Highlights
- Total operating revenues for Golar LNG Limited ("Golar" or "the
Company") increased from $123.1 million in 3Q to $181.9 million in
4Q. Full year 2018 operating revenues increased to $430.6 million
from $143.5 million in 2017.
- Adjusted EBITDA1 increased from $83.5 million in 3Q to $121.2
million in 4Q. Full year 2018 Adjusted EBITDA1 increased to $218.1
million from a loss of $24.0 million in 2017.
- The shipping fleet recorded Time Charter Equivalent1 ("TCE")
earnings of $77,600 per day ($97,300 for spot TFDE vessels).
- Established small-scale LNG entity Avenir LNG Limited
("Avenir") in conjunction with Stolt-Nielsen Limited
("Stolt-Nielsen") and Höegh LNG Holdings Limited ("Höegh").
- Received a Limited Notice to Proceed with the conversion of a
FLNG vessel to service the BP operated Greater Tortue/Ahmeyim
project offshore Mauritania and Senegal.
- FLNG Hilli Episeyo successfully completes first maintenance
window ahead of schedule and maintains 100% commercial uptime.
- Non-cash items including $195.7 million of unrealized Brent oil
linked mark-to-market derivative instrument losses and a $149.4
million impairment charge in relation to its investment in Golar
LNG Partners L.P. ("Golar Partners" or the "Partnership")
contributed to Golar reporting a net loss of $313.0 million for
4Q.
Subsequent Events
- Golar and BP execute contracts for the provision of an
FLNG vessel to service the Greater Tortue/Ahmeyim project offshore
Mauritania and Senegal for 20 years.
- Subject to certain conditions precedent and receipt of a final
Notice to Proceed, Golar enters into binding agreements to convert,
sell and operate a FSRU in Croatia.
- FSRU Golar Nanook commences loading operations of first Sergipe
commissioning cargo from FLNG Hilli Episeyo on February 26.
- Dividend of $0.15 cents per share declared for quarter.
Financial Review
Business Performance
|
2018 |
|
Oct-Dec |
Jul-Sep |
(in thousands of $) |
Vessel and other operations |
FLNG |
Total |
Vessel and other operations |
FLNG |
Total |
Total operating revenues |
127,415 |
|
54,524 |
|
181,939 |
|
68,577 |
|
54,524 |
|
123,101 |
|
Vessel operating expenses |
(18,407 |
) |
(10,692 |
) |
(29,099 |
) |
(16,785 |
) |
(12,065 |
) |
(28,850 |
) |
Voyage, charterhire & commission expenses (including expenses
from collaborative arrangement) |
(40,690 |
) |
605 |
|
(40,085 |
) |
(23,280 |
) |
(1,457 |
) |
(24,737 |
) |
Administrative expenses(2) |
(12,902 |
) |
227 |
|
(12,675 |
) |
(14,804 |
) |
29 |
|
(14,775 |
) |
Project development expenses(2) |
(928 |
) |
(3,798 |
) |
(4,726 |
) |
(1,037 |
) |
(4,704 |
) |
(5,741 |
) |
Realized gain on oil derivative instrument(3) |
- |
|
12,419 |
|
12,419 |
|
- |
|
11,270 |
|
11,270 |
|
Other operating gains (losses) |
14,740 |
|
(1,296 |
) |
13,444 |
|
26,000 |
|
(2,740 |
) |
23,260 |
|
Adjusted EBITDA(1) |
69,228 |
|
51,989 |
|
121,217 |
|
38,671 |
|
44,857 |
|
83,528 |
|
|
|
|
|
|
|
|
Reconciliation to operating income (loss) |
|
|
|
|
|
|
Unrealized (loss) gain on oil derivative instrument(3) |
- |
|
(195,740 |
) |
(195,740 |
) |
- |
|
77,470 |
|
77,470 |
|
Depreciation and amortization |
(16,244 |
) |
(12,051 |
) |
(28,295 |
) |
(16,477 |
) |
(12,051 |
) |
(28,528 |
) |
Operating income (loss) |
52,984 |
|
(155,802 |
) |
(102,818 |
) |
22,194 |
|
110,276 |
|
132,470 |
|
(2) With effect from the quarter ended June 30,
2018, we presented a new line item, "Project development expenses",
which includes costs associated with pursuing future contracts and
developing our pipeline of activities that have not met our
internal threshold for capitalization. Previously, these costs were
presented within "Administrative expenses" along with our general
overhead costs. This presentation change has been retrospectively
adjusted in prior periods.
(3)With effect from the quarter ended September
30, 2018, we have split the line item "Realized and unrealized gain
on oil derivative instrument" relating to income from the FLNG
Hilli Episeyo Liquefaction Tolling Agreement into two line items,
"Realized gain on oil derivative instrument" and "Unrealized (loss)
gain on oil derivative instrument". The unrealized component
represents a mark-to-market loss of $195.7 million (September 30,
2018: gain of $77.5 million) 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 $12.4 million
(September 30, 2018: $11.3 million) and represents the income in
relation to the Hilli Episeyo Liquefaction Tolling Agreement
receivable in cash. This presentation change has been
retrospectively adjusted in prior periods.
