the amount receivable under the
services agreement will cover the associated operating costs,
therefore revenue from operating services agreements are excluded.
For contracts, which do not have a separate Operating Services
Agreement management has made an assumption about operating costs
based on the current run rate. The only material application of
this methodology was to the Hilli Earnings backlog where we assumed
operating costs of approximately $144kpd. For consolidated
subsidiaries where we do not own 100% of the share capital,
management has only included our proportionate share of contract
earnings. The material application of this assumption was to Gimi
(70% ownership) and Hilli (44.5% of the Common Unit entitlement).
No contracted fee income is included for T3 or for the Hilli oil
derivative. For Golar Group Contract Earnings Backlog, the backlog
of the Partnership and Hygo are included on a 100% basis using the
same principals that we apply to the GLNG contract earnings
backlog. The main assumption for Hygo is a USD:BRL FX rate of 4.5.
For these equity accounted investments, when their contract
earnings backlog actualizes, we will show our share of their
earnings net of interest and tax in one line in the Income
Statement “Equity in net earnings/(losses) of affiliates”. As Golar
is positioned as an integrated LNG company, management believes
that this metric is useful as it allows people to understand the
total contracted earning backlog, based on asset performance,
across the entire LNG value chain. Contract earnings backlog is not
intended to represent EBITDA or future cashflows that will be
generated from these projects, it also excluded items such as
G&A and other non-cash accounting adjustments. This measure
should be seen as a supplement and not a substitute for our US GAAP
measures of performance.
Golar LNG Limited's pro-rata share of
Golar Group Contract Earnings Backlog: GLNG’s share of
Contract Earnings Backlog adjusts the Golar Group Contract Earnings
Backlog to include GLNG’s proportionate share of the contract
earnings backlog of our equity accounted investments. This means
that only 32.2% of the Partnership’s Contracted Earnings and 50% of
Hygo’s contracted earnings backlog are included. For these equity
accounted investments, when their contract earnings backlog
actualizes, we will show our share of their earnings net of
interest and tax in one line in the Income Statement “Equity in net
earnings/(losses) of affiliates”. As Golar is positioned as an
integrated LNG company, management believes that this metric is
useful as it allows people to understand GLNG’s share of the total
contracted earning backlog, based on asset performance, across the
entire LNG value chain. Contract earnings backlog is not intended
to represent EBITDA or future cashflows that will be generated from
these projects, it also excluded items such as G&A and other
non-cash accounting adjustments. This measure should be seen as a
supplement and not a substitute for our US GAAP measures of
performance.
Definitions
TFDE: Tri-fuel Diesel Electric
FSRU: Floating Storage Regasification
UnitJKM: Japan Korea MarkerCAGR:
Compound Annual Growth Rate
Forward Looking Statements
This press release contains forward-looking
statements (as defined in Section 21E of the Securities Exchange
Act of 1934, as amended) which reflects management’s current
expectations, estimates and projections about its operations. All
statements, other than statements of historical facts, that address
activities and events that will, should, could or may occur in the
future are forward-looking statements. Words such as “may,”
“could,” “should,” “would,” "will," “expect,” “plan,” “anticipate,”
“intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,”
“potential,” “continue,” or the negative of these terms and similar
expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and
other factors, some of which are beyond our control and are
difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such
forward-looking statements. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. Unless legally required, Golar undertakes no
obligation to update publicly any forward-looking statements
whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to
differ materially from those in the forward-looking statements
are:
- changes in our ability to obtain additional financing or
refinancing of our existing debt, including our Term Loan facility
and Margin Loan facility, each scheduled to mature in December
2020, and our 2017 convertible bonds, on acceptable terms or at
all;
- changes in our ability to comply with the covenants contained
in the agreements governing our future or existing
indebtedness;
- our inability and that of our counterparty to meet our
respective obligations under the Lease Operate Agreement (“LOA”)
entered into in connection with the BP Greater Tortue/Ahmeyim
Project (“Gimi GTA Project”);
- continuing uncertainty resulting from potential claims from our
counterparties of purported force majeure under contractual
arrangements, including but not limited to our construction
projects, and other contracts to which we are a party;
- our ability to realize the expected benefits from acquisitions
and investments we have made and may make in the future;
- changes in the timeliness of the completion of the LNG Croatia
(formerly known as the Golar Viking) commissioning and subsequent
acceptance by the customer;
- our ability to enter into contracts with third parties to fully
utilize the Hilli Episeyo;
- the length and severity of outbreaks of pandemics, including
the ongoing worldwide outbreak of the novel coronavirus
(“COVID-19”) and its impact on demand for liquefied natural gas
(“LNG”) and natural gas, the timing of completion of our conversion
projects, the operation of our charters, our global operations
including impact to our vessel operating costs and our business in
general;
- Hygo Energy Transition Ltd.’s (“Hygo”) (formerly known as Golar
Power Limited) ability to operate the Sergipe power station project
and related floating storage and regasification unit (“FSRU”)
contract and to execute its downstream LNG distribution and
merchant power sales plans;
- Hygo’s ability to successfully complete an initial public
offering (“IPO”) of its common shares.