Golar reports today a 4Q operating loss of
$102.8 million compared to income of $132.5 million in 3Q 2018
("3Q"). The loss arises as a result of a fair value change in the
Hilli Episeyo contract related oil derivative from a $77.5 million
gain in 3Q to a $195.7 million loss in 4Q. Adjusted EBITDA1
increased from $83.5 million in 3Q to $121.2 million in
4Q.
Total operating revenues net of voyage,
charterhire and commission expenses increased from $98.4 million in
3Q to $141.9 million in 4Q. Of the 4Q total, $86.7 million is
derived from vessel and other operations and $55.1 million is from
FLNG operations.
Revenues from vessel and other operations,
including management fee income, net of voyage, charterhire and
commission expenses increased by $41.4 million to $86.7 million in
4Q. The start-up of new LNG production facilities together with
China's early entry into the winter buying market and subsequent
use of vessels for floating storage generated significant vessel
demand. Utilization quickly increased, as did voyage charter rates
which reached record levels. Fleet utilization increased from 86%
in 3Q to 93% in 4Q. Full fleet TCE1 earnings increased from $41,200
in 3Q to $77,600 in 4Q.
In line with the prior quarter, FLNG Hilli
Episeyo generated operating revenues of $54.5 million including
base tolling fees and amortization of pre-acceptance amounts
recognized. Operational efficiency continues to improve with
experience. In addition to a reduction in operating costs, more
efficient use of LNG during the liquefaction process resulted in
reduced 4Q FLNG related voyage expenses.
Vessel operating expenses at $29.1 million in 4Q
were in line with the prior quarter. FLNG operating costs decreased
by $1.4 million and are now in line with expected average operating
costs for Hilli Episeyo. Offsetting this, an additional $1.8
million of unanticipated repairs were incurred during the final
stages of Golar Viking's reactivation.
At $12.7 million for the quarter, total
administrative expenses were $2.1 million lower than 3Q.
Reduced engineering fees in connection with the
now concluded Front End Engineering and Design ("FEED") exercise
for the BP-Kosmos Tortue FLNG conversion resulted in a decrease in
project expenses from $5.7 million in 3Q to $4.7 million in 4Q.
The Brent oil linked component of Hilli
Episeyo's fees generates additional annual operating cash flows of
approximately $3 million for every dollar increase in Brent Crude
prices between $60.00 per barrel and the contractual ceiling.
Billing of this component is based on a three-month look-back at
average Brent Crude prices. Amounting to $12.4 million in 4Q, the
realized gain on the oil derivative instrument was up $1.1 million
on 3Q. The increase in this hire component is the result of higher
oil prices, particularly during September and October.
The fair value of the derivative asset decreased
by $195.7 million during the quarter, with a corresponding
unrealized loss of the same amount recognized in the income
statement. The fair value decrease was driven by a significant
downward movement in the expected future market price for Brent
Oil. The spot price for Brent Oil decreased from $82.72 per barrel
on September 30 to $50.57 per barrel on December 31 and has since
recovered to around $65.00 per barrel today. Despite the loss in
4Q, the derivative contract still had a positive value recorded as
an asset on the balance sheet of $84.7 million. Based on the spot
price of $67.00 and forward curve on 21 February, the gain on this
non-cash derivative since year-end would be approximately $35.6
million.
Other operating gains and losses reported a 4Q
gain of $13.4 million for the quarter. A further cash recovery of
$14.7 million was made during the quarter as a result of
proceedings in respect of a former contract for the Golar Tundra.
These proceedings are expected to end shortly. Offsetting the 4Q
cash recovery in respect of Golar Tundra was the write-down of $1.3
million of Fortuna specific costs incurred in respect of the vessel
Gandria.
Depreciation and amortization at $28.3 million
in 4Q was in line with the prior quarter.
Net Income Summary
|
2018 |
2018 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Operating (loss) income |
(102,818 |
) |
132,470 |
|
Interest income |
2,983 |
|
3,106 |
|
Interest expense |
(31,251 |
) |
(32,645 |
) |
Losses on derivative instruments(4) |
(23,605 |
) |
(8,004 |
) |
Other financial items, net(4) |
(780 |
) |
(227 |
) |
Income taxes |
(627 |
) |
(156 |
) |
Equity in net (losses) earnings of affiliates |
(154,089 |
) |
2,668 |
|
Net income attributable to non-controlling interests |
(2,770 |
) |
(31,000 |
) |
Net (loss) income attributable to Golar LNG Limited |
(312,957 |
) |
66,212 |
|
(4) With effect from the quarter ended September
30, 2018, we presented a new line item, "(Losses) gains on
derivative instruments", which relates to the change in the fair
value of our derivative instruments. Previously, these items were
presented within "Other financial items, net" along with our
general finance costs. This presentation change has been
retrospectively adjusted in prior periods.