- changes in our relationship with Golar LNG Partners LP (“Golar
Partners”), Hygo or Avenir LNG Limited (“Avenir”) and the
sustainability of any distributions they pay to us;
- any adverse effects on us, including reputational harm, or the
value of our investment in Hygo, as a result of the implication of
Hygo’s former chief executive officer, Eduardo Antonello, who
resigned from his position with Hygo in October 2020, in certain
allegations by the Brazilian government concerning alleged improper
payments made in Brazil pre-dating Mr. Antonello’s relationship
with Hygo;
- the outcome of any pending or future legal proceedings to which
we are a party;
- approval of amendments to agreements with our engineering,
procurement and construction contractors and lending banks to
adjust the construction and financing schedules relating to the
Gimi GTA Project;
- failure of our contract counterparties, including our joint
venture co-owners, to comply with their agreements with us or other
key project stakeholders;
- changes in LNG carrier, FSRU, floating liquefaction natural gas
vessel (“FLNG”), or small-scale LNG market trends, including
charter rates, vessel values or technological advancements;
- our vessel values and any future impairment charges we may
incur;
- challenges by authorities to the tax benefits we previously
obtained under certain of our leasing agreements;
- continuing volatility of commodity prices;
- a decline or continuing weakness in the global financial
markets;
- fluctuations in currencies and interest rates;
- our ability to close potential future sales of additional
equity interests in our vessels, including the FLNG Gimi on a
timely basis or at all;
- changes in our ability to retrofit vessels as FSRUs or FLNGs,
our ability to obtain financing for such conversions on acceptable
terms or at all and our ability to obtain the benefits that may
accrue to us as the result of such modifications;
- changes in the supply of or demand for LNG carriers, FSRUs,
FLNGs or small-scale LNG infrastructure;
- a material decline or prolonged weakness in rates for LNG
carriers, FSRUs, FLNGs or small-scale LNG infrastructure;
- changes in the performance of the pool in which certain of our
vessels operate and the performance of our joint ventures;
- changes in trading patterns that affect the opportunities for
the profitable operation of LNG carriers, FSRUs, FLNGs or
small-scale LNG infrastructure;
- changes in the supply of or demand for LNG or LNG carried by
sea;
- changes in the supply of or demand for natural gas generally or
in particular regions;
- changes in our relationships with our counterparties, including
our major chartering parties;
- changes in general domestic and international political
conditions, particularly in regions where we operate;
- changes in the availability of vessels to purchase and in the
time it takes to construct new vessels or convert existing
vessels;
- failures of shipyards to comply with delivery schedules or
performance specifications on a timely basis or at all;
- changes in our ability to sell vessels to Golar Partners or
Hygo;
- changes to rules and regulations, applicable to LNG carriers,
FSRUs, FLNGs or other parts of the LNG supply chain;
- our inability to achieve successful utilization of our expanded
fleet or inability to expand beyond the carriage of LNG and
provision of FSRUs, FLNGs, and small-scale LNG infrastructure
particularly through our innovative FLNG strategy and our joint
ventures;
- actions taken by regulatory authorities that may prohibit the
access of LNG carriers, FSRUs, FLNGs or small-scale LNG vessels to
various ports;
- increases in costs, including, among other things, crew wages,
insurance, provisions, repairs and maintenance; and
- other factors listed from time to time in registration
statements, reports or other materials that we have filed with or
furnished to the U.S. Securities and Exchange Commission
("Commission"), including our most recent Annual Report on Form
20-F.
As a result, you are cautioned not to rely on
any forward-looking statements. Actual results may differ
materially from those expressed or implied by such forward-looking
statements. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise unless required by
law.
November 30, 2020The Board of DirectorsGolar LNG
LimitedHamilton, BermudaInvestor Questions: +44 207 063
7900Iain Ross - CEOKarl Fredrik Staubo - CFOStuart
Buchanan - Head of Investor Relations
- Interim results for the period ended 30 September 2020
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