In 4Q, the Company generated a net loss of
$313.0 million. In addition to the decrease in Operating Income,
key items contributing to the $379.2 million decrease in 4Q are
summarized as follows:
- 4Q recorded a $23.6 million loss on derivative instruments
compared to a 3Q loss of $8.0 million. This includes
mark-to-market valuations on the Total Return Swap ("TRS") and
interest rate swaps ("IRS").
- The $154.1 million 4Q equity in net losses of affiliates is
primarily comprised of a loss of $157.9 million in respect of
Golar's stake in Golar Partners. Included in this loss is a $149.4
million impairment of the carrying value of Golar's interest in the
Partnership. A more sustainable distribution and improving coverage
following the distribution cut have not translated into a higher
unit price. Golar Partners' unit price as at December 31 was
$10.80, whereas the unit price at IPO was $22.50. The impairment is
based on the year-end unit price of $10.80. Given the time that the
Partnership's unit price has traded below its carry value, the
reduction is now considered other than temporary. The unit price on
February 26 was $13.78, which equates to $292.5 million for Golar's
common unit equity stake. The $8.5 million balance is comprised of
Golar's share of the Partnership's 4Q net loss, net of fair value
adjustments. Non-cash losses on interest rate swaps were a major
contributor to the Partnership's 4Q net loss.
Net income attributable to non-controlling
interests represents external interests in the Hilli Episeyo and
the finance lease variable interest entities ("VIEs").
Commercial Review
LNG Shipping
Key markets continue to import record levels of
LNG as they distance themselves from coal and nuclear, with Chinese
and Korean 2018 demand up 41% and 18%, respectively. Lessons
learned from gas shortages and last minute buying at the end of
2017 meant that China entered the winter buying market earlier in
2018. Milder than expected temperatures subsequently resulted in a
slower than anticipated inventory drawdown with high or full North
Eastern terminals delaying a number of vessel discharges and
requiring that others slow steam. The resultant increase in
congestion together with a steady stream of new cargoes quickly
absorbed all available ships, driving LNG carrier rates to all-time
high levels in November. Effective spot rates for trifuel diesel
electric propulsion ("TFDE") vessels, including positioning and
ballast fees briefly exceeded $200,000 per day, with a minimal
discount to gas injection vessel rates being noted. Rates for steam
("ST") vessels also reached their highest level in five years.
Drawdown of LNG as a result of cooling December
temperatures then allowed vessels to discharge and speed up, adding
some slack to the tight shipping availability. Despite record
December LNG imports into Northeast Asia, falling Brent prices,
strong European gas prices and milder weather prevented the
arbitrage window from opening. The shipping balance lengthened to
the extent that multiple vessels became available for spot fixtures
with resulting TFDE and ST spot rates falling to $100,000 and
$85,000 per day, respectively, by the end of December. Rates have
continued to soften into 1Q 2019 when around half of the 2019
newbuild vessels are scheduled to deliver. JKM LNG prices have
traded down to 9-10% of Brent. This has significantly capped
the global LNG arbitrage and placed further pressure on shipping
rates. These same low prices do however strengthen the
long-term fundamental growth prospects of LNG as a cheap clean
fuel. Comprised of a TCE1 of $97,300 for spot TFDE vessels, $91,700
in respect of its total TFDE fleet, and $13,700 for its two steam
vessels, Golar recorded a 4Q TCE1 of $77,600 per day, up 151% on
the $30,900 per day achieved in 4Q 2017 and 88% on the $41,200
achieved in 3Q.
The Company's forward view of the market remains
bullish despite current volatility. Vessel deliveries are expected
to slow by approximately 20% from record levels of around 49 in
2018 to around 39 in 2019. Of the 2019 deliveries, only 5 are
uncontracted. At the same time, new liquefaction capacity ramps up
at close to its fastest pace in history with approximately 35mtpa
of new LNG scheduled to come on line in 2019 versus 30mtpa in 2018.
Most of this new liquefaction will originate from the US, close to
doubling their current nameplate export capacity and further
increasing ton-miles. Around 35 vessels and a further 20mtpa of
new, predominantly US-source, LNG is scheduled to deliver in 2020.
Leading brokers are forecasting a 10+ vessel shortfall at the end
of 2019, increasing to more than 20 at the end of 2020.
Significant progress has been made establishing
a joint structure with other ship owners that allows LNG shipping
investors more direct exposure to the LNG shipping market. Golar
plans to contribute its TFDE vessels, the technical management of
which will remain with Golar Management Oslo, into a new company.
Agreements with banks and lessors have also been reached securing
approximately $1.1 billion in financing for the 9 vessels Golar is
considering contributing to this new company.
A potential separation or spin-off of the LNG
shipping fleet is expected to reduce the volatility in Golar's cash
flows and better position the long-term contracting business for
infrastructure investors.
Golar Arctic recently completed its floating
storage contract in Jamaica and will shortly commence its 5-year
scheduled dry-dock in Asia. Thereafter it will trade in the spot
market.
Golar Viking is currently serving a short-term
contract, due to expire in 1Q 2020. Golar has also entered into
binding agreements with a Croatian project developer, LNG Hrvatska
d.o.o., to convert the 2005 built Golar Viking into an FSRU, sell
the converted vessel, and then operate and maintain the FSRU for a
minimum of 10-years. Conversion capex will be funded by stage
payments under the agreement. Commencement of this project is
subject to certain conditions precedent, including confirmation of
project funding and receipt of a Notice to Proceed from LNG
Hrvatska d.o.o.
Golar Partners (a non-consolidated affiliate of
Golar LNG)
Largely the result of a non-cash loss on
interest rate swaps and a reduction in revenues recognized in
respect of the FSRU Golar Freeze, the Partnership reported a 4Q net
loss of $19.0 million. Although charter hire in respect of a prior
contract for the FSRU Golar Freeze continues to be received on a
monthly basis through to April 2019, all remaining revenue
receivable in respect of this contract was recognised in 3Q. Partly
offsetting reduced revenues recognized in respect of FSRU Golar
Freeze was revenue from the Golar Mazo which was on hire throughout
the quarter.
Dry-dock and modifications necessary to service
Golar Freeze's new 15-year contract were completed on October 20.
The FSRU subsequently departed Dubai arriving offshore Jamaica on
December 11. Hire at the full rate is expected to commence early in
2Q. LNG carrier Methane Princess also completed its scheduled
dry-docking during the quarter resulting in 20 days off-hire.
Charterers of the FSRU Golar Igloo extended the
2018 regas season to include December and subsequently elected to
exercise their option to extend the charter by a further year,
covering the 2019 regas season. After its scheduled 5-year dry-dock
the vessel returned to Kuwait in late February to commence its 6th
regas season.
Charterers of the carrier Golar Grand, cognizant
of the strong underlying shipping market, have also exercised the
first of their one-year extension options. The option rate between
May 2019 and May 2020 will represent a material improvement on the
initial 2-year rate.
By virtue of its 50% interest in Hilli Episeyo's
common units, the Partnership is entitled to 50% of the net
earnings of Hilli Episeyo attributable to common unit holders. The
Partnership's reported share of net earnings in 4Q amounted to $1.3
million, which includes non-cash charges of $8.4 million related to
the depreciation and amortization of fair value adjustments made
upon acquisition of the common units.
On October 23, the Partnership's board approved
a quarterly distribution going forward of $0.4042 per unit.
The Partnership has reported increased distribution coverage1 from
1.02 in 3Q to 1.20 in 4Q.
FLNG
FLNG Hilli Episeyo, which completed its first
scheduled maintenance window during the quarter without issue and
ahead of schedule, continues to operate with 100% commercial
availability. The vessel is currently in the process of exporting
its 16th LNG cargo. In terms of increased utilization, discussions
continue with charterers Perenco and SNH. Onshore treatment
and compression systems for additional gas volumes are currently
being installed. Noting that only 30-day notice is required
under the current agreement, it is expected that the
contracted option for the third train may be exercised during 4Q
2019 and that the base throughput could therefore be increased
before the end of 2019.
Together, Perenco, SNH and Golar also see the
logic in working to further increase throughput that would utilize
Hilli Episeyo's fourth train. Discussions have been initiated with
a view to concluding a way forward on this objective before the end
of 2019.
On February 26, Golar entered into an agreement
with BP for the charter of an FLNG unit, Gimi, for a 20-year period
expected to commence in 2022. LNG carrier Gimi has been relocated
from layup to Keppel Shipyard where a site team has been assembled.
Subject to closing conditions, Golar also entered into a
Subscription Agreement with Keppel Capital in respect of their
participation in a 30% share of the project. Total conversion
works, which incorporate lessons learned from FLNG Hilli Episeyo
including some improvements and modifications, are expected to cost
approximately $1.3 billion, excluding financing costs. Annual
contracted revenues less forecasted operating costs of
approximately $215 million are expected, equivalent to a total
forecasted Contract Earnings Backlog1 of $4.3 billion, of which our
expected share is $3.0 billion. Golar is in the final stages of
receiving an underwritten credit commitment for a $700 million
long-term financing facility from a syndicate of international
banks that will also be available during construction. Golar's plan
is that together with other financing facilities and taking account
of financing costs during construction, by the end of the
construction period the anticipated maximum total equity
contribution from the Company in respect of its 70% stake will be
approximately $300 million.
Progress has also been made on development of
the first FLNG for the US Gulf of Mexico "Delfin LNG" project. When
connected to Delfin's existing pipeline infrastructure, Golar's
FLNG could deliver a low cost liquefaction solution in North
America giving Delfin and Golar an early mover advantage marketing
a relatively small parcel of LNG into a demand driven market. Work
continues to establish the right gas supply and offtake combination
to enable a financing and yard commitment before the end of
2019.
The Company notes that Ophir Energy's Production
Sharing Agreement with the government of Equatorial Guinea has not
been extended. Golar remains engaged with the relevant authorities
in the event that the production license is awarded to an operator
interested in pursuing FLNG as a development solution.
Longer-term, LNG prices will, in Golar's view,
continue to be set by US producers offering Henry Hub indexed LNG
at $7-$8mmbtu. This will squeeze the economics of higher cost
liquefaction solutions. The multi-year construction time frame for
LNG projects does however mean that new capacity additions post
2020 need to be sanctioned promptly to avoid LNG shortages from
2022/3. Where a floating facility is appropriate, Golar's FLNG
solutions remain substantially cheaper and quicker to market than
alternatives. The Company is seeing increased activity levels on
the back of both the success of Hilli Episeyo and the vote of
confidence given by BP after their extensive review. During
the last quarter alone Golar has been approached by several
potential new resource holders seeking to use the Company's
technology to produce what were previously considered stranded
assets.
Golar Power (50/50 Golar/Stonepeak
Infrastructure Partners non-consolidated downstream joint
venture)
Construction of the Sergipe power plant remains
on track for commencement of operations on January 1, 2020.
Engineering, procurement, FSRU, pipeline and civil works are all
now complete. Installation of the mooring and assembly of the power
plant and associated infrastructure including transmission lines
continues apace. FSRU Golar Nanook is currently alongside FLNG
Hilli Episeyo in Cameroon where it will collect a commissioning
cargo that will be used for acceptance testing in Sergipe over the
coming months.
Contractually commencing in less than 11 months,
Golar's 2020 share of expected annual contracted revenues less
forecasted operating expenses from the fully financed Sergipe power
project and Golar Nanook FSRU is around $100 million, reducing to
approximately $45 million after deduction of debt service costs.
Golar Power is also advancing discussions with a view to using some
of the FSRU's spare capacity to support local LNG fuelled
opportunities. The targeted opportunities are focused on
substituting diesel for LNG and are expected to deliver significant
cost and emission savings for the end user.
Further FSRU-power opportunities are being
pursued in Brazil. License approvals for projects are making good
progress, including the recently gazetted Barcarena site approval.
These licenses put Golar Power in a strong position to develop FSRU
terminal projects, to win future power auctions, and to distribute
LNG locally.
In other FSRU business, the redeployment of
Golar Freeze to Jamaica and the potential deployment of a converted
Golar Viking to Croatia are evidence of smart utilization of older,
smaller steam vessels. The Company continues to pursue these
projects in addition to seeking longer-term employment for the
larger Golar Tundra. Golar Power will continue to work to jointly
develop projects where an opportunity exists to invest either in a
terminal or a power station that also requires a FSRU better suited
to an asset currently owned by Golar or the Partnership.
Together with its joint venture partner, Golar
has initiated a review of the strategic alternatives for Golar
Power going forward. This includes a focused high growth plan
for the business incorporating financing considerations. The
original agreements also confer upon our joint venture partner the
right to trigger an Initial Public Offering of Golar Power.
Significant value, which has been accumulated in full compliance
with IFC and World Bank environmental, social and governance
standards, has been built up over the last four years. This
could position Golar Power well for Environment, Social and
corporate Governance ("ESG") investors.
Avenir (22.5% interest in LNG small-scale
venture, a non-consolidated affiliate)
On October 1, Golar invested $24.8 million in
small-scale LNG services provider Avenir, representing part of a
combined commitment of up to $182.0 million from founding partners
Stolt-Nielsen, Höegh and Golar. During November the company was
capitalised with the placement of 110,000,000 new shares at a par
price of US$1.00 per share. Of these, 45% are owned by
Stolt-Nielsen, 22.5% (equivalent to 24,750,000 shares) by Golar,
22.5% by Hoegh and 10% by institutional and other professional
investors. The shares were listed on the Norwegian OTC market on
November 14 (ticker: AVENIR). These have since appreciated in value
by approximately 80%. Following the initial equity offering the
founding partners are committed to fund $72.0 million of which
Golar is committed to approximately $18 million. To date, proceeds
have been invested in four 7,500cbm LNG carriers and two 20,000cbm
carriers, all under construction in China, and in an 80% interest
in an LNG terminal and distribution facility under development in
Sardinia.
Avenir intends to be the leading provider of
small-scale LNG for the power, bunkering, trucking and industrial
markets by supplying low-cost LNG using innovative technology and
leveraging its founders' know-how and existing LNG infrastructure.
Golar is very pleased with the way Avenir, its management and
shareholders work together and sees significant strategic
opportunities for the company.
Financing Review
Golar's total current cash position as at
December 31 was $704.3 million (including long-term restricted
cash), of which $217.8 million was unrestricted. Included within
restricted cash is $176.4 million relating to lessor-owned VIEs and
$175.5 million relating to the Hilli Episeyo letter of credit. Of
the $175.5 million restricted cash securing the Hilli Episeyo
letter of credit, approximately $110.0 million is expected to be
released between 2019 and 2021. Supported by the vessel's strong
operational performance to date, options to reduce the LC and
accelerate the release of associated cash collateral are currently
being explored.
Notable outflows from unrestricted cash during
4Q include the $24.8 million investment in Avenir, $28.6 million
paid in respect of final sums due for Hilli Episeyo, $18.6 million
paid to Keppel Shipyard in respect of initial FLNG Gimi conversion
costs, a $33.4 million collateral payment on the margin loan and
$13.5 million in respect of the TRS.
During the quarter, a 2-year extension to the
Golar Seal sale and leaseback facility was agreed. In return for a
$13.0 million prepayment in January 2019, this facility has been
extended to January 2021. The ECA-backed Golar Bear and Golar Frost
debt facilities were also extended to 2H 2024.
Golar's contractual debt1 including 100% of
Hilli Episeyo as at December 31 were $2.7 billion. The Company's
adjusted net debt1 was $2.1 billion.
Included within the $730.3 million current
portion of long-term debt and short-term debt on the Balance Sheet
is $646.5 million relating to lessor-owned VIE subsidiaries that
Golar is required to consolidate in connection with 8 sale and
leaseback financed vessels, including the Hilli Episeyo.
Corporate and Other Matters
As at December 31, 2018, there were 101.3
million shares outstanding, including 3.0 million TRS shares that
had an average price of $45.01 per share. The TRS, which is fully
collateralized, was marked-to-market as of December 31, 2018 when
the closing price was $21.76 per share. The cash collateral posted
against the swap is included within the restricted cash balance on
the Balance Sheet. There were also 3.8 million outstanding stock
options in issue with an average price of $36.16.
The Board has approved a dividend of $0.15 for
the quarter.
Outlook
Golar enters 2019 in a substantially stronger
position than it was twelve months ago. This is evidenced by:
- FLNG Hilli Episeyo is operational, cash flow generative and
constructive progress is being made with respect to utilization of
its spare capacity.
- The underlying recovery in the shipping market.
- Golar Power's Sergipe power project and FSRU Golar Nanook are
fully financed and less than 11 months from contractual
start-up.
- The award by BP of a 20-year FLNG contract that is expected to
deliver annual contracted revenues less forecasted operating costs
of approximately $215 million.
- Forecasted Gross Contract Earnings Backlog1 for the Golar group
of companies of $10.3 billion comprised of $3.5 billion from Golar,
$4.9 billion from Golar Power and $1.9 billion from the
Partnership. Total forecasted Contract Earnings backlog1,including
our proportionate share from equity investments, is $6.6 billion,
comprised of $2.5 billion from Golar Power, $0.6 billion from Golar
Partners and $3.5 billion from Golar.
Mild weather in key Asian markets is suppressing
Asian LNG prices and preventing inter-basin trading activity. Close
to half of the 2019 newbuild vessels are also scheduled to deliver
in 1Q. Together, this is contributing to a rise in prompt vessel
availability and falling spot rates. Headline TFDE spot rates are
currently assessed at around $50,000 per day. Based on fixtures to
date Golar expects 1Q 2019 TCE will be significantly reduced from
4Q and clearly below mid-cycle rates. Although spot rates may be
prone to further periods of volatility, 2019 is expected to report
a shipping deficit. This deficit is expected to increase in
2020.
New FLNG opportunities are appearing and others
are developing on the back of a strong operational performance from
Hilli Episeyo and the award of the BP contract. FLNG is progressing
into a mainstream LNG technology application and Golar remains the
leader in terms of operating experience, project development skills
and ability to work with project owners in order to get their
projects to a FID.
The Company expects 2019 operating income to
continue to improve, driven by a stronger shipping market and the
first full year of FLNG Hilli Episeyo operations. In 2020
operations will commence at Sergipe and further production growth
from Hilli Episeyo is anticipated.
The Board is pleased to see Golar lever its
strong LNG industry foothold, technology and significant experience
to establish a market leading position across the LNG value chain
from well to grid. Through the provision of cheaper and
cleaner energy the LNG market will likely take market share from
coal and oil and sustain industry growth levels of around 10% for
the foreseeable future.
Non-GAAP measures
Adjusted EBITDA: Adjusted EBITDA is
calculated by taking net income before interest, tax, unrealized
mark-to-market movements on the oil derivative instrument,
depreciation and amortization. We believe that the exclusion of
these items enables investors and other users of our financial
information to assess our sequential and year over year performance
and operating trends on a more comparable basis and is consistent
with management's own evaluation of business performance. Adjusted
EBITDA is a non-GAAP financial measure and should not be considered
as an alternative to net (loss) income or any other indicator of
Golar's performance calculated in accordance with US GAAP. The
table below reconciles net (loss) income, the most directly
comparable US GAAP measure, to Adjusted EBITDA.
|
2018 |
2018 |
2018 |
2017 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Jan-Dec |
Jan-Dec |
Net
(loss) income attributable to Golar LNG Limited |
(312,957 |
) |
66,212 |
|
(231,428 |
) |
(179,703 |
) |
Adjusted for: |
|
|
|
|
Interest income |
(2,983 |
) |
(3,106 |
) |
(10,133 |
) |
(5,890 |
) |
Interest
expense |
31,251 |
|
32,645 |
|
101,908 |
|
59,305 |
|
Losses on derivative
instruments |
23,605 |
|
8,004 |
|
30,541 |
|
(20,696 |
) |
Other financial
items, net |
780 |
|
227 |
|
1,481 |
|
69 |
|
Other non-operating
loss |
- |
|
- |
|
- |
|
81 |
|
Income taxes |
627 |
|
156 |
|
1,267 |
|
1,505 |
|
Equity in net losses
(earnings) of affiliates |
154,089 |
|
(2,668 |
) |
157,636 |
|
25,448 |
|
Net income
attributable to non-controlling interests |
2,770 |
|
31,000 |
|
63,214 |
|
34,424 |
|
Operating (loss)
income |
(102,818 |
) |
132,470 |
|
114,486 |
|
(85,457 |
) |
Adjusted for: |
|
|
|
|
Unrealized loss
(gain) on oil derivative instrument |
195,740 |
|
(77,470 |
) |
9,970 |
|
(15,100 |
) |
Depreciation and amortization |
28,295 |
|
28,528 |
|
93,689 |
|
76,522 |
|
Adjusted EBITDA |
121,217 |
|
83,528 |
|
218,145 |
|
(24,035 |
) |
Adjusted net debt: The Company
consolidates a number of lessor VIEs, which means that on
consolidation, Golar's contractual debt under various sale and
leaseback facilities are eliminated and replaced with the lessor
VIE's debt. Adjusted net debt is calculated by taking net debt
defined by GAAP line items and reversing out the lessor VIE debt
and restricted cash balances and replacing it with Golar's
contractual debt under the sale and leaseback facilities. We
believe that the exclusion of the lessor VIE's debt enables
investors and users of our financial information to assess our
liquidity based on our underlying debt obligations and aids
comparability with our competitors. This presentation is consistent
with management's view of the business. Adjusted net debt is a
non-GAAP financial measure and should not be considered as an
alternative to net debt or any other indicator of Golar's
performance calculated in accordance with US GAAP. The table below
reconciles net debt based to adjusted net debt:
(in thousands of $) |
December 31, 2018 |
Net debt as calculated by GAAP |
|
Total debt (current and non-current) net of deferred finance
charges |
2,565,359 |
|
Less |
|
Cash and cash equivalents |
(217,835 |
) |
Restricted cash and short-term deposits - current and non-current
portion |
(486,426 |
) |
Net debt as calculated by GAAP |
1,861,098 |
|
VIE Consolidation Adjustment |
87,045 |
|
VIE Restricted Cash |
176,428 |
|
Deferred Finance Charges |
21,546 |
|
Adjusted Net Debt |
2,146,117 |
|
(in thousands of $) |
December 31, 2018 |
Total debt (current and non-current) net of deferred finance
charges |
2,565,359 |
|
VIE Consolidation Adjustments |
87,045 |
|
Deferred Finance Charges |
21,546 |
|
Golar's Contractual Debt |
2,673,950 |
|
Please see Appendix A for a capital repayment
profile for Golar's contractual debt.
TCE: The average daily TCE rate of our
fleet is a measure of the average daily revenue performance of a
vessel. TCE is calculated only in relation to our vessel
operations. For time charters, TCE is calculated by dividing total
operating revenues (including revenue from the Cool Pool, but
excluding vessel and other management fees and liquefaction
services revenue), less any voyage expenses, by the number of
calendar days minus days for scheduled off-hire. Under a time
charter, the charterer pays substantially all of the vessel voyage
related expenses. However, we may incur voyage related expenses
when positioning or repositioning vessels before or after the
period of a time charter, during periods of commercial waiting time
or while off-hire during dry-docking. TCE rate is a standard
shipping industry performance measure used primarily to compare
period-to-period changes in an entity's performance despite changes
in the mix of charter types (i.e. spot charters, time charters and
bareboat charters) under which the vessels may be employed between
the periods. We include average daily TCE, a non-GAAP measure, as
we believe it provides additional meaningful information in
conjunction with total operating revenues, the most directly
comparable US GAAP measure, because it assists our management in
making decisions regarding the deployment and use of its vessels
and in evaluating their financial performance. Our calculation of
average daily TCE may not be comparable to that reported by other
entities. The following table reconciles our total operating
revenues, the most directly comparable US GAAP measure, to the
average daily TCE rate.
|
2018 |
2018 |
(in thousands of $) |
Oct-Dec |
Jul-Sep |
Total operating revenues |
181,939 |
|
123,101 |
|
Less: Liquefaction services revenue |
(54,524 |
) |
(54,524 |
) |
Less: Vessel and other management fees |
(8,241 |
) |
(4,767 |
) |
Time and voyage charter revenues |
119,174 |
|
63,810 |
|
Less: Voyage and commission expenses |
(40,690 |
) |
(23,280 |
) |
|
78,484 |
|
40,530 |
|
Calendar days less scheduled off-hire days |
1,012 |
|
984 |
|
Average daily TCE rate (to the closest $100) |
77,600 |
|
41,200 |
|
Contract Earnings Backlog: Contract
earnings backlog represents Golar'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. 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
Episeyo Earnings backlog where we assumed operating costs of
approximately $120,000 per day.
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 Episeyo (44.5% of the Common Unit entitlement). No contracted
fee income was included for Hilli T3 or the oil derivative.
For equity accounted investments (the
Partnership and Golar Power) we have included our proportionate
share of their contract earnings backlog under the same assumptions
that we have applied to our consolidated subsidiaries. In the
future when our 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". The Golar Power numbers are calculated based on an
exchange rate of 3.7BRL:1USD.
Management has not forecasted net income for
these initiatives as information to provide such a forward-looking
estimate is not available without unreasonable effort. Contract
earnings backlog is not intended to represent EBITDA or future
cashflows that will be generated from these projects nor is it
intended to represent the dividend income that will be payable to
Golar from our equity investments. This measure should be seen as a
supplement and not a substitute for our US GAAP measures of
performance.
Gross Contract Earnings Backlog: Gross
contract earnings backlog represents each Golar entity's share of
contracted fee income for executed contracts less forecasted
operating expenses for these contracts. In calculating the
forecasted operating expenditure, management has applied the same
methodology in preparing the "Contract Earnings Backlog" measure
above. Management has not forecasted net income for these
initiatives as information to provide such a forward-looking
estimate is not available without unreasonable effort.
Contract earnings backlog is not intended to represent EBITDA or
future cash flows that will be generated from these projects nor is
it intended to represent the dividend income that will be payable
to Golar from our equity investments. This measure should be seen
as a supplement and not a substitute for our US GAAP measures of
performance.
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:
- our inability and that of our counterparty to meet our
respective obligations under the Lease and Operate agreement
entered into in connection with the BP Greater Tortue / Ahmeyim
Project;
- changes in liquefied natural gas, or LNG, carrier, floating
storage and regasification unit, or FSRU, or floating liquefaction
natural gas vessel, or FLNG, or small-scale LNG market trends,
including charter rates, vessel values or technological
advancements;
- Golar Power's ability to successfully complete and start up the
Sergipe power station project and related FSRU contract;
- changes in our ability to retrofit vessels as FSRUs or FLNGs
and in our ability to obtain financing for such conversions on
acceptable terms or at all;
- our ability to close potential future sales of additional
equity interests in Golar Hilli LLC on a timely basis or at
all;
- 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 commodity prices;
- changes in the supply of or demand for natural gas generally or
in particular regions;
- failure of our contract counterparties, including our joint
venture co-owners, to comply with their agreements with us;
- changes in our relationships with our counterparties, including
our major chartering parties;
- challenges by authorities to the tax benefits we previously
obtained under certain of our leasing agreements;
- a decline or continuing weakness in the global financial
markets;
- changes in general domestic and international political
conditions, particularly where we operate;
- changes in the availability of vessels to purchase and in the
time it takes to construct new vessels;
- failures of shipyards to comply with delivery schedules or
performance specifications on a timely basis or at all;
- our ability to integrate and realize the benefits of
acquisitions;
- changes in our ability to sell vessels to Golar Partners or
Golar Power;
- changes in our relationship with Golar Partners, Golar Power or
Avenir and the sustainability of any distributions they pay to
us;
- 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;
- changes in our ability to obtain additional financing on
acceptable terms or at all;
- increases in costs, including, among other things, 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 Securities and Exchange Commission, or the
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.
February 27, 2019
The Board of Directors
Golar LNG Limited
Hamilton, Bermuda
Questions should be directed to:
Golar Management Limited +44 207 063 7900
Iain Ross - Chief Executive Officer
Graham Robjohns - Chief Financial Officer and
Deputy Chief Executive Officer
Stuart Buchanan - Head of Investor Relations
- Preliminary fourth quarter and financial year 2018
results.pdf
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